The Slovak Parliament adopts the Act on Protection of Competition which contains rules on merger control

The new Slovak Competition Act will come into force on 1 June 2021. While the primary purpose of adoption of the new legislation is the transposition of Directive 2019/1 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market (ECN+ Directive), the merger control area has not been ignored. The new Competition Act no longer contains special notification thresholds for creation of full-function joint ventures, introduces the power of the Antimonopoly Office of the Slovak Republic (AMO) to impose interim measures, specifies time limits in merger review proceedings, and inevitably deals with the impact of the COVID-19 pandemic.

Notification criteria

The criteria for notification of concentrations according to the new Competition Act follow the well-established logic of firm turnover thresholds. A concentration is subject to mandatory notification to the AMO if:

A. the combined aggregate turnover in the Slovak Republic of the undertakings concerned for the last financial year preceding the concentration was at least EUR 46 million and, at the same time, at least two of the undertakings concerned have each generated, in the Slovak Republic, an aggregate turnover of at least EUR 14 million for the last financial year preceding the concentration; or

B. the aggregate turnover for the last financial year preceding the concentration in the Slovak Republic was:

  • in case of a concentration by merger or amalgamation of two or more independent undertakings, at least EUR 14 million generated by at least one of the concerned undertakings and, at the same time, the worldwide aggregate turnover generated for the last financial year preceding the concentration generated by another of the concerned undertakings was at least EUR 46 million;
  • in case of a concentration by an acquisition of control, at least EUR 14 million generated by at least one target undertaking and, at the same time, the worldwide aggregate turnover for the last financial year preceding the concentration generated by any other of the concerned undertakings was at least EUR 46 million.

The new Competition Act no longer contains the special notification thresholds for concentrations by creation of full-function joint venturers, which were subject to notification if the aggregate turnover of at least one of the undertakings creating the joint venture in the Slovak Republic was at least EUR 14 million for the last financial year preceding the concentration, and at the same time, the worldwide aggregate turnover of another of the undertakings concerned was at least EUR 46 million for the last financial year preceding the concentration.

The threshold, not requiring the joint venture itself to have any turnover in Slovakia, was generally considered unnecessary, since it caught several purely foreign-to-foreign transactions with no relation to the Slovak market (including such diverse transactions as entry of Indian investor to businesses based in Germany, Italy, UK, the Netherlands, Singapore, Brazil, Mexico, China, and USA, establishment of automotive manufacturer in Thailand, or renovation and operation of the airport in Santiago de Chile). Moreover, it was difficult in practice to distinguish between some cases of establishment of full-function joint venture and acquisition of joint control.

Under the new Competition Act, concentrations by establishment of full-function joint ventures will be assessed under the general notification threshold, and the threshold for acquisitions of control.

The provision in the first draft of the new Competition Act on the basis of which the AMO should have gained the power to assess concentrations not meeting the turnover thresholds based on an alternative turnover and market share threshold, was dropped in the legislative process, and was not included in the final wording of the act.

Merger review procedure

Timelines for assessment of concentrations remain unchanged: 25 business days in Phase I, and additional 90 business days in Phase II. It is specified in the new Competition Act that the 90-business day period in Phase II starts from the last day of the Phase I period, compared to the present legislation, under which the Phase II period started from the delivery of an announcement to the notifying party that the transaction will be considered in Phase II.

Another procedural novelty, inspired by practice of the EU Merger Regulation, is the obligation of the notifying party to inform the AMO without delay, of any changes in the notification, or any important facts relating to the notification that occur after the notification. The time limit for rendering a decision automatically stops from the occurrence of such an event, until such time the event is notified to the AMO.

Interim measures

The new Competition Act grants the AMO several new powers including the power to impose interim measures in merger control cases. In case of a prima facie suspicion of gun jumping, implementation of a prohibited concentration, or breach of remedies imposed in merger clearance decision, the AMO will be empowered to impose interim measures for restoration or preservation of effective competition. The interim measures are to be lifted as soon as the reason for their imposition ceases to exist, and at the latest by issuance of a decision on the concentration itself, or by a decision to permanently restore the state of competition before the concentration, in particular to demerge an undertaking, to transfer certain rights, or to fulfil other necessary obligations.

A decision on an interim measure is subject to appeal, and subsequently to court review, and each aforesaid remedy must be decided in three months. An appeal and court action, do not, however, suspend the applicability of the interim measure. Imposition of interim measures is without prejudice to the possibility to impose fines or periodic penalty payments.

Impact of COVID-19

One of the first tasks to be tackled when the new legislation comes into force will be the impact of the COVID-19 pandemic. The AMO will gain the power to interrupt any proceedings and any time limits if the circumstances related to the extraordinary situation or state of emergency prevent it from duly considering and adjudicating a case. The maximum duration of the interruption is one month after the end of the extraordinary situation or state of emergency. This power can prove especially relevant in merger control cases, where closing of transactions can be postponed to after the pandemic.

Further, if the last financial year preceding the concentration, which is relevant for assessment of notification thresholds, includes, even partially, the time of extraordinary situation or state of emergency and one month after their cancellation, and the undertakings concerned did not achieve the turnover thresholds required for notification of a concentration, the previous financial year not concerned by the extraordinary situation or state of emergency shall be relevant for assessment of turnover thresholds. The rationale for this provision is the view of the AMO that even though the turnovers of entire markets can drop as a result of the pandemic, this does not influence the relative market power of the undertakings, since the entire market can be dropping equally. As a result, the merging parties will always have to consider the latest turnovers, as well as the pre-pandemic turnovers.

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Authors

  • Čechová & Partners (Bratislava)
  • Čechová & Partners (Bratislava)

Quotation

Marek Holka, Tomas Maretta, The Slovak Parliament adopts the Act on Protection of Competition which contains rules on merger control, 11 May 2021, e-Competitions March 2021, Art. N° 100776

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