Amendment of the competition act: merger control changes and a big step towards facilitating private enforcement – Part I.

The Hungarian Parliament has adopted the latest amendment of the Hungarian competition act. The amendment primarily concerns the clearance of mergers and antitrust damages actions but it also brings a couple of other important changes. In our current edition of Law-Now, we would like to provide a brief summary covering the most important points. We will also elaborate on the new rules and the upcoming changes in two detailed articles that will follow. The amendment is currently awaiting publication and the changes below will enter into force on the thirty-first day thereafter.

1. Most important changes regarding the clearance of mergers

(i) Increase in the threshold – less transactions to be filed

Concentrations fall under merger control in Hungary if two thresholds are met. While the amendment leaves the aggregate threshold of HUF 15 billon (approx. EUR 48 million) unchanged, the threshold to be met by at least two groups of undertakings (typically by the purchaser’s group and the target) is doubled from HUF 500 million (approx. EUR 1.6 million) to HUF 1 billion (approx. EUR 3.2 million).

(ii) Additional filing requirement – specific transactions to be potentially caught

Although the general aim of the amendment was to make merger clearance procedures even more effective, under the new rules specific transactions that do not meet the general thresholds could also be subject to merger clearance. Namely, merger clearance will be required if the aggregate net turnover of all participating groups of undertakings exceeds HUF 5 billion (approx. EUR 16 million) and it is not clear whether the concentration would lead to a significant lessening of competition in the relevant market (in particular by creating or strengthening a dominant position).

This new rule has been included in the amendment because the legislator also intends to catch concentrations that would otherwise not require clearance due to the turnover thresholds not being met but in regard to which it cannot be excluded that negative effects on competition would arise due to the nature and specifics of the given market (in practice, when the merger would otherwise require an in-depth review by the Hungarian Competition Office; “HCO”). As the burden of the assessment lies on the parties, the application of this provision was heavily disputed and may potentially generate uncertainty among market players. However, it is to be noted that the HCO may not investigate such mergers if 6 months have lapsed since the implementation of the concentration.

(iii) Notification instead of application for clearance

In order to further enhance the efficiency of merger control within the HCO, the amendment transforms the current merger clearance system based on an application for clearance to a system based on a notification (in Hungarian bejelentés). The notification process will be a simplified process that does not qualify as an official competition control procedure and the procedural fee will be decreased by 75% to HUF 1 million (approx. EUR 3200) in clear cut, straightforward cases. If within 8 days of the filing of the notification (subject to the payment of the fee), the HCO concludes that an in-depth review (and hence the launch of a formal procedure) is not required it will issue an official certificate, which is equal to a clearance decision. However, similar to the current system, if negative effects resulting from the transaction cannot be excluded a formal procedure will be conducted.

(iv) Dawn raids on mergers?

Similar to the European Commission’s investigative power, in the future the HCO will – subject to court approval – also have the right to conduct dawn raids in cases where it suspects the violation of the standstill obligation or that significant information was withheld or altered during the notification procedure. Although competition law practitioners expressed concerns, the legislator expects this power to ensure that accurate data is submitted to the HCO and further enhance the efficiency of the procedures.

2. Transposition of the EU Antitrust Damages Directive

In addition to the national competition authorities being very active, private enforcement is also achieving increasing importance throughout Europe. In order to facilitate claiming damages related to antitrust infringements, the EU Directive on Antitrust Damages Actions (Directive 2014/104/EU; “Directive”) is to be implemented by all member states by 27 December 2016.

So far, there has been a small number of antitrust damages litigations conducted within the general civil law litigation framework in Hungary. The amendment brings a significant change by introducing a new chapter in the Hungarian Competition Act that largely mirrors the specific and detailed rules of the Directive. Although we do not expect an instant increase in the number of antitrust damages actions, the amendment clearly underlines the increasing importance of private enforcement even in Hungary, which both represents an additional risk to bear in mind and offers a string of opportunities.

3. Other highlights

The amendment makes it possible to file for leniency in relation to vertical restraints aimed at the direct or indirect fixing of purchase or resale prices.

Further, in the case of a settlement reached with the HCO (where the settling company would inter alia admit its involvement in the infringement and waive its right for remedies against the HCO’s decision) the potential reduction of the fine is increased from 10% to a maximum of 30%. After the publication of the amendment, this rule will be applicable in ongoing procedures where the HCO has not yet issued its preliminary standpoint.

Further details on the amendment will follow. Should you need any assistance or further information please contact us.