1) Is a merger control regulation in force?

Yes. Merger control regulation is present in Part 5 of the Faroese Competition Act.

2) Which authorities enforce the merger control regulation?

The Faroese Competition Council enforces the Faroese Competition Act including the merger regulation contained therein. However, the Competition Authority, which is the secretariat of the Faroese Competition Council, prepares the cases and the day-to-day administration of the Faroese Competition Act.

Decisions of the Faroese Competition Authority and the Competition Council may be appealed to the Faroese Appeals Tribunal.

3) Relevant regulations and guidelines with links:

The merger regulation is contained in Part 5 of the Faroese Competition Act. More detailed rules may be found in various executive orders. Links to the relevant legislation, guidelines and forms are listed here:

4) Does general competition regulation apply to mergers or ancillary restrictions?

The Faroese Competition Act is modelled on the Danish Competition Act, which is interpreted in accordance with EU competition law in this respect (as in any other competition regulation matters). Consequently, the prohibition of anti-competitive agreements etc. and the prohibition of abuse of dominant market position, may apply to mergers that do not meet the thresholds for merger control.

For mergers that meet the thresholds, generally, restrictions of competition that are ancillary to the merger, for instance a standard non-competition obligation on the seller, are considered inherent parts of the merger and are not subject to separate scrutiny under the general competition regulation. However, restrictions that go beyond what may be considered ancillary may be caught by the general prohibition on anti-competitive agreements.

Furthermore, the general competition regulation may in special circumstances be used to oppose a transaction as such (not merely a specific restriction in the transaction documents). For instance, the general prohibition on anti-competitive agreements may be applied to full-function joint ventures that have coordination of the market behaviour of the parent companies as their object or effect.

5) May an authority order a split-up of a business irrespective of a merger?

No.

(Section 26 of the Faroese Competition Act lists the orders that may be issued by the Faroese Competition Council.)

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

The Faroese Competition Act does not regulate any specific sector. However, the Faroese Fishing Act has certain anti-trust rules, which are stricter than the merger control regime in the competition regulation. In general, the mergers that would be permissible under the Faroese Fishing act would also be permissible under the merger control regime. 

Foreign investment control

There has been an expressed desire to implement a regime controlling foreign investment, however, there is not at this time a regime of control of foreign investment in place in the Faroe Islands.

7) Are any parts of the territory exempted or covered by particular regulation?

No.

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory, provided the thresholds are met.

9) Is there a general definition of transactions subject to merger control?

Yes, according to the Faroese Competition Act a merger subject to merger control is defined as a transaction whereby:

1. two or more previously independent undertakings merge into one undertaking;
2. one or more persons who already control at least one undertaking, or one or more undertakings – by an agreement to purchase shares or assets or by any other means – acquire direct or indirect control of the entirety of or parts of one or more other undertakings; or
3. a joint venture that will perform on a permanent basis all the functions of an independent business entity is established.

Note that certain transactions of a temporary nature are not considered to be mergers subject to merger control (see topics 19 and 20).

10) Is "change of control" of a business required?

Yes, generally a merger will only be considered to take place if the transaction results in a change of control over a business.

However, transactions that result in the establishment of a new business (a joint venture) controlled by two or more businesses or persons already controlling one or more businesses will also constitute a merger.

11) How is “control” defined?

The Faroese Competition Act states that “control” of an undertaking is obtained through rights or agreements or in other ways that will, either separately or in combination, make it possible to exert decisive influence on the operations of the undertaking.

The Faroese Competition Act is modelled on the Danish Competition Act, which interprets "Control" and "Change of control" according to EU competition law, including the European Commission’s Consolidated Jurisdictional Notice.

12) Acquisition of a minority interest

Acquisition of a minority interest that does not result in anyone gaining control over a business is not subject to merger control.

However, if acquisition of a minority interest confers someone with de facto control of a business, the transaction will be subject to merger control. This is, for instance, the case if the buyer is provided with veto rights regarding decisions that are essential for the strategic behaviour of the business or if the remaining shares are spread over a large number of shareholders and the acquired shares de facto confer the buyer with a decisive influence on general meetings.

13) Joint ventures/joint control – which transactions constitute mergers?

It is mandatory to notify the creation of a full-function joint venture. Full-function is viewed as a joint venture performing all the functions of an autonomous economic entity on a lasting basis.

A joint venture that is not full-function, because it does not, on a lasting basis, perform all the functions of an autonomous economic entity, is not subject to merger control but may be scrutinized under the general prohibition on anti-competitive agreements.

Whether a joint venture is considered full-function or merely “cooperative” depends on the level of the joint venture’s dependence on its parents and to what extent the joint venture has an independent presence in the market.

Even if a joint venture is full-function and therefore subject to merger control (provided the thresholds are met), the general prohibition on anti-competitive agreements may also be applied if the joint venture has coordination of the market behaviour of the parent companies as object or effect.

14) Which thresholds decide whether a merger notification must be filed?
(Unless explicitly stated otherwise, the thresholds described under one threshold category are not cumulative with those described under another category. Thus for instance if there is a market share threshold and a turnover threshold, it is sufficient to meet one of these, unless stated otherwise.)

a) Turnover thresholds

A merger notification must be filed if:

1. the combined total annual turnover in the Faroe Islands of all undertakings involved is at least DKK 75 million and the total annual turnover in the Faroe Islands of each of at least two of the undertakings involved is at least DKK 15 million; or
2. the total annual turnover in the Faroe Islands of at least one of the undertakings involved is at least DKK 75 million and the total annual worldwide turnover of at least one of the other undertakings involved is at least DKK 75 million.

b) Market share thresholds

N/A

c) Value of transaction thresholds

N/A

d) Assets requirements

N/A

e) Other

Certain anti-trust rules apply to the fishing sector under the Faroese Fishery Act (available in Faroese here), more specifically in Sections 11-13.

Sections 11 and 12 set up limitations for establishing fishery activities in the Faroe Islands (e.g., country of domicile, ownership, etc.), while Section 13 limits the total control of the company’s share of the Faroese commercial fishing split up into different groups. Similarly, the provisions also set up requirements that any changes in the ownership of commercial fishing companies must be notified to the Faroese authorities before closing. If this is not complied with, the authorities may revoke the fishing license.

These anti-trust rules are in general stricter than the merger regime. Therefore, a merger under the fishing sector, which is not in conflict with these anti-trust rules, will generally be allowed under the general merger regime.

15) Special thresholds for particular businesses

The thresholds stated in topic 14 apply to all transactions.

A relatively strict anti-trust regulation is applied in the fishing sector. See above in topics 6 and 14.

16) Rules on calculation and geographical allocation of turnover

Rules on calculation and geographical allocation of turnover are contained in the Notice on the calculation of turnover, which is only available in Faroese. Turnover shall be converted to DKK.

Turnover is calculated on the basis of the most recent audited accounts of a financial year of the participating undertakings as well as any undertakings associated with each participating undertaking, including any direct or indirect parent companies, subsidiaries, joint ventures and subsidiaries of parent companies. The turnover a joint venture has with third parties must be divided equally between the controlling owners irrespective of their share in the capital and the actual distribution of profit; i.e., if the shares in a joint venture are divided 60/40 between two participants who exert joint control, half of the turnover of the joint venture must be attributed to each participant.

Is the seller/seller's group turnover relevant in a standard acquisition of sole control?

No.

17) Special rules on calculation of turnover for particular businesses

Businesses owned by the State/central authorities
For businesses owned by the State/central authorities the aggregate gross operational expenditure of the relevant Ministry in the preceding accounting year applies instead of turnover.

Businesses owned by municipal authorities
For businesses owned by local or regional authorities the aggregate gross operational and investment expenditure of the relevant authority in the preceding accounting year applies instead of turnover.

Insurance undertakings
For an insurance undertaking the value of the gross premiums written applies. This includes all premiums received by the undertaking the relevant year. Amounts paid by the undertaking for reinsurance are not deducted.

Credit institutions and other financial undertakings
Turnover is calculated as the sum of:

1. Interest income and similar income
2. Income from shares
3. Fees and commissions receivable
4. Net profit on financial operations
5. Other operating income.

Trade associations and comparable associations
Turnover is calculated as the combined turnover of all undertakings that are members (as well as their associated undertakings) and the turnover of the association itself – with deduction of any turnover between the members and between the members and the association.

18) Series of transactions that must be treated as one transaction

Transactions that are interdependent because they are linked by conditions must be treated as one if control in each transaction is acquired ultimately by the same undertaking(s).

Furthermore, if the same parties enter into different transactions that are not interdependent regarding the sale of different businesses or different parts of a business, all such transactions within a two-year period must be treated as one and the same merger.

19) Temporary change of control

The Faroese competition regulation does not address the possibility of exemption for a transaction only granting temporary control, however, see topic 20.

20) Special industries, owners or types of transactions

The Faroese Competition Act specifies that there is no obligation to file a merger notification in the following situations:

1. Where credit institutions, other financial undertakings or insurance companies whose normal activities include transactions and dealing in securities are temporarily in possession of interests in an undertaking acquired with the intention to resell, provided that they a) do not exercise voting rights for the purpose of determining the competitive conduct of that undertaking or b) exercise voting rights exclusively with the aim of preparing the disposal of all or part of that undertaking and that the disposal takes place within one year of the date of acquisition; or
2. Where control is acquired by a professional who has powers under current insolvency legislation to deal with and dispose of the undertaking.

21) Transactions involving only foreign businesses (foreign-to-foreign)

There is no exemption for foreign-to-foreign transactions. All transactions that meet the thresholds are subject to merger control regardless of where the undertakings concerned are registered, operate or own assets. It should be noted that the threshold has been defined so as to require actual turnover in the Faroe Islands. Where no actual effects on the market can be shown, the merger can generally be notified – and approved – by short notice.

22) No overlap of activities of the parties

There is no exemption for transactions with no overlap of activities, but there is a simplified procedure available if there is no overlap.

23) Other exemptions from notification duty even if thresholds ARE met?

N/A.

24) May a merging party file voluntarily even if the thresholds are not exceeded?

No.

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

No.

26) Referral within the jurisdiction

N/A.

27) Referral from another jurisdiction

N/A.

28) Referral to another jurisdiction

N/A.

29) May the merging parties request or oppose a referral decision?

30) Stage of transaction when notification must be filed

A merger notification must be filed no later than one week after a binding agreement has been concluded, a public notice have been given, or a controlling interest has been acquired. 

31) Pre-notification consultations

The Faroese Competition Authority encourages pre-notification consultations. Often the parties will submit a number of draft notifications before the authority informs the parties that the notification appears to be ready to be formally submitted.

The deadlines for the Faroese competition authorities will only start to run from the formal submission, but it is normally advisable not to formally submit the notification before the authority has invited the parties to do so.

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

Mergers that are a consequence of acquisition of securities on a stock exchange or a public takeover bid must be notified after the acquisition/publication of the takeover bid.

The acquisition/takeover bid may be implemented before approval from the Faroese competition authorities has been obtained, provided that the merger is immediately notified to the authority and that the acquirer does not exercise the voting rights attached to the securities in question or only does so on the basis of an exemption granted by the authorities.

33) Forms available for completing a notification

There is one form for both simplified and full notification available. Both are included in the same form mentioned in topic 3, but the form is only available in Faroese.

Simplified notification is possible in each of the following cases:

1. two businesses acquire or establish a joint venture that will only have insignificant business in the Faroe Islands;
2. a business goes from having joint control to having sole control over another business;
3. the merging parties are not active on the same markets or vertically connected markets;
4. the merging parties are active on same markets but do not have a combined horizontal market share exceeding 15% in the Faroe Islands;
5. the merging parties are active on same markets but do not have a combined vertical market share exceeding 25% in the Faroe Islands;
6. the merger is covered by Section 14(1)(2) of the Faroese Competition Act, i.e. the aggregate annual turnover of at least one of the undertakings involved is more than DKK 75 million in the Faroe Islands and the aggregate annual turnover of at least one of the other undertakings concerned is more than DKK 75 million world-wide, or
7. the merging parties are active in markets requiring a license according to the Faroese fishing legislation.

Note, however, that the Faroese competition authorities may always request a full notification, even if the conditions for simplified notification are present, and even after having accepted and declared a simplified notification complete.

34) Languages that may be applied in notifications and communication

Faroese, Danish and English.

35) Documents that must be supplied with notification

The following documents should always be supplied with a merger notification whether simplified or full:

1. the most recent audited annual financial statements and annual reports for each of the parties to the merger.
2. documentation regarding undertakings that have been sold or acquired after the conclusion of the most recent financial year;
3. all documents concerning the merger, regardless of whether the merger is brought about by agreement between the parties to the merger, acquisition of a controlling interest or a public takeover bid;
4. group chart/overview for each of the parties to the merger;
5. Excel file with contact information for most significant competitors, suppliers and customers;
6. any documentation on which the parties have based their market definition and assessment of market shares;
7. non-confidential version of the notification (to be supplied to third parties);
8. Faroese certificate of incorporation (if any); and
9. documentation of payment of the applicable filing fee.

For full notification, a range of further documents may be relevant, including analyses, reports, minutes of board meetings and similar documents related to the merger.

36) Filing fees

The filing fee for simplified notifications is DKK 50,000.

For full a notification, the filing fee is 0.1% of the combined total annual turnover in the Faroe Islands of all undertakings involved; however, the filing fee is subject to a maximum of 300.000 DKK.

37) Is implementation of the merger before approval prohibited?

Yes. The merging businesses must be run separately and independently until the merger has been approved.

Please also see topic 32 regarding public takeover bids and acquisitions on stock exchanges.

38) May the parties get permission to implement before approval?

Yes, the Faroese Competition Authority may exempt from the prohibition on implementation before approval.

39) Due diligence and other preparatory steps

The parties must conduct their due diligence in a way to safeguard against the sharing of commercially sensitive information that is not strictly necessary in assessing the transaction. Thus, the sharing of commercially sensitive information must also end at the time of signing at the latest.

There are no guidelines on what may be considered acceptable preparatory steps under Greenlandic law. However, as the Faroese regime is modelled after the Danish regime, which in turn is modelled and interpreted on the basis of the EU merger control regime, similar principles apply. I.e., preparation of integration of internal functions such as IT and HR is generally acceptable, as long as it is conditional on approval.

40) Veto rights before closing and "Ordinary course of business" clauses

An "ordinary course of business" clause that prevents the target company from taking decisions outside the course of its ordinary business until the closing date is generally considered acceptable.

However, it must be assessed on a case-by-case basis to what extent the parties may discuss – or provide each other with veto rights concerning – any decisions in their respective businesses.

41) Implementation outside the jurisdiction before approval – "Carve out"

There are no specific rules on “carve out” of the Faroese part of a transaction to avoid delaying implementation in the rest of the world pending approval in the Faroe Islands.

42) Consequences of implementing without approval/permission

The parties may be fined if the merger is implemented before approval is obtained. The amount of the fine will be fixed based on the nature, gravity and duration of the infringement

Furthermore, the merger may be prohibited and the Faroese Competition Authority may decide to split up the merged entity or take any other measures necessary to restore efficient competition.

43) Phases and deadlines

44) Tests or criteria applied when a merger is assessed

It is assessed whether the merger will "significantly impede effective competition – in particular due to the creation or strengthening of a dominant position".

A range of factors may be taken into consideration, including efficiencies that may be gained from the merger (efficiency defense) and whether one of the parties is likely to fail as an independent business (failing firm defense).

45) May any non-competition issues be considered?

No.

46) Special tests or criteria applicable for joint ventures

The assessment for joint ventures is the same as for other mergers, but if the joint venture also has coordination between the owners as object or effect, it will also be assessed whether such coordination is acceptable under the general prohibition against anti-competitive agreements. 

47) Decisions and remedies/commitments available

A merger may be approved, approved with conditions/commitments or prohibited.

If the Faroese Competition Authority expresses serious concerns about the merger, it is important that the parties enter into negotiations of possible commitments well before the expiry of the deadlines, as the authority will normally only consider an approval with conditions if the parties have offered commitments.

Commitments may take any form and they can be either structural or behavioural and with or without time limitations.

The authority may revoke an approval if at any time it becomes aware that incorrect or misleading information has been provided by the parties or if the parties do not comply with the conditions/commitments contained in the approval.

If a merger has been implemented without approval, the Faroese Competition Authority may prohibit the merger and order a separation of the businesses or any other measure capable of restoring competition.

48) How and when will details about the merger be published?

The Faroese Competition Authority will generally make a public announcement when it has received a merger notification and again when a decision has been taken. The latter announcement will include a non-confidential version of the decision. The level of detail of decisions varies considerably.

To protect business secrets, the parties are requested to provide a non-confidential description of the transaction with the notification and to identify any confidential information in the notification and the final decision.

49) Access to the file for the merging parties and third parties

The merging parties:

The merging parties have a right to access to the file. However, the authority may redact third parties’ confidential information, often including the identity of such third parties. There is no right of access to the authority’s internal documents and correspondence.

Third parties:

Third parties do not have access to the file, but the Faroese Competition Authority may decide to provide third parties with a non-confidential version of the notification and other documents in connection with its market surveys.

50) Who can appeal and what may be appealed?

The decisions made by the Competition Council can be appealed to the Competition Appeals Tribunal. The decisions made by the Competition Appels Tribunal may in turn be appealed to the ordinary Faroese court.