Buying a company. When you need clearance from Slovakia's competition authority

When buying a company, the buyer usually focuses on the price, legal due diligence and the contract. However, the turnover of the buyer and target company can also determine when the transaction may be completed. The first question is whether the acquisition constitutes a concentration under Slovakia’s Competition Act, Act No. 187/2021 Z. z. Only then is it necessary to examine whether it meets the turnover thresholds and is subject to review. A concentration can therefore arise even below those thresholds. If review is required, the buyer generally needs final clearance from the Antimonopoly Office of the Slovak Republic before exercising rights arising from the transaction.

When a company acquisition is a concentration

Under Section 7(1) of the Act, a concentration is a lasting combination of businesses, whether through a merger of independent undertakings or the acquisition of control over an undertaking or part of one. The Act defines control as the ability to exercise decisive influence over an undertaking’s activities (Section 7(4)). A majority stake can provide that ability, but so can a contract or other rights that allow decisive influence over the composition, voting or decisions of the company’s governing bodies. When acquiring a minority stake, it is therefore also necessary to review the company’s constitutional documents and shareholders’ agreement.

A concentration does not have to involve a share purchase. Part of an undertaking can also consist of assets capable of generating turnover (Section 7(3)), so the acquisition of an operating business or division may also require assessment. Creating a joint venture jointly controlled by several undertakings and performing all the functions of an autonomous economic entity on a lasting basis is also a concentration (Section 7(5)).

By contrast, certain temporary acquisitions of control are not treated as concentrations (Section 7(7)). One example is the temporary holding of securities by a bank or another financial institution whose ordinary activities include trading in them. However, the exception is not automatic. The institution must not use its rights to influence the company’s competitive behaviour, or may exercise voting rights only to prepare for a sale. The sale must cause it to lose control within one year of acquiring the securities. On request, the Office may extend that period if it is shown that a sale within it was not possible.

Turnover thresholds under Section 8

A concentration is subject to the Office’s review if either of the following conditions is met in the accounting period preceding its creation:

• the participants’ combined turnover in the Slovak Republic is at least EUR 46,000,000 and at least two of them each achieved turnover in the Slovak Republic of at least EUR 14,000,000,
• in an acquisition of control, the company over which, or over part of which, control is acquired achieved turnover in the Slovak Republic of at least EUR 14,000,000 and any other participant achieved worldwide turnover of at least EUR 46,000,000.

For a merger, the second test applies where at least one participant has Slovak turnover of at least EUR 14,000,000 and another participant has worldwide turnover of at least EUR 46,000,000 (Section 8(1)(b), first point). The calculation is not limited to the individual company’s turnover. Total turnover also includes undertakings controlled by the participant, those controlling it, and other companies in the same group (Section 8(2)). Intragroup turnover is excluded, and the Act sets rules for allocating the turnover of joint ventures. On the acquired side, the calculation covers the undertaking or parts that are the subject of the concentration, rather than automatically including the seller’s entire group. If only part of an undertaking is acquired, that part’s turnover is decisive (Section 8(3)). Two or more concentrations between the same undertakings within two years that together reach the thresholds are treated as one concentration arising on the date of the last transaction (Section 8(4)).

The Act contains a special rule for the relevant accounting period. If the preceding period overlapped, even partly, with the period of an emergency situation under Section 49(1), and the participants did not reach the thresholds in that period, the immediately preceding accounting period unaffected by that emergency period is used instead (Section 8(5)).

The Slovak component of the turnover tests concerns turnover generated in the Slovak Republic. A transaction between two foreign groups may therefore require notification in Slovakia if the target company or the part being acquired has sufficient turnover here and the buyer meets the worldwide threshold.

Notification and the prohibition on completing the transaction

When a company acquisition is subject to the Office’s review, the concentration must be notified after the contract is concluded but before the parties begin exercising the rights and performing the obligations arising from it (Section 9(1)). The Act sets a different trigger for other ways of acquiring control, such as a takeover bid. The Office can also assess an intended concentration, meaning a notification submitted before the contract is signed (Section 9(4)). The contract can therefore be signed earlier, but implementation must generally wait until the decision becomes final.

The following quotation is the original Slovak statutory wording:

Podnikateľ nesmie vykonávať práva a povinnosti, ktoré vyplývajú z koncentrácie až do nadobudnutia právoplatnosti rozhodnutia o koncentrácii.

§ 10 ods. 1 zákona č. 187/2021 Z. z.

The Act also provides narrow exceptions (Section 10(2) and (3)). A successful participant in a commercial public tender may implement its proposal if it does not exercise the related voting right. A takeover bid or a series of market transactions in securities acquired from different sellers may proceed if the concentration is notified without delay and the acquirer does not exercise voting rights. Exercising those rights solely to maintain the investment’s full value requires an exemption from the Office.

The Office decides within 25 working days of receiving a complete notification. If it has concerns about the concentration’s effect on competition and needs a more detailed analysis, it gives written notice within that period and decides within 90 working days after the period expires (Section 35). Where documents are requested under Section 9(3), or further material information under Section 36(3), time stops running from the day the request is sent until the information is supplied. On a participant’s reasoned request or with its consent, the time limit can be extended by a total of up to 30 working days (Section 36(5)). The Act also provides other cases in which time stops running or starts afresh, so these figures do not guarantee the overall duration of the proceedings.

An administrative appeal known as a rozklad may be lodged within 15 days of service of the decision (Section 27(1)). If the participants waive that appeal after notification of the decision, the decision becomes final on the day the Office receives the waiver (Section 27(9) and (11)).

For serious reasons, the Office may grant an exemption from the prohibition on request and make it subject to conditions (Section 10(4) to (6)). It decides on the request within 20 working days of receipt, with time suspended from the sending of a request for further information until that information is supplied (Section 38). On the substance, the Office clears the concentration, clears it subject to conditions, or prohibits it if it would significantly impede effective competition on the relevant market (Section 11). An acquisition of joint control also requires assessment of any prohibited coordination of competitive behaviour. The Office may stipulate that rights arising from the concentration must not be exercised until an imposed condition has been fulfilled (Section 11(5)). In that case, final clearance alone is not enough.

What happens if the transaction is implemented without clearance

Failure to notify a concentration before exercising the rights arising from it, or breach of the prohibition on exercising those rights where the Office has not granted an exemption, leads to a fine of up to 10% of worldwide turnover for the preceding accounting period (Section 42(1)(c) and (d)). For concentrations, turnover means total turnover under Section 8(2), including the group (Section 47(4)). The preceding period is the one for which the most recent financial statements were prepared (Section 47(1)). If turnover under Section 3(10) is no more than EUR 330, is zero or cannot be quantified, the Act allows a fine of up to EUR 330,000 instead of the percentage ceiling (Section 47(2)). A fine may be imposed within ten years of the infringement (Section 47(6)).

In addition to a fine, the Office may impose an interim measure to restore or preserve effective competition where there are reasonable grounds to believe that rights arising from a concentration are being exercised before the decision becomes final (Section 40(1)). If those rights are exercised contrary to a prohibition of the concentration or a condition attached to clearance, the Office may also require the restoration of the level of competition that existed before the concentration, in particular by breaking up the undertaking or transferring rights (Section 40(5)).

When the transaction extends beyond Slovakia

Concentrations with an EU dimension are assessed by the European Commission under Council Regulation (EC) No. 139/2004, and Member States do not apply their national competition law to them (Article 21(3) of the Regulation). An exception applies where the Commission refers all or part of the case to a national authority (Article 4(4) or Article 9). The concentration is then notified to the Slovak Office after the Commission informs the undertaking that the Office will handle the case (Section 9(1)(e) of the Act). This does not exclude appropriate national measures to protect other legitimate interests under Article 21(4) of the Regulation. For smaller cross-border transactions, the Slovak thresholds are assessed separately. If the parties also generate turnover in other countries, it is worth considering a review of the rules in each of those countries as well.

Accounting for merger control in the contract

It is worth checking the thresholds at the outset, alongside the review of the target company described in our article on what legal due diligence covers. If the transaction requires clearance, we recommend making the transfer conditional on final clearance from the Office and, where applicable, fulfilment of any condition imposed before the rights can be exercised. The contract should also specify who will prepare the notification and by when, and what happens if clearance is not obtained by the agreed date. Until the decision becomes final, the buyer should not exercise rights conferred by the transaction, such as voting rights in the target company.

We assess the turnover thresholds, prepare merger notifications and draft the corresponding contractual conditions as part of our mergers and acquisitions and company sales and acquisitions services. We review the target company through our legal due diligence service. If you are acquiring a division or an operating business, see also our carve-out and business division sales service.