Competition Newsletter - More flexible approach to non-compete clauses related to investments in startups

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On June 19, 2020, the Hungarian Competition Authority (“GVH”) adopted a decision providing guidance for financial investors and startups. 

The decision was a result of follow-up proceedings related to an acquisition of joint control by capital funds over CodeCool Kft., an undertaking involved in the development of innovative educational methods (the “CodeCool Case”). 

In the decision, the authority examined the non-compete clause binding upon the former controlling entity and the minority shareholders, who were also founding owners of the startup. The findings of the decision concerning the ancillary restrictions of competition may mitigate the risks associated with investments in the innovative sectors and thereby facilitate the market entry of startups and stimulate growth.

Read our latest competition newsletter here for a summary of the principles applicable to ancillary restrictions under competition law, the relevant case law of the GVH and the main elements of the decision adopted in the CodeCool Case.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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