The evolution of merger proceedings in the Czech Republic and Slovakia

Czech Republic

In collaboration with the Czech government, the Czech Competition Authority (CCA) has recently launched two initiatives to update the Czech merger control regime. The first is a proposed amendment to the Czech Competition Act, which is currently in the legislative process. Additionally, the CCA has consulted the current regime to collect ideas for its future improvement.

First, the bill proposes the deployment of a "new competition tool" (NCT) to address concentrated industries. This will allow the CCA, following a sectoral investigation that identifies competition problems in the market, to require notifications for potentially all concentrations within the market or among market participants, including those below the thresholds.

Second, the bill proposes a call-in model. The bill effectively sets a new category of transactions meeting lower turnover thresholds than those requiring a notification, which can be called in within six months after closing. It will also be possible to file these transactions voluntarily. While de minimis turnover thresholds remain in place that prevent the CCA from calling in the smallest transactions, it could still affect investors' certainty and willingness to enter the Czech market. 

The two proposals overlap in their ambition to tackle competition issues in industries identified by the CCA as prone to structural distortion, such as digital markets and other oligopolistic sectors (e.g. energy and telecommunications). 

Third, the CCA's consultation of the regime shows its willingness to align with EU merger control practices. Currently, the regime retains certain particularities, such as those related to joint ventures and the simplified procedure, which require ironing out.

Slovakia

The Slovak Competition Authority (SCA) is currently discussing potential reforms to improve its merger control regime. A key area of focus has been addressing gaps in the existing merger notification system and tackling sectors that might escape merger control scrutiny. 

One of the most important concerns recently raised by the SCA is the limitation of the current turnover-based notification thresholds, which can result in significant mergers (not in terms of value but based on their effect on the market) slipping through the regulatory cracks. To address this, the SCA is contemplating the introduction of a so-called "call-in" model. This would allow the SCA to call in transactions that meet certain risk factors related to competition, even if they fall below the existing turnover thresholds. 

In this respect, the SCA has identified various sectors prone to high market concentration in which a potential transaction could escape oversight under the current regime. Based on the SCA's data-driven analysis, sectors such as media, agriculture, logistics and partially healthcare are characterised by a small number of active companies, while transaction turnovers in these sectors may fall below the notification thresholds. 

As mentioned, the SCA plans to address this issue not by lowering thresholds or adjusting them (for instance with respect to the specific sectors or transaction value) but by introducing a call-in right of the SCA. However, it is important to note that these reforms are still under discussion and have only been presented by representatives of the SCA. They have not yet received formal approval from the Slovak government and there is no draft legislation in place to implement them. 

Summary

The actions of both the Czech and Slovak competition authorities suggest that we may be at the bring of a revolution in the relatively stable merger control regimes of both countries. If the Czech bill finds its way into law, the CCA could arguably become one of the most powerful national merger control authorities within the EU, based on its toolkit. Similarly, the SCA could gain significant power through a call-in mechanism if they succeed in persuading the government of the need for such a change.

If these changes are indeed implemented, they would also be highly welcomed by the European Commission following the Illumina/Grail saga.

authors: Marek Bomba, Jan Kupčík, Michal Lučivjanský, Marek Fuchs