Hungary: Modifications to the Competition Act
On the 15th of January 2017, modifications to the Competition Act entered into force in Hungary. The modifications cover two important areas:
• the modification of the merger of undertakings rules and
• the implementation of the regulations of the Directive 2014/104/EU of the European Parliament and of the Council into the Hungarian Competition Act, whereby the rules on the enforcement of civil claims related to the infringement of competition law have been introduced.
Until recently, it was obligatory to obtain permission from the Competition Authority on the merger of undertakings only if the total net revenue of the concerned business groups/undertakings achieved in the previous financial year exceeded an amount of HUF 15 billion (approx. EUR 50 million) and there were at least two undertakings in the business group which together achieved in the previous business year, a net revenue exceeding HUF 500 million (approx. EUR 1,6 million).
With the entering into force of the new legal provisions, the procedure for the authorization of mergers, which previously began following the request of the concerning undertakings, has ceased. The undertakings shall only notify the Competition Authority on the concerned merger should the following threshold be reached: the threshold of HUF 15 billion has remained unchanged, which means that the total net revenue of the concerned business groups/undertakings achieved in the previous financial year shall exceed the amount of HUF 15 billion (approx. EUR 50 million) and now it is a total net revenue amounting to over HUF 1 billion which shall be reached together by at least two of the concerned undertakings/business groups. The companies concerned are now only obliged to make an announcement on the merger instead of the previously required submission of the license application.
On the basis of the notification, and if the legal conditions thereof are met, the competition authority will initiate the proceedings ex officio to examine the effects of the mergers to be authorized on competition.
Nevertheless, where mergers do not reach the above mentioned thresholds, the undertakings concerned shall still take into account the rules on competition, as these undertakings are also obliged to notify the competent authority since the modifications entered into force, if it is not obvious that their merger would not significantly reduce the competition in the relevant market, especially as a result of the creation or the strengthening of a dominant economic position. However, in this case, an additional condition is required to be met: the total net revenue of each concerned business group achieved together in the previous financial year shall exceed the amount of HUF 5 billion (approx. EUR 16.5 million).
In where there is a lack of notification, the Competition Authority can only initiate the proceedings on the competition supervision ex officio in the interest of legal certainty up to six months after the implementation of the merger, which embraces the entire investigation of the merger.
Until recently, the rules on notification and evaluation of the merger were not included in the Competition Act, the evaluation thereof has been reached on the basis of procedural rules established by the Competition Authority and published in its bulletins.
Concerning the procedural rules entered into force, it is important to highlight that the notification shall be filed on official application form and several documents shall be attached thereto evidencing and justifying the data and statements made in the submitted notification. Moreover, at the same time of the submission of the notification, a process fee amounting to HUF 1 million (approx. EUR 3,260) shall also be paid up. This process fee, however, has been decreased to a quarter of the previously required process fee.
There is now also the possibility to initiate prior consultations with the Competition Authority in order to clarify the scope of the required information and documents, which enable the concerned undertakings to gain time, and the pending legal situation during the examination of the application exists in the shortest possible period of time.
The investigator shall decide within eight days of receipt of the notification whether or not he orders an exhaustive examination of the merger, or if he concludes that there is no reason for an exhaustive investigation, he issues an official certificate on this fact to the applicant. If during this timescale any of the above mentioned actions have taken place by the investigator, the merger can be carried out.
In case of an exhaustive investigation, the Competition Authority shall reach its decision within 4 months.
Previously only on-site researches (“raids”) were permitted on the basis of prior judicial authorization in the case of a suspected cartel. Going forward, these raids are also possible in the case of the mergers, if there is a ground to suspect the violation of the prohibition on implementation, the concealment of essential facts in the notification of merger, or if those essential facts are not truly notified.
Due to the above mentioned modifications only mergers which are substantial in terms of competition fall in the Competition Authority’s radar and due to the establishment of procedural rules on law-level the control of mergers becomes more effective.
Parallel to the modification, those rules of the Directive of the European Parliament and of the Council has also been introduced which define the detailed rules on enforcement of civil claims before court arisen from the infringements of competition law, for which the tribunals above the county courts-level are competent in Hungary.
For damages caused by the infringement of competition law the rules of Civil Code on non-contractual liability (Civil Code 6:519. § – 6:534. §) should be applied with the exceptions set for in the Competition Act. The aggrieved party’s claim can be enforced, regardless of the fact, where this party is situated in the production-distribution chain. The Competition Act declares all contractual clauses null and void, if they aim to restrict or exclude the contractual liability for damages caused by the infringement of competition law. Also the multiple tort, special rules for the exploration of evidences, penalties applicable for compensation in competitive lawsuit as well as the binding force of the competition authorities’ decisions in these lawsuits have become regulated.
With regard to the fact that previously the aggrieved person had to seek compensation for damage in regulation divergent in each member state, which, due to the globalization, often meant that the aggrieved person had to sue in another member state different from where he resides, and had to act in unfamiliar jurisdictions, the implementation of the rules of the directive into the national legal systems makes the exercise of rights of the aggrieved person significantly easier.