Major changes in the Hungarian competition regulation
Legislator implements significant changes with respect to competition rules
With its recently adopted laws, the Hungarian Parliament decided on some major changes to Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition (’Hungarian Competition Act’) considering merger thresholds, a formal notice procedure and expenditure of the GVH’s power in relation to the EU’s Digital Market Act. The majority of the changes will be effective as of 1 January 2023.
Changes in the merger thresholds and other updates regarding the merger procedure
The newly adopted amendments are mostly concerning the current merger procedure under the Hungarian Competition Act. As regards to the merger thresholds, the legislator maintains the current, two-stage threshold system, but increases the applicable numbers. This means, that concerned undertakings have to notify the GVH on their transaction if
- the parties’ aggregate turnover exceeds 20 billion HUF (instead of the previous 15 billion HUF); and
- each of at least two parties’ turnover exceeds 1,5 billion HUF (instead of the previous 1 billion HUF) in the previous business year in Hungary.
According to the reasoning for the changes, the increase of the threshold numbers is following the inflationary trends in Hungary. Also, the GVH expects to have lesser transactions notified with about 10-15% resulting in a better allocation of its powers.
The legislator also amended the wording of the so-called secondary notification thresholds by explicitly indicating that it is not a mandatory notification obligation under the law. This means that if the parties’ aggregate turnover exceeds 5 billion HUF (thus the current threshold does not change) and it is not immediately apparent that the concentration does not significantly reduce competition in the relevant market, the parties can decide whether they notify their transaction to the GVH or not. However, it is important to note that this does not mean the authority cannot investigate the transaction: if the parties fail to notify the transaction based on such secondary threshold, the GVH can initiate a competition supervision procedure in the future.
Another change related to the inflation is the increase of the administrative fees and fines for early implementation of mergers. The administrative fees for the phase I merger clearance increased to 4 million HUF from 3 million HUF and for phase II merger clearance it increased to 19 million HUF from 15 million HUF. Also, in case the parties implement the merger before its clearance by the authority, the amount of the maximum daily fine increased to 300,000 HUF from 200,000 HUF.
Another significant change concerns the timing of the notification of the transactions. Currently, parties can notify the authority on their intended merger once the related agreement is signed. However, with the effect of the new rules, parties can notify the authority before even signing their agreement, thus they shall only demonstrate their good faith intention to proceed with the transaction. This way, the undertakings will have more freedom to submit early notifications on mergers.
A limitation under the notification requirements has also been amended: currently insurance holding companies, credit institutions, financial holding companies and others do not have to notify their intended transactions to the GVH in case their goal is to resell the assets within a one-year period. The new rules extend the subject of this exception to investment funds and investment fund managers as well.
Along with the new provisions of the Hungarian Competition Act, the GVH published a statement regarding its new service: the authority will publish on its website the list of every market definition which has been defined during the actual year in its simplified merger clearance procedures. This way the undertakings would have a better understanding of the markets concerned in merger clearance procedures and have some aid during their transactions. The published information would contain a list where the authority collects those market definitions which have been developed during the past procedures and a separate list where only the parties’ market definition would be indicated which they used during their merger clearance.
Beside the above-described changes concerning merger procedure, the legislator decided to implement a new formal notice procedure as well as expended the powers of the GVH regarding the EU Digital Markets Act.
The new procedure will allow the GVH to inform the undertakings on their concerns regarding allegedly unlawful practices which would provide the possibility to the concerned undertakings to amend their practices if necessary, or to preserve their behavior without determining any infringement. Beside this new tool, the authority would also be entitled to initiate a competition supervision procedure if it is deemed necessary. Information on the notifications will be published on the authority’s website.
By the new regulations, the GVH’s supervisory power would be extended to undertakings subject to the Digital Markets Act. This indicates that the authority will be responsible for the review of the practices of – among others – online marketplaces, social network services and online search engines.