Introduction

Recent years have seen many important updates to European competition law. After the revision of the Vertical Block Exemption Regulation (VBER) and the update of the Guidelines on Vertical Agreements in 2022, as well as the adoption of the new Guidelines on Horizontal Agreements in 2023, it was soon the turn of the merger control regime to be in the spotlight. As of 1 September 2023, the new Merger Simplification Package applies, which is a welcome step made by the European Commission to simplify the assessment and clearance mechanism for mergers with a European dimension. Moreover, the Foreign Subsidies Regulation established a new category of pre-approval oversight for merging companies in the EU.

In Romania, the merger control mechanism was not per se under scrutiny, but the national landscape nevertheless imposed new obligations on merging parties in the form of new modifications to the Foreign Direct Investments framework.

Relevant European Updates and Their Impact on Merger Control in Romania

The main purpose of the Merger Simplification Package was to establish, on the basis of the European Commission’s decision-making practice, a set of criteria that accurately identifies cases that do not raise competition risks, as it was found that more than 90% of mergers notified to the Commission do not actually raise competition concerns and are cleared unconditionally. The package includes three main acts:

• a new Implementing Regulation on the control of concentrations between undertakings, repealing the 2004 version;
• a Commission Notice on a simplified treatment for certain concentrations; and
• a Commission communication regarding the transmission of documents.

The concrete changes brought about by the Merger Simplification Package include the following:

Extension and clarification of the categories of simplified cases

The simplified procedure has been extended to include two new categories of cases that may benefit from such treatment. These relate to the value of market shares where vertical relationships exist between the merging parties. So-called super-simplification cases were also introduced for cases involving joint ventures whose activities are located exclusively outside the EEA or cases not involving horizontal overlaps or vertical relationships. The information required for these filings is significantly reduced and parties are advised to notify the Commission directly, without pre-notification contacts, thus saving a lot of time. Moreover, flexibility clauses were introduced to allow for the analysis under the simplified procedure of mergers that would not normally meet the criteria for this procedure.

Also, the new simplified procedure includes a clearer and more detailed list of safeguards and exclusions (ie, situations where a concentration that technically qualifies for simplified treatment could still be investigated under the full procedure).

Changes to the notification forms

A completely new Simplified Notification Form has been introduced, now having a tick-the-box format, where notifying parties simply fill in pre-defined tables for most questions, and fill in text boxes for clarification for more complex situations.

There are also changes to the Notification Form for the full procedure, from which some sections have been eliminated. The new form contains a special section for concentrations to which flexibility causes may apply and it provides clear instructions for requesting exemptions from providing information, which simplifies the subsequent procedure, as there is no need to resort to requests for additional information and clarifications.

The simplification package of 2023 aims to alleviate, where possible, the procedural burden in cases of mergers that do not raise competition concerns and therefore allows the Commission to focus its investigative efforts on more detailed cases.

It is important to note that these new rules only apply to mergers with a European dimension and do not have an impact on national merger control rules. However, they could serve as an inspiration for member states, and therefore for Romania, in regulating their own national merger assessment regimes, in the sense of de-bureaucratisation and simplification. Until then, however, the new provisions will benefit the large Romanian economic operators who intend to carry out mergers with a European dimension.

Article 22 of Regulation 139/2004 on the Control of Concentrations Between Undertakings (the “EU Merger Regulation”)

The new changes to simplify the merger control mechanism are not the only recent concerns of the Commission regarding the merger regime in the European Union. Attention now turns to the developments on the interpretation that the European Commission was promoting with regard to Article 22 of the EU Merger Regulation, which governs the cases in which transactions that do not have a Community dimension can still be referred to the Commission for assessment.

In 2022, the Commission adopted Guidelines on the application of Article 22, which make provision for referring to the European Commission those mergers that do not meet the European thresholds, if the transaction affects trade between member states and threatens to significantly affect competition in the territory of the member state(s) making the referral request. The guidelines also seem to encourage member states to consider referring transactions to the Commission when these are not within the scope of their national merger control rules. In practice, these new guidelines create an unpredictable ex-post merger control mechanism. This approach caused quite a lot of controversy at the time.

More recently, in March 2024, in the context of the famous Illumina/Grail case, Advocate General Emiliou has challenged the European Commission’s approach as it leads to a significantly inflated extension of the EU Merger Regulation and the Commission’s jurisdiction, which basically gains the power to review almost any concentration. Moreover, this power is at odds with the principle of “precise allocation” of competence between the Commission and the national competition authorities.

The final judgment of the CJEU in this case is expected to be delivered by the end of 2024 but, until then, merging parties should continue to be cautious.

Updates on Foreign Direct Investments Control in Romania

A topic that occupied the recent public discourse in the Romanian competition field is the severe Foreign Direct Investments (FDI) control mechanism.

Historically, the examination of foreign investments was the prerogative of the European Commission, but member states have gradually created, expanded and strengthened their own investment screening systems. The need for such more rigorous controls has grown, particularly in view of the COVID-19 pandemic and global security concerns following Russia’s invasion of Ukraine. Despite regular co-operation and a number of important similarities between national screening mechanisms, member states continue to show variations in the actual screening.

Given the European Commission’s desire to implement a decentralised mechanism for examining FDIs in the Union, some differences in regulation from state to state are natural. However, in Romania in particular, the system raises an original problem: even European investors (and therefore even Romanian investors) are subject to notification obligations under the national FDI regime.

Observing the progression of modifications that eventually led to the current situation, the first form of GEO 46/2022 on measures to implement Regulation (EU) 2019/452 establishing a framework for the examination of foreign direct investments in the Union (GEO 46/2022) did not differentiate between types of investors and the definition of the foreign investor was clear. In June 2023, however, the concept of “European Investor” was introduced and an exception was established that became, de facto, the rule and gave rise to the interpretation that any investment, regardless of whether the investor is foreign or EU-based, should be subject to FDI scrutiny if the FDI criteria were met. With the modification of the GEO 46/2022 in December 2023, it became apparent that this was indeed the will of the Romanian legislator and therefore, at present, any investment that falls under the scope of the FDI screening, regardless of the identity and nationality of the investor (thus, even Romanian investors), should be notified to the Commission for the Examination of Foreign Direct Investments (CEISD) if the investment cumulatively fulfils the following conditions:

• the investment exceeds EUR2 million; and
• the investment is included in the list of sensitive sectors established by the Supreme Council of National Defence Decision No 73/2012 (“Decision No 73/2012”), namely:
1. the security of citizens and communities;
2. border security;
3. energy security;
4. transport security;
5. the security of supply systems for vital resources;
6. critical infrastructure security;
7. the security of information and communication systems;
8. the security of financial, fiscal, banking and insurance activities;
9. the security of the production and circulation of weapons, ammunition, explosives, toxic substances;
10. industry security;
11. protection against disasters;
12. protection of agriculture and the environment; and
13. protection of the privatisation operations of enterprises with state capital or their management.

Please note that the FDI control applies to investments of any kind that allow the establishment or maintenance of lasting and direct links with the target company (eg, transactions, restructuring, capital increases, investments in tangible or intangible assets, etc). Further, the acquisition of control by the investor does not represent a condition associated with the FDI notification obligation, this being only one of the ways that permits establishing/maintaining lasting links with the target company.

There are also a number of marginal elements of the national legislation that currently pose additional difficulties in the practical application of the provisions of GEO 46/2022. These include the method of establishing the value of the investment, which it is understood will be laid down by instructions from the Romanian Competition Council, as well as the EUR10,000 fee that the investor must pay for the examination.

Moreover, the list of sectors that fall under the scope of the FDI regime is extremely broad, as GEO 46/2022 is referring to CSAT Decision 73/2012, which seems to be an easy way to include as wide a variety of businesses and activities as possible within the scope of the FDI mechanism. Note that, in the absence of any other criteria or circumstances, this can encompass an extremely wide variety of activities and, in one way or another, almost any investment could be subject to scrutiny, creating significant pressure on potential investors who will be put in the position of notifying investments that perhaps only marginally touch one of the 13 areas of interest, in order to shelter themselves from fines of up to 10% of the global turnover in the year prior to sanctioning and to avoid the risk of annulment of the investment.

New Notification Obligations Under the Foreign Subsidies Regulation

Merging parties in Romania should also be mindful of the additional category of ex ante notification obligations introduced by the Regulation 2022/2560 on foreign subsidies distorting the internal market (the “FSR Regulation”).

The FSR Regulation includes three procedures:

• a notification-based procedure to investigate concentrations;
• a notification-based procedure to investigate bids in public procurement; and
• an ex officio procedure to investigate all other market situations, where the Commission can start a review on its own initiative.

In economic concentration cases, a transaction should be notified to the European Commission if at least one of the merging undertakings, the acquired undertaking or the joint venture is established in the Union and generates an aggregate turnover in the Union of at least EUR500 million and the parties were granted foreign financial subsidies (ie, financial contributions received, directly or indirectly, from non-EU countries which confer a benefit on an undertaking engaging in an economic activity in the internal market) of more than EUR50 million in the last three years.

This implies a standstill obligation until the clearance of the European Commission. The failure to notify a concentration that meets the conditions or implementing a transaction before the authorisation may lead to fines of up to 10% of the annual turnover of the undertakings concerned, in the preceding financial year.

It is important to note that the Commission can also request ad-hoc notifications for concentrations that are below the thresholds, if it suspects the existence of distortive foreign subsidies and, moreover, the ex officio procedure allows the Commission to start investigations on its own initiative if information indicates the possibility that a foreign subsidy distorting the internal market exists.

The procedure under the FSR Regulation and the existing national and EU merger control regimes, as well as the FDI authorisation mechanism, are applicable in parallel, which means that the merging parties should observe three different procedures that, in some cases, may lead to different decisions as the standards of review are distinct.

Insights on Merger Control in Romania

Recent years have been quite intense in merger control at national level. In 2022, the Romanian Competition Council authorised 94 transactions, this being the highest number of cleared economic concentrations in almost 16 years.

In line with this trend, in 2023, the Competition Council cleared 74 transactions in different fields such as:

• energy (eg, the takeover of Next Energy Distribution by Cis Gaz and Toma family and authorisation of the creation of a company for the construction of a combined cycle power plant by Oltenia Energy Complex and Alro);
• pharma (eg, the takeover of a series of pharmacies by Mini-Farm);
• health sector (eg, the takeover of Monza Hospital by Brain Hospital and Roho Medical Investments);
• entertainment industry (eg, the takeover of UNTOLD Universe); and
• food retail (the takeover of Cora stores by the Carrefour group).

Only one of these transactions was authorised with commitments (ie, the takeover of Gedeon Richter Farmacia SA and Pharmafarm SA by Mediplus Exim). Moreover, in 2023, the Commission for the Examination of Foreign Direct Investments (CEISD) issued 105 authorisation decisions, after analysing transactions from the point of view of national security.

The year 2024 also started strongly. Up until June, 23 new economic concentration cases have been filed to the Competition Council in different sectors, including what could be called the transaction of the year, the acquisition of Profi Rom Food SRL, an important food retail chain, by Ahold Delhaize group.

Regarding new developments in merger control at national level, representatives of the Competition Council stated that many of Romania’s markets are too fragmented and do need some concentration so that fewer, bigger and more efficient players are created. These players should be able to compete on the national and international markets and offer better and cheaper services and products. On the other hand, the markets where a higher level of concentration has already been reached will be under more scrutiny, the competition authority already announcing that, in 2024, it will carefully examine mergers in the banking, telecommunications and food retail sectors.

Transactions authorised by June 2024 include important names in the following sectors:

• energy (eg, the takeover of EP Wind Project (ROM) Six by Engie Romania, the takeover of Stratum Energy Romania by Emma Lambda Limited and the takeover of the business line operating three wind plants and four additional wind park projects by Alive Wind Power One);
• banking (eg, the takeover of First Bank by Intesa Sanpaolo Bank);
• retail (eg, the takeover of Drim Daniel Distributie FMCG by Zabka Polska and a series of natural persons); and
• pharma (eg, the takeover by the Fildas-Catena over a group of four pharmacies belonging to Andofarm and Zen pharma).

Especially in the last part of 2023, and continuing in 2024, the competition authority achieved important performance results in reducing the analysis time and issuing authorisation decisions in short periods of time for both ordinary merger control files and the examination of FDI cases.

Prior contact with the authority is also an important element of the Romanian merger control regime, as representatives of the Competition Council are open to discussion and are keen to facilitate the process, their support becoming especially helpful in recent years.