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How Does Competition Law Affect Your Transaction?

How Does Competition Law Affect Your Transaction?

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EU and Hungarian competition law considerations are also highly relevant in any real estate transaction, especially from a merger control and information exchange perspective.

Under merger control rules, certain transactions must be notified to the various national competition authorities (including the Hungarian Competition Authority) and, in some cases, the European Commission. The notification requirement depends on the type of the transaction and the size (typically the turnover) of the companies involved.

  • As to the type of the transaction, it is clear that share deals (e.g. acquisition of a majority shareholding in a company which owns a certain piece of real estate) clearly qualify as relevant. In addition, asset deals may also be scrutinised by competition authorities, provided that the assets in question qualify as a so-called “part of an undertaking”, i.e., a standalone business unit to which turnover can be attributed. For example, the acquisition of a plot of land which has a shopping mall on it can typically qualify as a “part of an undertaking” as it would enable such shopping mall to be operated by/integrated into the buyer’s own business.
  • As to the size of the companies involved, most competition laws apply turnover thresholds, i.e. the net sales revenues of the companies involved in the transaction for the previous business year are reviewed. For example, under Hungarian law, the thresholds for notification are twofold:
    • all the undertakings concerned have to achieve at least HUF 15 billion in turnover from Hungary in the previous business year, and
    • there have to be at least two undertakings concerned that each achieved at least HUF 1 billion in turnover from Hungary in the previous business year.

From an information exchange perspective, companies engaged in real estate transactions need to make sure that they only exchange information that is absolutely necessary and only to the extent that is required depending on the stage of the transaction. This obligation is particularly relevant in case of a transaction involving real estate companies that are competitors to each other. In such cases, information barriers need to be erected, e.g. in the form of personal/company-wide confidentiality obligations or “clean teams” (i.e. persons dedicated to a certain transaction who are not involved in the strategic decision-making of the company) or via external advisors.

Compliance with the above rules is essential and may significantly affect the structure and timing of a transaction. Specifically, from a merger control perspective, if a notification requirement applies, it typically entails that the transaction may not be closed/implemented before clearance by the competent competition authority (or authorities). Competition law envisages serious sanctions in the form of fines for the breach of this obligation. Similarly, the illegal exchange of information could also entail fines by the authorities.

It is therefore suggested that competition law considerations be taken into account as early as the transaction planning stage and compliance with the relevant obligations be continuously monitored as the deal proceeds further.

By Zoltan Marosi, Co-Head of Competition and Antitrust, DLA Piper

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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