The practice of the Office of Economic Competition on merger notifications has changed as of 1 January 2020
Based on Act no. LVII of 1996 on prohibition of unfair trading practices and restriction of competition, i.e. the Competition Act, companies must notify the Office of Economic Competition (GVH) of a merger if particular thresholds are reached or when it is not obvious that the merger will not significantly reduce competition. GVH approves a merger if the legal criteria are fulfilled or prohibits it if the merger significantly reduces competition in the market concerned.
Under the Competition Act notification can be submitted following publication of the public bid that set up the merger, conclusion of a contract or acquisition of the right of control, whichever first occurs. If submission occurs too soon GVH rejects the notification and only half of the fee of HUF 1 000 000 (ca. EUR 2 950) is reimbursable. So it is an important matter – also in relation to costs – when notification is held as premature if the parties include conditions in the contract.
For the sake of increasing legal predictability, GVH published a non-binding notice which includes detailed regulations on submission of a merger notification and the date of doing so.
Before 1 January 2020 GVH deemed notification as premature if the parties include a condition in the contract for completion of the merger that only they can fulfil, which in turn can make completion of the merger dependent or questionable.
However, after analyzing experience over recent years and seeking the opinion of professionals, GVH concluded that, as of 1 January 2020, if the parties reach a definitive and final agreement on the merger, GVH will not examine any condition of the contract that can make completion of the merger dependent or questionable. GVH explains that it based its decision on the assumption that the parties wishing to set up a merger should not be deprived of the opportunity, in the interest of making a decision as soon as possible, of risking unnecessary submission of a merger notification because of non-fulfilment of a condition. Therefore as of 1 January 2020 a condition laid down in the contract cannot be the basis for a merger notification to be deemed preliminary and so for rejection of the notification.
Source: Act no. LVII of 1996 on the prohibition of unfair trading practices and restriction of competition;
Notice no. 1/2019 of the President of Office of Economic Competition and the President of the Competition Council of Office of Economic on specific appliance issues in connection with the procedures initiated for the examination of the mergers