Merger Control in Cyprus: The role of economic analysis

Merger control is a fundamental tool for preserving effective competition in the Cypriot economy. While the notification and assessment process is legal in nature, it increasingly relies on rigorous economic analysis. At Trojan Economics, we provide expert economic support at every stage of the merger review process, ensuring that the transaction is understood in terms of its competitive impact.

Regulatory framework

Under the Control of Concentrations Between Undertakings Law  of 2014 (Law 83(I)/2014), a concentration must be notified to the Cyprus Commission for the Protection of Competition (CPC) if:

• At least two of the undertakings involved each have a global turnover of more than €3.5 million;

• At least one of the undertakings has turnover in Cyprus;

• The total turnover in Cyprus of all undertakings exceeds €3.5 million.

The CPC examines whether the proposed transaction may significantly impede effective competition, particularly by creating or strengthening a dominant position. This assessment can be carried out under Phase I (initial review) or Phase II (in-depth investigation).

The Economic Toolkit: Key Areas of Analysis

1. Definition of the relevant market

Market definition is the cornerstone of merger assessment. We apply economic methodologies and data to define:

• Product Market: Based on demand-side substitutability, assessed using tools such as:

  • Qualitative analysis (product characteristics, usage, price levels);

  • Quantitative tools (e.g. SSNIP tests, diversion ratios);

• Geographic Market: Based on the area where conditions of competition are sufficiently homogeneous, supported by data on transport costs, trade patterns, and price differentials.

Our analysis often includes structured market surveys or transactional datasets to support robust conclusions.

2. Calculation of market shares and concentration indexes

Once the relevant market is defined, we calculate the market shares of all key players based on reliable turnover, volume, or capacity data. This includes:

• Pre- and post-merger market shares;
• Herfindahl–Hirschman Index (HHI);
• CR3/CR4 concentration ratios.

These indicators help the CPC (and the merging parties) anticipate the level of scrutiny the transaction may face.

3. Competitive effects assessment

Our economic assessment focuses on whether the transaction would likely:

• Increase unilateral market power, allowing price increases or quality reduction;
• Facilitate coordination among remaining firms;
• Foreclose competitors through vertical integration or control of critical inputs or customers.

Depending on the case, we use price-concentration analysis, bidding data analysis, or merger simulation models to estimate likely outcomes under different scenarios.

4. Quantification of potential efficiencies

Efficiencies are a potential counterbalance to anti-competitive effects, but they must be:

• Merger-specific: Not achievable by other means;
• Verifiable: Backed by credible documentation and analysis;
• Passed on to consumers: At least in part.

We support clients in identifying, documenting, and quantifying efficiencies such as:

• Economies of scale and scope;
• Lower unit costs;
• Innovation and R&D synergies;
• Expanded production capacity or improved distribution networks.

Where applicable, we employ cost-benefit models to estimate the net impact on prices and output.

5. Remedies and commitments

When concerns arise, remedies may be required to gain approval. Our role includes:

• Designing economically sound remedies (e.g. divestitures, behavioural commitments);

• Assessing remedy effectiveness through market modelling;

• Supporting negotiations with the CPC, ensuring remedies address the identified concerns without undermining the business rationale of the merger.

Our Services

At Trojan Economics, we provide economic consultancy support across all stages of merger control:

In today’s enforcement environment, sound economic reasoning can be decisive in determining the outcome of a merger review. By engaging economic experts early, merging parties can anticipate regulatory concerns, prepare robust supporting evidence, and propose credible remedies when necessary.

For guidance on any aspect of merger control in Cyprus, contact Trojan Economics. We are committed to delivering rigorous, practical, and strategic economic support tailored to the needs of each transaction.