Azerbaijan Merger Control Regime

In many jurisdictions, mergers and acquisitions (‘Merger’ or ‘Mergers’) are subject to specific legal rules under competition legislation. The Merger control regime in Azerbaijan has both corporate law aspects and competition law aspects. Mergers in the context of competition regulations are more comprehensive, covering not only ‘traditional’ M&As of corporate law, but also specific transactions that might be classified as a Merger under competition law, requiring notification or filings to be made to the relevant national competition agency. 

Regulating Mergers is essential for preventing restrictions on competition within the relevant market, which could deprive consumers of the benefits of effective competition – such as lower prices, higher-quality products, a broader selection of goods and services, and ongoing innovation.

This article covers the competition law Mergers with particular focus on Azerbaijan’s Merger control regime. 

1. What is ‘Merger’ under Azerbaijani Competition Regulations? 

Merger regulation laws in Azerbaijan are enshrined in Competition Code (‘the Code’) effective since July 1, 2024. State Agency for Antimonopoly and Consumer Market Control under the President of the Republic of Azerbaijan (‘CA’) is the responsible body for carrying out the Merger control. 

Economic concentration

The Code uses the term ‘concentration’ for competition law Mergers to differentiate them from corporate mergers. Joint ventures also might fall under concentration which are otherwise examined under Chapter 4 prohitibitions (‘Agreements restricting the competition’) of the Code. Although Mergers between entities related to each other under the ‘Single Economic Entity’ doctrine do not constitute concentration, such transactions are still notifiable to the CA within 7 days after completion of the Merger. 

Conditions for qualification of a merger as a ‘concentration’ as per Art 26 of the Code are as follows: 

• Traditional M&A: merger of two or more independent economic entities (or parts of their businesses)
• Acquisition of control (direct or indirect), either through the acquisition of shares or management rights, in the following ways:
• Acquisition of voting shares at stock companies or membership interests at an LLC by a new or existing shareholder or members;
• Acquisition of assets, as well as more than 20% of the core production facilities and intangible assets;
• Agreements whose duration exceeds 6 months, conferring control over the assets (including core production facilities and intangible assets) or the right to decisively influence the strategic decision-making of an entity
• Acquisition of control over the management of business or executive bodies of an entity (including, based on a service or a joint operation agreement);
• Acquisition of assets of a financial institution, in an amount more than determined by the Cabinet of Ministers, by a financial institution (this amount is yet to be determined);
• Acquisition of more than 50% of voting shares or rights over management of the foreign entity engaged in the same activity as the acquiring entity;
• Cross-directorship or cross-participation in the management board, executive bodies of 2 or more entities.
• Joint ventures 

2. When to notify CA about the Merger? 

Not all the concentrations are notifiable – the threshold for the notifiable concentrations under Art 27 of the Code is as follows: 

• One of the parties to the concentration holds a dominant position in the relevant market;
• The turnover of one of the entities participating in the concentration or of the merged entity exceeds 25 million manats in the relevant market;
• The combined domestic and worldwide turnover of the entities participating in the concentration exceeds 35 million manats in the most recent reporting year;
• The domestic turnover of one of the entities participating in the concentration exceeds 15 million manats, while this turnover should be more than 5 million manats for the other party (parties) to the concentration in the most recent reporting year;
• For the parties that do not have any of the aforementioned turnovers, if their total turnover comprises at least 20% of the total turnover of the relevant market.

While appraising the Merger, the focus of the CA will be on the effects of the Merger on the structure of the market and the state of the competition therein. Mergers which restrict or are capable of restricting the competition in the relevant market (or other markets) on the whole territory of Azerbaijan or part of it, or result (or are capable of resulting) in the creation of a dominant position or strengthening of it are prohibited. As the Code doesn’t distinguish between single or collective dominance at this point, both are presumed to be covered under the prohibition. 

Appraisal of Joint Ventures is vaguer as the Code doesn’t specify conditions under which the Joint Venture would be appraised as a ‘Merger’ rather than a horizontal agreement with the actual or potential effect of restricting competition. The CabMin is yet to determine the rules of appraisal of Mergers, which potentially will address this issue. 

The CA will also take into account whether the efficiencies brought about by the Merger outweigh the anti-competitive effects of the Merger, whether it doesn’t harm the consumers, and whether the benefits are Merger specific, i.e., there are no less anti-competitive ways of achieving the same results other than the merger. 

3. Merger Clearance: Filing Procedure

Timing and Deadlines 

If at least one of the conditions set out in Art 27 exists, the parties must apply to notify the CA of the Merger for clearance. Applications for approval must be submitted before the merger is implemented and within 30 days after the parties to the Merger have reached the agreement, or made up a decision, or an offer for potential Merger was made, or any other form in which parties have reached the decision for a merger (whichever of these comes first). For concentrations arising from public procurements, auctions, or other competitive processes, the period for submitting an application is calculated from the date of declaration of the winner.

Documentation and requirements 

The form of the application has been approved by the decision of the Cabinet of Ministers on approval of the “Form of the application provided for in Article 30.1 of the Competition Code of the Republic of Azerbaijan”. 

The following documents must accompany the application:

1. A copy of the agreement on concentration, decision, or other documents providing the basis for the concentration, certified by a notary public or, if there is a seal of the economic entity, with a seal (together with all annexes);
2. Information on the main types of activities, turnover (in kind or in monetary terms), and market shares of the economic entities participating in the concentration for the last 2 (two) years;
3. A copy of the reports submitted by the economic entities participating in the concentration to the tax and state statistics authorities on the volume of turnover (in kind or in monetary terms) for the last 2 (two) years;
4. A copy of the constituent documents of the economic entities participating in the concentration;
5. Information, as specified in paragraphs 2–4 above, on the founders of the business entities participating in the concentration, the entities under decisive control of the participating in the concentration entities, the entities that will exercise decisive control over the participating entities after the concentration, the entities over which the participating entities exercise decisive control but which do not participate in the concentration, as well as any existing joint ventures;
6. In the case of a concentration involving joint-stock companies, a document confirming that the shareholders have been duly notified in advance of the concentration;
7. A document confirming payment of the state fee for the review of the application.

As noted above, the Merger of the parties related to each other under the SEE doctrine, although not a concentration, is still ex-post notifiable. The following documents must be presented to the CA: 

1. The following information on each economic entity in the group of persons:
2. information on the main types of activities, turnover (in kind or in monetary terms), and market shares of the economic entities participating in the concentration for the last 2 (two) years;
3. a copy of the reports submitted by the economic entities participating in the concentration to the tax and state statistics authorities on the volume of turnover (in kind or in monetary terms) for the last 2 (two) years;
4. a copy of the constituent documents of the economic entities participating in the concentration.
5. Information on the turnover (in kind or value) between the economic entity and each economic entity in the group of persons in the last reporting year;
6. The form of dependence of the economic entity and each economic entity in the group of persons.

Application Review and Approval Process

The CA informs about any discrepancies or problems in the application within 10 (ten) business days, and the parties to the Merger are obliged to respond and fix the problems within 10 (ten) business days after receiving the notification from the CA about the problem. The general review period for the complete and accepted application is 30 (thirty) business days after the date of its submission. This period can be extended up to two times, each by 30 (thirty) business days. The CA will decide on these extensions and inform the relevant party within 3 (three) business days.

Furthermore, if the CA determines any restrictions posed by the concentration that can be eliminated within the investigation period, a notification is provided to the relevant party, instructing them to eliminate the restriction. The applicant shall then eliminate the deficiencies within the specified time frame. The review period is suspended in this case until the relevant party fixes the notified problem. 

Either one of the following types of decision is adopted: 

• Leaving the application unexamined: This applies if the Merger doesn’t fall under Art 27 or if the identified technical deficiencies in the documents are not remedied within 10 (ten) business days;
• Clearing the merger (fully or partially): This decision is made if the concentration does not restrict competition in the relevant market or if the pro-competitive effects, such as technological or efficiency-enhancing benefits, outweigh any potential competition restrictions, do not harm consumer interests, and cannot be achieved through alternative means;
• Refusing the application: This applies if the concentration restricts or may restrict competition in the relevant market or other markets, leads or may lead to the creation or strengthening of a dominant position, or if identified and rectifiable competition restrictions are not eliminated within 15 to 30 (fifteen to thirty) business days.

The CA has the right to establish justified additional conditions for the parties to the concentration in accordance with the laws regulating this area only for the protection of competition. 

For the purpose of examining the application, the CA may request additional information from the economic entity necessary for the resolution of the case with a justified request. If the CA does not make a decision during the examination of the application, the concentration shall be deemed approved.

The CA publishes information on the results of the examination of the submitted applications on its official website.

4. Consequences of non-compliance 

Economic entities are held accountable for failing to submit an application to the CA for concentrations subject to approval or for submitting the application after the concentration has already occurred. Each economic entity participating in the concentration is individually liable for this non-compliance. A financial sanction of up to 5% of the total turnover of the economic entity in the financial year preceding the year of the CA's decision may be imposed for such violations. 

Furthermore, if the concentration that is notifiable under Art 27 is not notified and results in restriction of competition or is implemented contrary to the permit granted by the CA with additional conditions, the CA has the right to apply to the court for the termination of the concentration.

Additionally, economic entities are responsible for submitting incomplete, incorrect, or false documents and information to the CA. This includes late submissions or failure to provide the required documents and information. A financial sanction of up to 3% of the total turnover of the economic entity in the financial year preceding the year of the CA's decision may be imposed for these violations.

When turnover serves as the basis for calculating financial sanctions, the liability of the respective economic entities is determined proportionally to their level of participation.