The Act LVII of 1996 on the prohibition of unfair market practices and the restriction of competition (hereinafter “UMPA”) was substantially modified by the Act LV of 2022 (hereinafter “Amending Act”), in principle with effect from 1 January 2023.
Firstly, the thresholds for merger notifications have been modified. The previous threshold of HUF 15 billion has been raised to HUF 20 billion, while the previous threshold of HUF 1 billion has been raised to HUF 1.5 billion.
Another change is that a merger that previously fell below the HUF 5 billion notification threshold (Section 24 (4) of UMPA) no longer requires that the National Competition Authority (in Hungarian: Gazdasági Versenyhivatal, hereinafter “GVH”) be notified. This is the case even if it is not obvious that the merger does not significantly reduce competition in the relevant market, but the merger exceeds the merger notification threshold. The former obligation for such cases has become an option.
The scope of application of the merger exemption rule provided for the temporary acquisition of control (Section 25 (1) of UMPA) has been clarified and extended. Instead of insurance companies, the rule now covers temporary acquisitions of control by insurance and insurance holding companies, mixed financial holding companies, mixed-activity insurance holding companies, investment funds, and investment fund managers for the purpose of resale, not exceeding one year.
An important new feature for companies planning a merger is that from 1 January, they do not have to wait for the publication of a public bid, the conclusion of a contract, or the acquisition of the right of control before notifying about the merger, as – in line with the rules of the EU Merger Regulation – the notification can be made while demonstrating a good faith intention to merge. However, the legislation does not specify when and how such a good faith intention can be demonstrated, so this will be determined by the practice of GVH, most likely based on EU merger case law.
The latter change has made it necessary to amend the provisions governing the calculation of the turnover. As of 1 January, the merger thresholds are calculated on the basis of the net turnover of the annual accounts or simplified annual accounts for the last officially closed financial year preceding the earliest action related to the merger, be that the publication of the public bid, the conclusion of the contract, the acquisition of the right of control, or the submission of the merger notification, and, in the case of proceedings for the breach of the prohibition on implementation, the implementation of the merger.
The Amending Act also introduces a new legal instrument, the letter of formal notice. The President of the GVH is entitled to issue a letter of formal notice in order to make known his concerns about allegedly unlawful market conduct falling within the competence of the GVH and to promote compliance with the law. A letter of formal notice is an indication to the undertaking that the GVH considers its conduct objectionable. The undertaking is not obliged to reply to the letter of formal notice but by voluntarily replying, a dialogue can be established between the undertaking and the authority, which facilitates cooperation and the mutual exchange of views. Each year, the GVH publishes on its website a list of the alleged infringements, the relevant markets, and the number of letters of formal notice sent in the year concerned for each of the relevant markets.
In the case of proceedings based on a notification or complaint received by the GVH outside the competition control proceeding, the rules in force from 1 January 2023 provide that the proceedings shall be dismissed even if the notifying party has withdrawn its notification.
It should also be highlighted that the powers of the GVH have been extended again. Within the European Union, Regulation 2022/1925 of the European Parliament and of the Council of 14 September 2022 (hereinafter “Regulation”) has changed the competition control rules in the digital sector, and in the light of these changes, a new Chapter XI/D was added to the UMPA, containing detailed rules on the procedures to be initiated under the Regulation. Under these rules, the GVH, as the designated authority, cooperates with the European Commission in the enforcement of the Regulation and may, among other powers, initiate competition control proceedings if an undertaking (a so-called gatekeeper undertaking) fails to comply with its obligations set out in the Regulation.
Last but not least, from 1 February, the administrative service fee for merger notifications will increase. The rules for calculating the fine that the GVH can impose on those who implement a merger contrary to the prohibition in Section 29 of the UMPA will also change, and the daily amount of the fine will increase.