Merger Controls First Edition - J Sagar Associates

Chrysses Demetriades & Co. LLC Cyprus
reviews to determine levels of competition operating in the market in certain sectors, such as the banking, insurance, and
telecommunications sectors. In fact, with respect to mergers, the CPC and the Service do not pro-actively monitor merger
activity. The CPC rather handles mergers that are notified to them. This position arises principally from (a) the size of
the Cyprus market which means there is very little merger activity, and (b) the fact that the greater part of mergers notified
are multinational mergers with no Cyprus participants.
The Merger Lawxi sets out the criteria to be considered in determining if the proposed merger is compatible, with the
competitive conditions on the relevant market, these include:
(a) the structure of the affected markets;
(b) market position;
(c) economic power;
(d) alternative sources of supply of the products or services and any substitutes;
(e) supply and demand trends;
(f) barriers to entry; and
(g) interests of consumers.
As most mergers are cleared at phase 1, the CPC does not carry out a detailed assessment of many of these issues. The
two matters that the CPC looks at and attempts to define are the relevant product market and the relevant geographic
market. The CPC, in the context of multinational mergers, does not define the relevant geographic market, preferring to
leave the matter open. This lack of definition of the geographic market does not impact upon the decision since in most
cases the market share of the overseas entities had a low market share. In cases involving Cyprus participants, the
geographic market is generally defined as Cyprus. The exception here was in the Swissport Cyprus Ltd and LGS handling
Ltd case where the geographic market was Larnaca and Paphos airports.
On the matter of relevant product market, the CPC tends to take a broad view of the product market and defines it as
including all goods or services supplied by the participants. Again, the exception was in the Swissport Cyprus Ltd and
LGS HandCorp Ltd case where the product market was defined as the area of the economic activity of the joint venture.
The CPC does not engage in a very detailed economic analysis in determining the relevant product market and does not
give much consideration to such matters as demand or supply side substitution.
Key economic appraisal techniques applied
The key substantive test as stated in the Merger Lawxii is whether the proposed merger “creates or strengthens a dominant
position in the affected markets within the Republic”. If it does then it is declared incompatible with the conditions of the
competitive market. The criteria to consider are those mentioned in the section under “Key industry sectors reviewed”
above. Although most mergers are cleared at phase 1 and, thus, there is little analysis in the context of assessing each of
these criteria, the approach under the Merger Law and that of the CPC is market-based and examines the affect and impact
of the proposed merger on the conditions of competition operating on the market.
Approach to remedies (i) to avoid second stage investigation and (ii) following second stage investigation
There are no significant developments in 2010/2011 with respect to the approach to remedies since the preponderance of
cases were disposed of in phase 1. The Merger Law itself, and the practice of the CPC, where mergers go into a phase 2
investigation, adopts a negotiated approach, viz. enter into negotiations with the parties to remove the incompatible elements
of the merger either through amending the structure of the merger or getting commitments or undertakings from the parties.
Key policy developments
There have been no key policy developments in the period 2010/2011.
Reform proposals
There are currently no proposals to reform the merger approval regime in Cyprus, however, some consideration is currently
being given to change the thresholds as is permitted pursuant to the provisions of the Merger Lawxiii .
* * *
Endnotes
i. See for e.g. Decision CPC:72/2010 Notification of Concentration relating to acquisition of Discuss Holdings Inc.
by Philips Holdings USA Inc.; Decision CPC:74/2010 Notification of Concentration relating to acquisition of King
Pharmaceuticals Inc. by Pfizer Inc.
Global Legal Insights ­ Merger Control First Edition
—47—
© Published and reproduced with kind permission by Global Legal Group Ltd, London
www.globallegalinsights.com