Hungary: The Hungarian Competition Office appoints its first divestment trustee

Hungary

To enhance the effectiveness of the Hungarian merger clearance regime and follow the main international trends, the Hungarian Competition Office (“HCO”) – for the first time – appointed a divestment trustee in response to the following case.

 

On 2 November 2015, Duna-Dráva Cement Kft. (“DCC”) – operating 2 cement plants, 29 ready-mix concrete plants and other construction sites in Hungary – concluded a contract to acquire control of Readymix Hungária Kft. and the affiliated company, Cemex Croatia.

 

In April 2017, the European Commission (“Commission”) prohibited the Croatian part of the transaction as it raised serious competition law concerns. Since the Commission’s decision stopped the parties from going through with the Hungarian part of the transaction, DDC sought separate clearance of the Hungarian acquisition (“Transaction”) from the HCO in July 2017.

 

In the course of its in-depth investigation, the HCO identified that both parties were active on the ready-mix concrete market in six cities in Hungary (Kaposvár, Kecskemét, Nagykanizsa, Siófok, Székesfehérvár and Pécs). Furthermore, it concluded that in these areas the Transaction – without implementing corrective measures – could have caused a significant lessening of competition and increased prices. In response to the HCO’s concerns, DCC proposed commitments, namely (i) to sell its ready-mix concrete plants or respective shareholdings in the six relevant geographic areas and (ii) to fulfil certain other undertakings, such as not  including a non-compete clause in the contracts with the purchasers of the six ready-mix concrete plants.

 

In accepting the DCC’s proposal, the HCO’s decision (“Decision”) ordered DDC to divest its interests relating to the six ready-mix concrete plants to the purchasers named in the Decision within 6 months.

 

To preserve the value and economic viability of the plants until the sales are completed, the HCO appointed a divestment trustee. Although this is the first case of its kind in Hungary, a divestment trustee – who oversees the commitments of the acquiring entity, monitors the progress of the divestiture and preserves the viability and marketability of the target business – is considered a “common tool” for the Commission, national competition authorities in Europe and the U.S. Department of Justice. The HCO appointed a well-known sector expert as a trustee, and is monitoring the operation of the six plants based on the trustee’s reports. Many will be interested to see how this case will affect the HCO’s future practice and whether trustees will become part of the HCO's toolbox in other merger cases.  

 

Case: Vj/37/2017.