Merger control is governed by Act No. 143/2001 Coll., on Protection of Competition and on Amendment to Certain Acts ("Act on Protection of Competition"), as amended ("Czech Competition Act"). The Czech Competition Act became effective on July 1, 2001, replacing the previous Act on Protection of Competition, which came into force on March 1, 1991. More detailed regulation is contained in the Decree of the Czech Competition Office for the Protection of Competition ("Czech Competition Office") No. 294/2016 Coll., as amended, stipulating details of the justification of a concentration notification and documents certifying facts decisive for a concentration ("Office Decree"). The Czech Competition Office has also issued guidelines on the essentials of the notification of a concentration of undertakings, on pre-notification contacts, on calculating turnover, the concept of a concentration of undertakings, the conception of ‘undertakings concerneÄ, on the prohibition of implementing concentrations before their approval and exemptions thereto, on the application of the failing firm defense concept in assessing concentrations of undertakings, and on simplified proceedings when assessing certain cases of concentration of undertakings.

Since the Czech Republic's accession to the European Union on May 1, 2004, EU legislation related to mergers and similar transactions is also in effect in the Czech Republic. Therefore, a merger with a community dimension must be assessed under the EU Merger Regulation (provided, however, that the European Commission, in accordance with such regulation, does not refer the concentration to the Czech Competition Office).

The Czech Competition Office, with its registered office at tr. Kpt. Jaroše 7, 604 55 Brno, Czech Republic, is the competent authority to assess concentrations under the Czech Competition Act. The powers of the Czech Competition Office are regulated by Act No. 273/1996 Coll., on the Scope of Activities of the Czech Competition Office, as amended. Further details are available at the website of the Czech Competition Office, www.uohs.cz.

Additional Comments:

In addition, the Czech Telecommunication Office is the competent administrative authority for electronic communications and postal services, including market regulation and determining the business conditions that would

• substitute for the missing effects of economic competition, and
• provide conditions for the appropriate functioning of economic competition and for the protection of users and other market actors until a fully competitive environment is achieved.

Similarly, the Energy Regulatory Office is the administrative authority regulating the energy sector in the Czech Republic. The Energy Regulatory Office exercises the following activities (among others):

• support for competition, and
• protection of consumer interests in the energy sector. However, merger notifications in the telecommunications and energy sectors must be submitted to and decided by the Czech Competition Office.

If the merger has a community dimension, the EU rules on the control of mergers will apply and prevail over Czech legislation. Should the turnovers of the undertakings concerned meet the notification thresholds stipulated in Council Regulation (EC) No. 139/2004 of 20 January 2004, on the Control of Concentrations Between Undertakings (the EU Merger Regulation), the concentration will be treated as a concentration with a community dimension falling within the (as a matter of principle) exclusive jurisdiction of the European Commission.

Merger filing requirements are set out in the Czech Competition Act and the Office Decree, both of which are published in the Collection of Laws of the Czech Republic and available at the Czech Competition Office's website https://www.uohs.cz/en/legislation.html (in English).

The Czech Competition Act defines concentrations fairly broadly so as to include the following situations:

• the merger of two or more previously independent undertakings concerned;
• one or more entrepreneurs or one or more persons, who are not entrepreneurs but control at least one undertaking, acquire the possibility to directly or indirectly control another undertaking or part thereof, in particular by acquiring equity shares, business or membership interests or by a contract or by other means allowing them to control such undertaking or part thereof;
• acquisition of an enterprise of another undertaking concerned or a part thereof (purchase of assets); or
• establishment of an undertaking that is jointly controlled by other undertakings concerned and which performs, on a lasting basis, all the functions of an autonomous economic entity (“full-function joint venture”).

Under Czech law, only a permanent change (on a lasting basis) in the nature of control over an undertaking concerned is deemed to constitute a concentration. A temporary acquisition of control is expressly excluded from the Notification Obligation Act if such temporary acquisition is by (i) a bank during a rescue operation or financial reconstruction, and/or (ii) an investment services provider which acquires shares, if the shares in question are acquired for the purposes of their subsequent sale, and the related voting rights have not been exercised. A one-year test period is provided for those cases. Please note that two or more related concentrations which are connected by their nature, time and personnel are to be considered as a single concentration. The same applies in the case of concentrations that take place within a two-year period between the same persons (undertakings).

Yes, if such investment would establish direct or indirect control over another undertaking or a part thereof. In this context, "control" entails being capable to perform a decisive influence on the activity of another undertaking or part thereof on the basis of a matter of law or fact, particularly on the basis of a:

• property right or right of use towards an enterprise of the controlled undertaking, or a part thereof; or
• right or other matters of law that provide a decisive influence on the composition, voting and decision-making of the controlled undertaking’s bodies.

Yes, foreign-to-foreign transactions are captured by the merger control regime if they exceed the notification thresholds. Please note that the notification thresholds under the Czech Competition Act are calculated from turnovers achieved by an undertaking in the Czech market. Therefore, the local effect test is included in the notification thresholds. For further details on the notification threshold, please see the next question.

The Czech Competition Act in Section 13 includes a turnover test to determine whether a concentration falls under Czech Competition Office control. A concentration is subject to Czech Competition Office approval if:

EITHER

• The combined net (aggregate) turnover achieved in the last ended accounting period in the Czech market exceeded CZK 1.5 billion (approx. EUR 61 million) for all the undertakings concerned AND at least two of the undertakings concerned each achieved a net (aggregate) turnover of more than CZK 250 million (approx. EUR 10.1 million) in the last ended accounting period in the Czech market;

OR

• The net (aggregate) turnover achieved in the last ended accounting period in the Czech market:
  • (if the concentration takes the form of a merger by absorption or amalgamation), by at least one of the parties to the merger;
  • (if the concentration takes the form of an acquisition of control), by the undertaking or part of the undertaking (e. g. enterprise), over which control is acquired; or; by
  • (if the concentration takes the form of a "full-function joint venture"), by at least one of the undertakings establishing the jointly controlled undertaking, exceeded CZK 1.5 billion (approximately EUR 56.7 million) AND the worldwide net (aggregate) turnover achieved in the last ended accounting period by at least one other undertaking concerned exceeded CZK 1.5 billion (approximately EUR 56.7 million).

For purposes of determining whether the (aggregate) net turnover thresholds are exceeded, the net turnovers generated by the following persons must be aggregated: (i) the undertakings concerned; (ii) all persons controlled directly or indirectly by the undertakings concerned (subsidiaries); (iii) all persons that will directly or indirectly control the undertakings concerned after the completion of the concentration (parent companies after the completion); (iv) all persons controlled directly or indirectly by the same person who will control the undertakings concerned after the completion of the concentration (sister companies); and (v) all persons jointly controlled by two or more persons referred to under items (i) through (iv).

The term "net turnover" means the net (i.e., exclusive of any taxes and rebates) sales (i.e., amounts derived from the sale of products and provision of services) from the ordinary activities of all members of the respective group of undertakings concerned, irrespective of the sector in which the turnover is achieved (however, intra-group sales should be deducted from the overall figures). A specific list of items to be used for the purposes of turnover calculation of banks, credit and other financial institutions is provided. In general, the turnovers need to be attributed to the place where the customer is located.

The term “last ended accounting period” means the accounting period that immediately precedes the accounting period in which legal or other circumstances that create a concentration of undertakings concerned happened or will happen. An accounting period means 12 uninterrupted consecutive months, and it can be the calendar or economic year which commenced on the first day of a month other than January. The audited figures need to be provided, if available.

Additional Comment:

The Czech Competition Act provides for special rules related to the calculation of turnover of banks and insurance companies.

Filing is mandatory if the above-mentioned conditions under the Czech Competition Act are met. Concentration approval proceedings are initiated on the basis of a notification.

There are no time limits for filing. A notification may be made before the agreement on concentration is signed or before control is otherwise acquired. The best practice is, as soon as the transaction documentation is final, to file a notification that embraces the exact structure of the planned transaction. It has to be kept in mind though, that a merger cannot be implemented before the Czech Competition Office grants clearance.

There is no particular waiting period. However, a concentration that is subject to notification may be implemented only after the Czech Competition Office grants clearance (either implied or express). The validity of such concentration is dependent on the clearance.

Additional Comments:

The Czech Competition Office has the right to grant a derogation from the standstill obligation at the written request of a (the) party(ies); a derogation can be granted if there is a threat of serious damage or other serious detriments to the undertakings concerned or to third parties. The request can be filed together with the notification or anytime during the proceedings. The Czech Competition Office will decide on the derogation within 30 days from the request delivery. It may also decide on granting a partial derogation (i.e. in relation to certain actions covered by the request). Further, the Czech Competition Office may stipulate in its decision conditions and restrictions in favor of maintaining effective competition. If it issues no decision within the above-mentioned period the derogation is deemed to be granted.

Exemptions also exist in cases of concentrations that are to occur on the basis of a public takeover bid, or on the basis of a sequence of operations with listed securities as a result of which control shall be acquired from different entities, provided the application for initiating proceedings was filed immediately and provided the voting rights attached to such listed securities are not exercised.

Under the Czech Competition Act, a concentration notification must contain written evidence of the circumstances decisive for the concentration and satisfy the prerequisites set out by the implementing legal regulation. The notification must contain the information stipulated in the Czech Competition Act and details specified in the Office Decree. Under the Office Decree, the notification must include, inter alia, a duly completed questionnaire for approval of the concentration. Further, confirmation of payment of the administrative fee must be submitted as an obligatory item of any application for approval of a concentration.

The application, including all its parts and annexes, must be submitted in Czech or Slovak. Annual reports and consolidated financial statements may also be submitted in English or German. Otherwise, a certified translation to Czech is required along with the foreign language original. Exceptions can be granted by the Czech Competition Office in individual cases.

All financial data must be denominated in CZK. Financial data originating in foreign currencies must be converted into CZK at the average rate for the relevant accounting period, i.e. the average foreign exchange market rate announced by the Czech National Bank for the period to which the financial data is related.

There is a notification fee amounting to CZK 100,000 (approximately EUR 4,070) payable to the Czech Competition Office before the notification is filed. As already mentioned above, confirmation of payment of the administrative fee must be submitted as part of the application for approval of the concentration. Further, a request for a derogation from the standstill obligation, see our response to "Is there an automatic waiting period? If so, please specify." is subject to a fee of CZK 10,000 (approximately EUR 407).

Since September 1, 2009, two types of notifications and proceedings exist:

• simplified procedure applicable when particular conditions are met; and
• standard proceedings with an investigation including a first phase and (under certain conditions) a second phase.

Both types of proceedings (i.e. simplified and standard) are initiated when an original of the completed notification is delivered to the Czech Competition Office in writing.

The time period for adopting a short-form clearance is 20 days from receipt of the completed (short-form) notification. However, if the conditions for treatment under the simplified procedure are not met, or if the exclusions set forth by the Czech Competition Office apply (in particular, the Czech Competition Office needs more information to evaluate the merger), the notifying party(ies) must re-notify a (full-form) notification; the decision period (described below) starts to run after delivery of the (full-form) notification. The Czech Competition Office must, within 30 days of receiving a completed (full-form) notification (first phase), (i) decide whether the concentration is subject to approval and, if not, issue a decision so stating; or (ii) issue a decision approving the concentration, if such concentration does not significantly affect competition. Within the same time limit, the Czech Competition Office may open an in-depth investigation (second phase) if the concentration raises serious concerns that competition will be significantly affected.

If neither of the above decisions is issued within the first phase, the Czech Competition Office is deemed to have issued clearance. In the second phase, the Czech Competition Office issues its clearance or prohibits implementation of the concentration within five months after receiving the completed notification. If it does not issue the decision within five months, it is deemed to have approved the concentration.

Further, during both the first and second phases, the Czech Competition Office may (repeatedly) exercise the right to formally request additional information or documents from the notifying party(ies) or third parties. The investigation time period is suspended between the delivery of the formal request to the notifying party(ies) and the delivery of the requested information to the Czech Competition Office. Before issuing a decision, the Czech Competition Office informs the notifying party(ies), in writing, of its objections. Following this it must enable the party(ies) to become acquainted with the basis of the decision and it will stipulate a reasonable deadline (at least 14 days) for the party(ies) to propose additional evidence. Facts and evidence provided after this time period will not be taken into consideration unless such facts or evidence could not be supplied earlier. Further, the party(ies) can inspect the documents during the proceeding. The parts of the documentation which contain commercial, banking or similar secrets protected by law are excluded from such inspection.

The Czech Competition Office does not clear the concentration if it would result in a substantive distortion of competition on the relevant market, in particular, if the concentration would give rise to the creation, or reinforcement of a dominant position of one or more of the undertakings concerned.

The Czech Competition Office is required to assess the need to preserve and further develop competition, the structure of all markets affected by the concentration, the shares of the parties to the concentration in such markets, their economic and financial power, legal and other barriers to entry by other undertakings into the relevant markets, the alternatives available to suppliers and customers of the parties to the concentration, the development of supply and demand in the affected markets, the needs and interests of consumers and research and development provided that it is to the consumers' advantage and does not form an obstacle to effective competition. If the common share of the undertakings concerned on the relevant market does not exceed 25 percent, it is presumed that the concentration will not result in a significant distortion of competition, unless proven otherwise during the concentration assessment.

The Czech Competition Office can issue the following decisions:

• Decision stating that the merger is not subject to approval
• Approval of the concentration – based on a proposal of the parties the Czech Competition Office can approve the concentration with conditions (commitments proposed by the parties) in order to preserve the competition. Failure to fulfill the conditions can result in revoking the approval.
• Prohibition of the concentration
• No decision – if no decision is issued within the statutory time limit it is deemed that the approval has been granted In addition to the decision on the merger notification the Czech Competition Office can issue:
  • A decision revoking approval of a concentration – if the concentration approval was based on documents, data and information, for the completeness, correctness and truthfulness for which the parties to the proceedings are responsible and which turn out to be incorrect or incomplete, in full or in part, or where the approval has been obtained after the parties to the proceedings mislead the office or fail to fulfill the conditions, restrictions or commitments, subject to which the office made the approval. The Czech Competition Office may initiate proceedings to revoke its decision within one year after it discovered the above facts, but not later than five years after such events occurred.
  • A decision on derogation from the standstill obligation – for further detail please see additional comments in our response to "Is there an automatic waiting period? If so, please specify."
  • A decision imposing a fine for breach of the standstill obligation

Yes, the parties can propose such commitments before or during the proceedings but no later than 15 days after the objections of the Czech Competition Office were served on the parties (an exception can be made to extend the deadline for another 15 days). Along with the proposal, the parties must provide evidence that the proposed commitments are sufficient to restore or maintain effective competition. The burden of proof is born by the parties.

Penalties for intentional or negligent breach of the prohibition to implement the concentration before the Czech Competition Office gives its clearance can be as much as CZK 10 million (approximately EUR 407,080) or 10 percent of the net turnover for the last accounting period. If the Czech Competition Office imposes a penalty on an association of undertakings, and the association is unable to pay the imposed penalties, each member of the association guarantees, by virtue of law, payment of the penalties imposed on the whole association up to 10 percent of its net aggregate turnover for the given accounting period.

Further, the Czech Competition Office may impose a penalty of up to CZK 300,000 (approximately EUR 12,200) or up to 1 percent of the net turnover of the relevant undertaking for the last accounting period for intentionally not submitting or only partially submitting documents or accurate or complete information to the Czech Competition Office.

When setting a penalty, the Czech Competition Office considers, in particular, the gravity of the administrative offense, how the administrative offense was committed and the results as well as the circumstances under which the administrative offense was committed. Legal persons are not responsible for an administrative offense if they prove that they made the required effort to prevent a violation of the legal obligation. The statutory barred period is 10 years.

Finally, the Czech Competition Office is also entitled to decide, according to the subject matter of the case, to impose remedial measures and to set a reasonable deadline for compliance therewith.

See our response to "Describe the sanctions for not filing or filing an incorrect/incomplete notification." (particularly the first paragraph).

No, the Czech Competition Office can only review the notifiable mergers. This is without prejudice to the application of Article 22 of the EU Merger Regulation. 

The Czech Competition Office is not authorized to commence the proceedings on merger approval ex officio, i.e. without notification of the parties concerned. However, the Czech Competition Office can: 

• impose on the undertakings an obligation to sell an undertaking or part thereof, where it acquired the possibility to control them, or discharge the contract, on the basis of which the concentration was realized, or to implement other adequate measures necessary for re-establishing effective competition in the relevant market;
• impose a penalty of up to CZK 10 million (approximately EUR 407,000), or 10 percent of the net turnover for the last accounting period (for further detail, please see our response to "Describe the sanctions for not filing or filing an incorrect/incomplete notification."); or
• impose remedial measures to restore effective competition in the market and stipulate a reasonable deadline for their fulfillment.

The Czech Competition Office closely follows the decision-making practice of the European Commission, the European Court and the Courts of First Instance in this area.

The Czech Competition Office is fairly cooperative and open to discussing controversial issues (both via electronic communication and personally).

In recent years, all notified mergers were approved. In the same time period, the Czech Competition Office imposed a penalty in several cases for failure to notify the merger.

Please note, that for conversions of turnover thresholds, we used a 2022 average rate of EUR 1 corresponding to CZK 24.565 and rounded the resulting numbers.