COVID-19 outbreak and competition law in Hungary: the competition authority to be highly vigilant during the crisis

Hungary

Due to the COVID-19 pandemic, the Hungarian government declared a state of danger (in Hungarian: “veszélyhelyzet”) effective 12 March 2020. Given this special legal order, the Government adopted certain economic protection measures, which could affect competition indirectly although core antitrust legislation remains unchanged. This means that the practice and communication of the Hungarian Competition Authority ("HCA") is highly relevant during this time.

From a technical perspective, the operation of the HCA remains mostly uninterrupted. A recent operational announcement of the HCA confirmed that most of its staff work from home. Only personal administration and hearings are suspended. With electronic administration in Hungary, HCA case handlers can easily communicate and issue requests for additional information without personal interaction via the designated e-platform as was the practice before. The HCA is not just continuing with proceedings it already launched, but is initiating new ones as well. The HCA understands, however, that most undertakings are experiencing disruptions in businesses, and it has indicated that longer deadlines and deadline extensions will be granted.

Reflecting on future competition law issues, the HCA made the important decision to join and publish the Joint statement by the European Competition Network (ECN) on application of competition law during the Corona crisis ("Statement”). In this Statement, national competition authorities highlight that “competition rules ensure a level playing field between companies. This objective remains relevant also in a period when companies and the economy as a whole suffer from crisis conditions.” In light of this statement, it is anticipated that the HCA will closely monitor the practices introduced in industries affected by the COVID-19 crisis.

Furthermore, the HCA published on its website practical hints and tips on how to lawfully communicate or advertise products concerning COVID-19. In this communication, the HCA draws consumers attention on how not to be misled and provides dos and don'ts for concerned undertakings. Moreover, the HCA has already initiated an investigation in relation to the COVID-19 crisis against an undertaking providing antivirus and antibacterial products, alleging unfair commercial practices.

I. Potential cartel exemptions

In light of the Statement, the HCA acknowledges that the pandemic situation may trigger necessary cooperation between undertakings to ensure the supply and fair distribution of scarce products to all consumers.

Therefore, the HCA shall not intervene against temporary and necessary cooperation between undertakings for ensuring appropriate supplies. However, the HCA will monitor such cooperation and evaluate from an economic perspective the timeframe, justification and post-cooperation effects. If any misconduct is detected, it will apply the requisite measures.

It is also clear that the crisis situation is not an excuse for taking clearly anticompetitive action. Despite the crisis, it is not permitted to agree on prices or on customer and geographic market allocation. The likelihood of dawn raid inspections these days is not crucial.

II. Abuse of dominance still not permitted

Due to the Statement, the HCA considers it crucial to ensure that products essential to protect the health of consumers in the current situation (e.g. face masks and sanitising gel) remain available at competitive prices.

Given the above, it is anticipated that the HCA will closely monitor the healthcare sector and other key industries to avoid a shortage of supplies, and case handlers will be more sensitive to market signals than before. In cases of alleged infringement, the HCA is certain to take imme-diate action.

The HCA made a legislative proposal to the Hungarian government to introduce maximum price regulation on certain essential products preventing excessive pricing, but this initiative was refused.

III. No changes but slowdown in merger clearance

According to the HCA, all notifications should be submitted in the designated iForm.

Moreover, the HCA advises merging entities to consider postponing the notification of a planned transaction and to take into account the fact that the evaluation of a concentration may be longer due to difficulties in collecting market information from third parties.

The risk of delays due to the above should be taken into account when planning transactions, including merger control clauses in transactional agreements.

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Article co-authored by Dora Altziebler