Proposed Reforms To Malta’s Merger Control Framework: Striking The Right Balance

The proposed amendments to the Control of Concentration Regulations (S.L. 379.08) represent a significant step in the continued evolution of Malta’s merger control regime. The initiative by the Office for Competition within the Malta Competition and Consumer Affairs Authority (MCCAA) is both timely and necessary, particularly in light of the extensive jurisprudence developed by the European courts and the need to align with modern economic realities and best practices across the EU.

Merger control remains a critical tool in safeguarding competitive markets by preventing concentrations that may substantially lessen competition. At the same time, regulatory frameworks must provide clarity and predictability. Investors and businesses depend on clearly defined thresholds and procedures to assess whether regulatory approvals are required and to execute transactions efficiently.

While the proposed reforms move in the right direction, certain elements most notably the introduction of call-in powers and the increase in fines raise legitimate concerns regarding proportionality and legal certainty.

Notification Thresholds: A Welcome Adjustment

One of the most positive aspects of the proposed amendments is the revision of notification thresholds. The move to refine turnover-based thresholds ensures that regulatory scrutiny is focused on transactions that genuinely impact the Maltese market, while excluding those unlikely to harm competition.

This approach reduces unnecessary administrative burdens, particularly for smaller enterprises, and reflects a more targeted and efficient regulatory framework.

Call-In Powers: Flexibility vs Legal Certainty

The proposed introduction of call-in powers for below-threshold transactions reflects a growing trend across EU Member States, particularly in response to concerns surrounding so-called “killer acquisitions.” While the rationale is understandable, the implementation of such powers must be approached with caution.

Notably, the Court of Justice of the European Union in the landmark Illumina v Commission (Grail) judgment emphasised the importance of turnover-based thresholds as a guarantee of foreseeability and legal certainty for businesses.

Across the EU, national competition authorities that have adopted call-in mechanisms have typically done so using clear and objective criteria. Jurisdictions such as Denmark, Germany, Hungary, Italy and Sweden have introduced measurable thresholds or structured conditions to guide intervention.

By contrast, Ireland has adopted a broader, more discretionary approach, allowing intervention where a transaction may affect competition. This model has been criticised for increasing legal uncertainty.

The wording currently proposed in Regulation 2B appears closer to the Irish approach. This raises concerns, as broad discretionary powers without clearly defined parameters risk undermining predictability for businesses and investors.

A more balanced solution would involve combining high mandatory thresholds with a call-in mechanism subject to clear, objective criteria, safeguards, and time limits. Where flexibility is required, frameworks such as that found in Lithuania which ties intervention to the creation or strengthening of dominance or a significant impediment to effective competition may provide a useful model.

Requests for Information: Ensuring Proportionality

The proposal to empower the Director General to request necessary information is both reasonable and expected. However, this power should be exercised proportionately to avoid creating unnecessary administrative burdens, particularly in straightforward transactions.

Timeframes for responding to such requests should reflect the complexity and scope of the information required, ensuring that businesses are able to comply effectively without undue pressure.

Increased Fees: A Question of Proportionality

The proposed revision of filing fees acknowledges the increased complexity and resources required for merger assessments. However, the scale of the increase particularly the cap applicable to Phase II investigations, may prove burdensome, especially for smaller undertakings.

In the absence of transparency regarding the cost structure underlying these increases, there is a risk that the revised fees could act as a deterrent to legitimate transactions. A tiered fee system, calibrated according to the size or revenue of the parties involved, would provide a more proportionate and equitable solution.

Suspension of Time Limits

Granting the Director General discretion to suspend procedural time limits during specific periods, such as August and the December–January holiday season, is a pragmatic and welcome development. Extending this suspension to cover requests for information during these periods would further enhance procedural fairness.

Consultation with Sector Regulators

The introduction of a mechanism requiring consultation with sector-specific regulatory authorities is a positive development. Sector regulators possess valuable insights into competitive dynamics within their industries, and their input can materially enhance the quality of merger assessments.

Remedies Where Unwinding Is Not Feasible

The proposed amendments grant the Director General broad powers to impose alternative remedies where unwinding a transaction is not possible. While this flexibility is necessary, the absence of a clearly defined framework raises concerns.

In practice, there may be situations where reversing a transaction is legally or economically impractical, or detrimental to third parties such as employees. However, granting overly broad discretionary powers without clear guidance risks undermining legal certainty.

To address this, any remedial measures should be explicitly required to be necessary and proportionate, and applied only where unwinding is genuinely impracticable. Additionally, providing illustrative examples, such as access obligations, non-discrimination requirements, FRAND-based IP licensing, or functional separation would enhance predictability.

Fines: Deterrence vs Excess

The proposed increase in penalties from a €10,000 cap to up to €50,000 or 1% of global turnover aims to strengthen compliance. While deterrence is important, penalties must remain proportionate to the infringement.

In particular, the proposed increases for certain procedural infringements risk being excessive and may disproportionately affect smaller undertakings.

Conclusion

Overall, the proposed reforms represent a meaningful step towards modernising Malta’s merger control framework and aligning it with EU standards. The direction of travel is clearly positive, with several measures enhancing efficiency, transparency, and regulatory effectiveness.

However, achieving the right balance between enforcement and legal certainty is essential. In particular, the framework would benefit from:

• Clearly defined and objective thresholds
• Structured and safeguarded call-in powers
• Proportionate fee and penalty regimes

With these refinements, Malta has the potential not only to modernise its system but to set a benchmark for merger control frameworks across the European Union.

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