The acquisition of a business, a company or part of an undertaking is often an important step in a company’s development. However, not every such deal is simply a corporate transaction. In certain cases, it may constitute a concentration within the meaning of the Bulgarian Protection of Competition Act, which may trigger an obligation to notify the Commission for Protection of Competition (CPC) and comply with specific rules.
Before finalising such a transaction, it is advisable for the parties to seek legal advice from a lawyer who can assess whether the conditions for a concentration are met and whether any obligations arise under competition law.
What Is a Concentration?
Under the Protection of Competition Act, a concentration occurs when there is a lasting change of control over one or more undertakings. This definition is consistent with European Union law and the practice of the European Commission.
A concentration may take place through:
- a merger of two or more previously independent undertakings;
- the acquisition of control over one or more undertakings;
- the creation of a joint venture that performs, on a lasting basis, all the functions of an autonomous economic entity.
Therefore, not every business acquisition constitutes a concentration. The determining factor is whether control of a lasting nature is acquired.
When Does a Business Acquisition Constitute a Concentration?
Acquisition of Control
The key criterion is the acquisition of control. Control refers to the ability to exercise decisive influence over the activities of an undertaking. This may occur through:
- acquiring a majority of the voting rights at the general meeting;
- obtaining the right to appoint or remove a majority of the members of the management body;
- contractual or other legal mechanisms that confer decisive influence.
Control may be sole or joint.
Acquisition of an Undertaking or a Distinct Part of It
A concentration may also arise where not the entire company but only part of it is acquired, provided that this part constitutes an autonomous business unit – for example, a separate business, division or production line.
Lasting Change of Control
The change must be of a lasting nature. Temporary acquisitions made, for example, for security purposes or as a short-term investment generally do not constitute a concentration.
Turnover Thresholds
Not every concentration is subject to control by the CPC. The law provides for specific turnover thresholds which, when met, trigger an obligation for prior notification.
When Does an Acquisition Not Constitute a Concentration?
Not every transaction involving shares, equity interests or assets falls within the scope of merger control rules.
Examples include:
- the acquisition of a minority interest without acquiring control;
- acquisitions by financial institutions for the purpose of subsequent resale;
- intra-group restructurings where the ultimate control remains unchanged.
What Are the Consequences When a Transaction Constitutes a Concentration?
Obligation to Notify the CPC
Where the statutory requirements are met, the parties are required to notify the Commission for Protection of Competition before implementing the transaction.
Prohibition on Prior Implementation
Until clearance is obtained from the CPC, the concentration may not be implemented. This is known as the standstill obligation. A breach of this requirement may result in significant sanctions.
Assessment of the Impact on Competition
The CPC assesses whether the concentration could result in:
- the creation or strengthening of a dominant position;
- a significant impediment to effective competition.
In making this assessment, a number of factors are considered, including the parties’ market shares, market structure, barriers to entry and the choices available to consumers.
Decisions of the CPC
Following its assessment, the Commission may:
- clear the concentration without conditions;
- clear the concentration subject to certain conditions;
- prohibit the concentration.
Sanctions
Where a concentration is implemented without the required clearance, significant financial sanctions may be imposed. In certain cases, the restoration of the situation existing prior to the implementation of the transaction may also be ordered.
Why Is a Preliminary Legal Assessment Important?
An incorrect assessment of whether a transaction constitutes a concentration may lead to delays in completing the acquisition, administrative proceedings and significant financial sanctions.
Therefore, in transactions involving business acquisitions, mergers, restructurings or asset acquisitions, it is advisable to carry out a preliminary legal assessment by a lawyer or legal professional experienced in competition law. This assessment can determine whether notification to the CPC is required and what steps should be taken.
Legal Assistance with Business Acquisitions and Proceedings Before the CPC
The G&P Law team advises Bulgarian and international investors on company acquisitions, mergers, restructurings and proceedings before the Commission for Protection of Competition. We conduct preliminary assessments of transactions, prepare the necessary documentation and provide legal assistance throughout the entire process until the proceedings are completed.
If you have questions regarding an upcoming transaction or would like to determine whether it constitutes a concentration, you can request an online consultation with a lawyer. This allows you to receive timely legal assistance without the need to travel, while maintaining all applicable professional standards, including attorney-client privilege and the confidentiality of the information provided.
Author: Stelian Chukurov
Images: Canva