Reporting of concentrations under the Law on protection of the competition

It is evident that the current business environment requires companies to constantly diversify their offer in order to remain competitive in the market.

Diversification for companies presupposes the expansion of its portfolio. Often, this means that the company is willing to acquire or merge with another company that has a different portfolio, where through such a combination of services and goods, the company can consolidate its place in the market.

Every company, and especially the industry leaders, have carried out an acquisition/merger at some point in order to take over a competitor, or to enter a new geographic market, or to access the right to use intellectual property and technology that belongs to another company.

However, what is of exceptional importance for companies in such ventures, is the fact that in addition to the commercial element in the negotiations, there is also a legal aspect that must be observed. Namely, the legal procedures when merging or taking control of a company are essential.

Comparatively speaking, the Merger and Acquisition (M&A) area represents one of the most complex (but also the most prestigious) areas of law. The deals that are subject in this area are often subjects that require expertise and niche knowledge of lawyers in certain business sectors to be able to carry out the deal.

In the Republic of North Macedonia, in accordance with the Law on Protection of Competition (LLC), such business ventures are regulated through the “Concentrations” institute. The law regulates that concentration arising from a change in control of the company on a long-term basis.

The company should report the notification that a certain concentration will take place to the Commission for the Protection of Competition, if the conditions of the ZPC are met. Namely, PPE stipulates 3 conditions:

  1. if the joint total annual income of all enterprises participating in the deal, which is achieved by selling goods or services on the world market, exceeds the amount of 10 million euros – achieved in the business year preceding the concentration, and at least one of the participants is registered in North Macedonia;
  2. The joint total annual income of all participating enterprises, achieved by the sale of goods and/or services in the Republic of North Macedonia, exceeds the amount of 2.5 million euros achieved in the business year preceding the concentration;
  3. The market share of one of the participants is more than 40% or the total market share of the participants in the market concentration is more than 60% in the year preceding the concentration.

Companies should pay particular attention to their reporting obligations. The companies that will participate in the concentration are obliged to submit a Notice before the implementation of the concentration, that is, after they have concluded the agreement that results in a change in control at the company.

At the same time, companies have the possibility, as a preventive measure, whether such a concentration will be allowed, to submit a Notice to the Commission of their serious intention to enter into an agreement, if the implementation of such an agreement would meet the condition for initiating a concentration procedure. In this way, before resolving the  commercial issues surrounding a merger/acquisition/purchase agreement, companies can approach to resolve the legal issue of the permissibility of the transaction.

The merger notification is a filing that contains a large number of elements and information that require deep analysis. The subject concentration requires the submitter of the Notice, i.e. through proxy – Attorney at Law, to define the relevant market of the concentration in question.

Defining the relevant market in itself assumes a more complex matter than it initially sounds. The parameters of the definition are important for the Commission when it decides whether the concentration is allowed, which means that care should be taken for the Commission to accept it.

In addition, in the Notification it is necessary to provide analyzes of the network operation of the companies, including the distribution network if they have one. This element is also related to the fact that the corporate structure of the participating companies should be illustrated on a vertical, and sometimes on a horizontal level.

The connection of the companies according to the corporate structure is of exceptional importance in the context of the calculation of the total income – and the total income is the basis and an essential element for whether a condition is fulfilled for initiating a concentration or not.

Hence, it is significant to point out that the entire content of the Notice is interrelated and an omission in one element may be of importance to the entire concentration. The overall content is what the Commission will assess whether or not such a concentration effectively distorts market competition.

So, it is indisputable that precise and thoughtful writing of the Notice of Concentration, taking into account both the legal and commercial interests of the participating companies, is absolutely necessary and necessary.

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