Hungary: First ex officio investigation triggered under the special Hungarian merger clearance threshold

Further to our report of the first divestment trustee in the Hungarian Competition Office’s (“HCO”) merger clearance practice, the HCO has launched the first ex officio investigation under the new Hungarian merger clearance threshold.

The comprehensive amendment of the Hungarian Competition Act came into force early 2017. Previously, transactions fell under merger control if two thresholds were met – the aggregate threshold of HUF 15 bn (EUR 48 m) was exceeded, and at least two groups of undertakings met the threshold of HUF 500 m (EUR 1.6 m). As of 15 January 2017, the legislation doubled the HUF 500 m threshold to HUF 1 bn (EUR 3.2 m) and introduced a second scenario under which transactions not meeting the general thresholds could be subject to merger clearance (“Amendment”). Namely, merger clearance is required if the aggregate net turnover of all parties exceeds HUF 5 bn (EUR 16 m) and it is not clear whether the transaction would lead to a significant lessening of competition in the relevant market (particularly, by creating or strengthening a dominant position).

This second scenario is now being tested for the first time by the HCO in an ex officio procedure in the telecommunication sector.

In August 2017, DIGI Távközlési és Szolgáltató Kft. acquired Greencom Kft.’s telecommunication network and the respective subscriber portfolio covering twenty Hungarian municipalities. This acquisition surpassed the HUF 5 bn threshold. Pursuant to the Amendment, the parties shall evaluate and consider if filing for clearance would be necessary. But in the absence of notification, the HCO has the right to initiate an investigation within six months from the implementation of the merger. In the current case, the HCO decided to intervene based on a private individual’s complaint that there may be a significant lessening of competition in one particular Hungarian municipality (Oroszlány) (“Procedure”). The HCO now has four months to conclude the Procedure.

Although transactions exceeding HUF 5 bn triggering HCO ex officio intervention appear to be exceptional, the initiation of the Procedure is a clear warning to market players, and raises awareness that a thorough analysis and assessment whether notification should be triggered is required in each case. Should parties fail to apply for clearance, the HCO will take an active approach, even on the local level, to safeguard effective competition. The evaluation of any potential, merger-specific competition law concern requires an in-depth expertise and a case-by-case review. However, we are hopeful that the Procedure will provide practical guidance about the HCO's approach to be followed in similar cases in the future.

Case: Vj/49/2017.