A bill introducing screening of acquisitions (or retention) of predominant control in a telecoms party has come into force In the Netherlands. The Minister of Economic Affairs and Climate Policy will now assess whether a transaction of this kind results in a threat to the public interest, such as abuse or deliberate potential disruption of telecommunication services. The Minister has the power to require guarantees to address the threat or, as a last resort, prohibit the acquisition or retention of control. Under the new law, any investor intending to acquire predominant control of relevant influence in the Dutch telecoms sector will have to notify the Minister. This new notification and screening regime is not limited to “traditional” telecoms providers, but also extends to internet hubs and data centres.
Three-step testThe screening mechanism applies a three-step test. First, predominant control must be acquired. Second, the acquired company or assets must be significant enough to give the controlling investor relevant influence in the Dutch telecoms sector. If these two steps are met, the transaction has to be notified to the Investment Screening Bureau of the Ministry of Economic Affairs. As a third step, the minister will then assess whether the transaction risks threatening the public interest. The screening is a continuous process. It operates not only at the time of the transaction, but also afterwards, since, for example, the ultimate beneficial owner or geopolitical circumstances might change. Such change might cause the Minister to exercise its powers pursuant to this new act.
Step 1: predominant controlThere is predominant control when the transaction leads to:
- one party, or several parties acting in concert, directly or indirectly holding at least 30% of the voting rights at the company's general meeting;
- one party, or several parties acting in concert, obtaining the right to appoint or dismiss more than half of the company's managing or supervisory directors;
- one or more shares with special statutory rights related to control of the company being acquired, regardless of how much power those rights give to the holder; or
- the assets in an asset deal becoming a branch of the buyer, provided that these assets offer access to: (i) an electronic communications network or related services; or (ii) hosting services or an internet hub or data centre (this definition may be extended by ministerial decree).
Step 2: relevant influence in the Dutch telecoms sectorThe new law stipulates that an acquisition of shares or assets in the Dutch telecoms sector must be notified to the Minister
- if the buyer acquires predominant control (as set out above); and
- this may lead to relevant influence in the telecoms sector.
- Telecoms: providing telephone services, internet access services or electronic communications network access to more than 100,000 end users;
- Internet hubs: providing an internet node that more than 300 autonomous systems are connected to;
- Data centres: providing data centre services with a power capacity exceeding 50 MW or providing hosting services for more than 400,000 domain names with a .nl-extension;
- Trust services: providing a qualified trust service, such as electronic signatures, stamps, time stamps, registered electronic delivery services and website authentication certificates.
Notification process and time linesOnce the thresholds of predominant control and relevant influence are met, the Minister must be notified of the intended acquisition at least eight weeks before completion. If the acquisition takes place through a public offer, the notification must coincide with the public announcement of the offer. The Minister has eight weeks to decide, but the clock stops each time the Minister requests additional information. If the Minister decides that an in-depth review of the transaction is required, an additional six months will be allocated for a decision to be made. The obligation to notify the transaction to the Minister rests on the buyer. Failure to notify in a timely manner may lead to a fine of up to EUR 900,000. Where a qualifying transaction has been completed without having been notified, the Minister can prohibit the transaction within eight months after learning of it. Parties will then have to reduce the extent of their control below the threshold for predominant control. Pending that reduction, the acquirer may not exercise control. In contrast with EU and Dutch merger control rules, mandatory notification under the proposed regime does not suspend a transaction. Parties could theoretically continue with the intended transaction before the Minister decides on the case, but that has its risks: the Minister could prohibit the transaction afterwards. If the risk is taken, and the Minister prohibits the transaction, the parties would have to reduce their influence such that this no longer qualifies as predominant control. If a transaction is executed after a decision to prohibit it has been taken, the transaction will be null and void.
Step 3: assessment of public interest threatAfter receiving the notification, the Minister must assess whether there might be a threat to the public interest. This is deemed to be the case if the relevant influence could lead to: (i) breach of confidentiality in internet traffic and/or telephone communications; or (ii) a telecoms services outage for a large number of users or for the national or military security and intelligence agencies. While it is not yet clear how the assessment of this threat will be carried out in practice, the facts that have to be stated in the notification form give some insight into what the assessment will focus on. This specifically concerns the questions relating to the investor and any party acquiring control of the telecoms party through the investor. The notification form requests information about whether they are or were:
- subject to economic or financial sanctions;
- responsible for serious crimes, such as war crimes, crimes against humanity, or terrorism;
- convicted of participation in a criminal organisation, bribery, fraud, money laundering, child labour, or human trafficking.