TerraLex Cross-Border Guide to Pre-Merger Notification Guide

Yes. A prior notification to the Authority is requested by Law No. 287/1990 (hereinafter the “Law”).

Italian regulations do not provide properly for a “voluntary merger notification mechanism” but for a sort of “pre-notification” mechanism whose purposes are: i) to allow a preliminary “discussion” of the operation with the Competition Authority; ii) to reduce the duration of the following formal procedure, by furnishing during this discussion the further information which may be needed by the Authority. In this procedure, which can be acted by the parties only in case the merger falls above the second threshold provided for by question 16 of the Law (see item 4, below), parties have to file an informal document containing the main elements of the operation, at the latest 15 days before they intend to file the formal mandatory merger notification. Such procedure does not end up through a formal statement of the Authority.

The following types of transactions are caught: - merger of two or more undertakings (both in case two or more undertakings amalgamate into a new undertaking and in case one or more undertakings are absorbed by another);

• acquisition of control of the whole or parts of another undertaking (the Authority deems that control is acquired whenever an operation enables one or more parties to exert a decisive influence over the whole or parts of one or more undertaking).

Acquisition of control is not defined in terms of any specific formal parameter, but includes all those instances where acquired rights, contracts or any other means make it possible to exercise a decisive influence on the strategic commercial behaviour of an undertaking. Control may be direct or indirect, namely, when it is not exercised through direct links between two undertakings, but is the result of relations existing between several parties. Control may be sole or joint. Joint control occurs where two or more undertakings are each able to exert a decisive influence over another undertaking by virtue of their equity holdings or under other agreements. The Authority deems a merger or acquisition to have taken place when substantial changes occur in the structure of control, such as when joint control is replaced by sole control. Creation of a joint venture through the setting up of a new undertaking (in case two or more undertakings set up a new undertaking under their joint control, provided the joint venture is not of a co-operative nature).

Pursuant to question 16 of the Law, a prior notification to the Authority is required for all operations where the following circumstances occur:

• the aggregate Italy turnover of all undertakings involved exceeds 511 million EUR;
• the aggregate Italy turnover of at least two of the undertakings involved exceeds, for each undertaking, €31 million.

Said thresholds were fixed on March 9, 2021, and are adjusted every year by an amount equivalent to the increase in the GDP price deflator index.

Aggregate Italy turnover means the turnover from the sale of products and services during the previous financial year on the Italian market after deducting returned products and discounts, as well as taxes directly relating to the sale of products and the provision of services.

For foreign-registered undertakings, the amounts in foreign currency must be converted into Euro at the average exchange rate of the relevant financial year.

The turnover of credit and other financial institutions is equal to the tenth part of the total of assets, exclusive of the contra accounts.

The turnover of insurance companies is equal to the total amount of the cashed insurance premiums.

Only the turnover of the undertakings or parts of the undertakings being acquired is to be taken into account.

Where the concentration involves the acquisition of parts of one or more undertakings, two or more operations between the same persons or undertakings over a two-year period are to be considered as one single concentration finalised on the date of the most recent operation.

The mandatory notification system also provides for a number of exemptions:

• Acquisition of equity holdings for purely financial purposes (The acquisition of shares by credit or other financial institutions, solely for resale, in undertakings undergoing incorporation or on the occasion of an increase in their share capital is not deemed to be a concentration. However, the acquiring institutions must not exercise any voting rights tied to the shares acquired, and must dispose of these shares within a time-period of 24 months).

• Cooperative joint ventures (Operations which result in the creation of a joint venture may have as their object or effect the co-ordination of the competitive behaviour of the parent undertakings. Where such coordination effects prevail over structural effects, the operation shall be appraised under question 2 of the Law. Considering the nature of the activity of the joint venture, an operation which results in the constitution of a joint venture that does not operate as an ‘autonomous economic entity’ is not considered to be a concentration within the meaning of the Law).

• Conversion of notification (When notifying a joint venture, the notifying parties may specifically request that, if the Authority deems that the joint venture is not a concentration within the meaning of the Law, the notified operation be appraised under question 13 of the Law, but only if the operation does not fall under question 101 of the Treaty on the Functioning of the European Union).

• Intra-firm operations: in this respect please note that the following operations between non-independent undertakings are considered to be intra-firm operations:

• those between one undertaking and one or more undertakings in which the first undertaking holds, directly or indirectly, the absolute majority of the share capital or the absolute majority of the voting rights at the general shareholders meetings;

• those between undertakings of which one and the same undertaking holds, directly or indirectly, the absolute majority of the share capital or the absolute majority of the voting rights at the general shareholders meetings.

• However, operations covered by paragraphs 1) and 2) above result in a concentration and must therefore be notified whenever no dependency relationship exists between the parties involved, either by law or statutory provisions, or by virtue of company resolutions, or because of the exclusively financial nature of the equity interest.

• Non-trading undertakings (Mergers and acquisitions between undertakings which do not carry out any economic activity and do not have direct or indirect control over another undertaking are not deemed to constitute concentrations within the meaning of the Law. Such undertakings include those whose only assets are real estate, and whose sole activity is managing these assets, provided that the acquisition is not carried out by undertakings operating on the real estate market).

The foregoing does not apply, however, to mergers and acquisitions between undertakings holding licenses, permits or franchises, or which by any other titles are able to engage in business activities, or which have direct or indirect control over another undertaking holding any of those titles.

One more exemption to the mandatory notification system is the case of acquisition of the only commercial licence owned by an undertaking if the latter is not prevented from operating the activity provided for in the licence.

Acquisitions by natural or legal persons that do not perform any economic activity and do not have control of at least one other undertaking are not deemed to be concentrations within the meaning of the Law.

In addition to the above, operations not producing economic effects on the Italian markets do not need to be notified: in this respect please note that the Authority does not require the notification of acquisitions and mergers through incorporation involving foreign-registered undertakings which do not have at the time of the operation, and did not have during the previous three years, directly or indirectly, a turnover in Italy. These operations are, however, subject to notification whenever, following the concentration, the undertaking begins doing business on the Italian market.

The constitution of joint ventures and mergers in which at least one of the parties to the operation is foreign-registered need not be notified if the foreign party does not have at the time of the operation, and did not have during the previous three years, any turnover in Italy. These operations are, however, subject to notification whenever, following the merger or acquisition, the new entity will start operating an economic activity on the Italian market.

Only full function joint ventures - i.e. the company is fit to stably carry out any functions of an autonomous entity, it being in possession of resources which allow to operate in an independent and durable manner - are caught within the merger mandatory notification system.

The nexus to the jurisdiction is determined by reference to the merging parties’ or the target undertaking’s sales in Italy (see item 4 above).

A substantial amount of information is required to prepare a filing. Normally, with counsel working diligently with client personnel, it takes 10-20 days to compile the information required for Short Form filing, and 15-60 days to compile the required information in the case of a Full Form. Usually, the most difficult information to collect concerns the market information.

No. Nevertheless, please take into account that parties are not required to provide information on affected markets where there are no markets affected by the proposed merger. According to the definition of affected markets as contained in the pre-defined Form, this applies to:

• mergers between competitors leading to a combined market share of less than 15%;
• vertical mergers where none of the parties, after the concentration, will have a share of 25% or more in an upstream or downstream market; and
• any other transactions where none of the undertakings being acquired or merged has a market share of at least 25%.

Besides, a Short pre-defined Form may be used to notify: i) mergers between competitors leading to a combined market share of less than 25%; ii) vertical mergers where none of the parties, after the concentration, will have a share of 40% or more in an upstream or downstream market.

Furthermore, a Full pre-defined Form notification is not required where the market share of the undertaking being acquired or merged is less than 1%.

The Short pre-defined Form contains all the questions of the Full one, except for the question G requiring a detailed description of the affected markets.

Effective from January 1, 2013, no fees are required.

With reference to the earliest time, Italian regulations do not provide for it but a definitive agreement on the essential elements of the transaction is required for the notification to be acceptable.

With reference to a deadline, after a definitive agreement has been reached, mergers must be notified prior to their execution, that is before the purchaser acquires the ability to exercise control over the business conduct of the target undertaking (see also item 11 below)

No. Nevertheless, please take into account that: - in case of a merger, the transaction must be notified before the merger deed is drafted;

• in case of acquisition of control by means of purchase of equities or shares in a company, the prior notification obligation is deemed to have been complied with where the full effectiveness of the deeds establishing acquisition of control is made conditional on the Authority’s approval;
• in case of creation of a new joint venture the transaction must be notified before the memorandum of incorporation is filed with the Register of Companies. According to established practice, the parties notify a definitive agreement, but also stipulate that the agreement will only become effective after clearance by the Authority.

The above means that there is no automatic standstill obligation pending the Authority review, so the parties are not prevented from implementing a notified merger at their own risk, unless, after initiating an investigation, the Authority has ordered them not to proceed with the concentration until the investigation is terminated. This provision does not apply to properly notified public takeover bids, as long as the acquired voting rights are not exercised pending the Authority’s final decision.

The Authority has 30 days from the notification to decide whether or not to open an in-depth investigation. The Authority may initiate the investigation beyond the time limits indicated above where the information notified by the undertakings is seriously inaccurate, incomplete or untrue. In this case the Authority sends a letter asking for the information and documents missing. Only when the undertakings have completed the notification the 30 days period review will start again.

If the Authority, after the first review period of 30 days, decides to open an in-depth investigation, a final decision must be adopted within 45 days. The deadline of 45 days period for the investigation may exceptionally (where undertakings fail to supply requested information and data in their possession) be extended by 30 more days.

For the banking sector the time limit to adopt a final decision is 60 days from the time of completion of the notification with all the necessary information

Administrative fines of up to one per cent of the undertaking’s turnover may be imposed in the event of non-compliance with the pre-merger notification obligation.

Such fine is independent from other eventual fines which may be imposed by the Authority (after the in-depth investigation) in case the transaction has been implemented failing the prohibition of the Authority or in case the conditions imposed by the Authority have not been fulfilled

If no decision is issued within the statutory periods (see item 12 above) parties are allowed to close the transaction and no post-closing challenge may be acted by the Authority.

The Italian Competition Authority is the “Autorità Garante della Concorrenza e del Mercato”, located in Rome, and it is an independent body responsible for enforcing the Law and, in particular, for reviewing mergers and acquisitions, with both investigative and decision making powers.

It is a public administration whose decisions are taken exclusively by virtue of laws, without any interference from the Government or any other political authority or representative.

The Authority can impose the sanctions or the conditions directly.

Public information is provided by the Authority as regards to the fact that a proposed merger has been notified only if both thresholds provided by question 16 of the Law are exceeded.

In such a case the Authority advertises on its web site a summary of the proposed merger (keeping confidential information that it deems to be undisclosable) and third parties have five days to contact the Authority in order to express their points of view on the proposed transaction.

Furthermore, the Authority must inform of the filing the Prime Minister and the Minister of Productive Activities. The contents of the notifications however are not made public.

Decisions to open an in-depth investigation as well as final decisions are all made public. Notifying parties may indicate which documents, or parts thereof, they consider to constitute business secrets, specifying the reasons why the information should not be disclosed or published.

If the Authority starts an in-depth investigation, third parties representing public or private interests, as well as consumer associations, may participate in the proceedings provided they are able to show, by means of a reasoned request, that the interests they represent might be directly and immediately harmed by the proposed merger or by any measures adopted as a result of the investigation. Third parties participating in the investigation will have access to the file. Access may be restricted or excluded with regard to documents containing confidential information and commercial secrets. In this respect parties wishing to safeguard the confidentiality or secrecy of information supplied must submit to the Authority a specific request to this end, containing details of the documents, or parts thereof, which they deem not to be disclosed, specifying the reasons for the request. Whenever the Authority considers that the request is not sufficiently justified, it shall notify thereof the party concerned by means of a reasoned opinion.

The Authority usually applies the Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) as well as the EC Commission Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings [Official Journal C 31 of 05.02.2004].

There is no typical or recommended approach in dealing with the Authority, except to use a cooperative and transparent behavior.

In Italy other independent Authorities cooperate with the Competition Authority in connection to Bank operations (i.e. Banca d’Italia), Insurance Company operations (i.e. IVASS) and Quoted Company operations (e. CONSOB).