I. Introduction
Following the obligations undertaken under the Association Agreement, on September 16, 2020, the Parliament of Georgia adopted significant amendments to competition legislation. As a result, Georgian competition law has been substantially aligned with European standards — key concepts were refined, enforcement mechanisms strengthened, and a more coherent legal framework established.
One of the most important aspects of this reform relates to merger control, which has become one of the most practical and business-relevant areas of competition law.
In this context, company acquisition is not always just a corporate transaction. In certain cases, it may fall within the scope of competition law and require prior approval from the Competition Agency.
II. The Pre-Reform Framework
Before the 2020 reform, the legal framework governing merger control was incomplete and ineffective. Although certain restrictions existed, the system lacked properly structured mechanisms for prior assessment. One of the key shortcomings was the absence of effective enforcement, as transactions subject to notification could be implemented without meaningful sanctions in case of non-compliance.
In addition, competition law did not fully apply to regulated sectors such as energy, communications, and banking. This created a fragmented system in which competition rules applied in some sectors but not in others. As a result, it was not possible to ensure a consistent and comprehensive application of competition law across the economy. The reform addressed these shortcomings by introducing a clearer, enforceable, and more structured regime.
III. What Is Considered a Concentration?
The amended legislation clearly defines the main forms of concentration and brings Georgian practice closer to European standards. A concentration may arise when two or more undertakings merge into a single entity, when control over another undertaking is acquired through shares, securities, contractual arrangements, or other means, or when a joint venture is established that performs an independent economic function.
In practice, company acquisition often qualifies as a concentration where it results in obtaining control over another company. Therefore, it is not the formal structure of the transaction that is decisive, but whether control is effectively transferred.pany.
IV. Why Is State Control Necessary?
In a market economy, merger and company acquisition are natural and often beneficial processes. Businesses combine, acquire shares, and establish joint ventures to achieve growth, increase efficiency, and strengthen their competitive position. However, from a competition law perspective, concerns arise when such transactions significantly alter market structure and reduce competitive pressure.
The main risks are associated with a reduction in the number of independent market participants and the concentration of market power in the hands of a single entity. In certain cases, this may lead to the creation or strengthening of a dominant position, increasing the risk of anti-competitive behavior. For this reason, merger control operates as an ex ante mechanism, meaning that the state intervenes before the transaction affects the market, rather than after harmful effects occur.
V. When Is a Concentration Problematic?
The central legal test in merger control and company acquisition is whether the transaction results in a significant restriction of competition. This is generally presumed where the transaction creates a dominant position or strengthens an existing one. In such cases, there is a presumption that competition may be significantly restricted.
Where dominance is not created or strengthened, it is generally presumed that competition is not significantly affected, and the burden of proof lies with the authority. Conversely, where dominance arises, the parties must demonstrate that the transaction will not harm competition. If the authority concludes that competition would be significantly restricted, it may declare the concentration inadmissible.
VI. When Is Notification Required?
Not every company acquisition requires notification to the Competition Agency. The obligation arises only when the transaction meets specific economic thresholds established by law. In particular, notification is required where the combined annual turnover of the parties in Georgia exceeds GEL 20 million, and at least two parties each have an annual turnover exceeding GEL 5 million.
This means that company acquisition does not automatically trigger the need for approval. The decisive factors are whether the transaction results in the acquisition of control and whether it meets the relevant turnover thresholds. If both conditions are satisfied, the transaction is subject to prior notification and assessment by the Competition Agency.
VII. Structural and Behavioral Remedies
Merger control does not always lead to prohibition. In many cases, the Competition Agency may approve a company acquisition subject to certain conditions aimed at mitigating potential negative effects. These conditions may take the form of structural measures, such as the divestiture of assets or shares, or behavioral measures, which regulate the conduct of the parties in the market.
The purpose of these mechanisms is to strike a balance between allowing the transaction to proceed and preserving effective competition in the market.
VIII. Competence of Authorities
An important outcome of the reform is that competition law now applies to regulated sectors as well. However, the allocation of competence depends on the nature of the parties involved. Where all parties operate within the same regulated sector, the relevant sectoral regulator is responsible for assessing the transaction. In other cases, the Competition Agency has jurisdiction.
Therefore, in practice, it is essential not only to determine whether a transaction requires notification, but also to identify the competent authority to which the notification must be submitted.
IX. Sanctions for Failure to Notify
The reform introduced effective sanctions for failure to notify notifiable concentrations. If a transaction subject to notification is implemented without informing the Competition Agency, the authority may impose a fine of up to 5 percent of the annual turnover of the previous financial year.
In addition, where the transaction results in a significant restriction of competition, the authority may apply to the court and request the restoration of the original situation. This may include the divestiture of assets or shares, restructuring of the undertaking, or termination of agreements. Further sanctions may apply if the parties fail to comply with imposed remedies, including additional fines calculated on a daily basis.
X. Practical Takeaways for Businesses
Company acquisition is not always limited to corporate and contractual considerations. In many cases, it also involves competition law implications that must be assessed in advance. Businesses should carefully evaluate whether control is being acquired, whether the relevant turnover thresholds are met, whether notification is required, and which authority has jurisdiction.
Failure to properly assess these factors may lead to significant financial penalties and may even put the validity of the transaction at risk.
