BACKGROUND

On 6 December 2016 the Hungarian Parliament adopted a number of significant changes to the Competition Act ("CA"), which were announced on 15 December 2016. The amendments address two main areas: the Hungarian merger control regime and the implementation of the EU Damages Directive (2014/104/EU) ("Directive"). This update will focus on the new merger control rules

NEW RULES ON MERGER CONTROL

Increase of merger control threshold. Under the new rules, at least two of the parties need to have a Hungarian turnover of more than HUF 1 billion each (approx EUR 3.2 million). Under the old rules, the threshold was HUF 500 million (approx EUR 1.6 million). Accordingly, in the future only those concentrations will have to be notified which include at least two undertakings whose net group turnover in the preceding business year exceeded HUF 1 billion (approx EUR 3.2 million) each, and the aggregate net turnover of the undertakings concerned have exceeded HUF 15 billion (approx EUR 48 million) in the previous business year.

New "merger investigation threshold". Even if the new merger control thresholds are not met, a transaction could require a merger control filing. Introducing a new concept to the Hungarian merger control rules, a transaction should be notified if the total net turnover of the undertakings concerned has exceeded HUF 5 billion (approx. EUR 16 million) in the previous business year, and if the concentration might significantly restrict competition, particularly as a result of the creation or strengthening of a dominant position in the relevant market.

A transaction, meeting the thresholds above, could be closed without clearance, however, filing is recommended. In case a concentration is not notified, the Hungarian Competition Authority ("HCA") may start ex-officio investigations in relation to the merger within six months following the closing of the transaction. If the HCA starts an ex-officio investigation, the implementation of the transaction does not have to be suspended. The parties face the risk, however, that the merger control proceedings may result in the transaction being prohibited or cleared in a structure that differs from the transaction that had been originally implemented. If so, the HCA may order restitution in integrum.

Only Hungarian revenues count. For the purposes of calculating the above thresholds, only the net sales revenues generated in Hungary will be taken into account. Previously, one had to distinguish between foreign companies and Hungarian companies, whereas now for the first only, the Hungarian turnover is relevant and for the latter, their global revenue.

Merger notification procedure in 8 days. Under the new rules, merger control procedures shall be initiated by a notification (instead of the currently applicable request to clear the transaction). Within 8 days upon such notification – or upon the payment of the respective filling fee - the HCA shall decide whether to initiate further investigation or not. If all the necessary information and documents are submitted in the notification and it is evident that the transaction will not lead to a substantive impediment of competition in the relevant market (and there are no other formal mistakes), then the HCA shall grant an official certificate that investigation of the concentration is not required.

The filing fee of such a notification is HUF 1 million (approx. EUR 320,000); however, if HCA fails to render a decision within the applicable deadline, the filing fee shall be reimbursed. In case the HCA initiates further investigation, the currently applicable procedural deadlines apply starting from the original notification/payment date, and additional filing fees (ie HUF 3 million / EUR 960,000 for phase 1 proceedings and HUF 15 million / EUR 4,800,000 for full proceedings including phase 2 ) shall be paid similarly to the current rules.

Dawn raids in merger control cases. The new rules expand the possibilities of the HCA to conduct dawn raids in order to seek evidence related to a potential infringement. Accordingly, with certain conditions the new regime allows the HCA to carry out such investigations in merger control cases as well, eg when it assumes that the notification of the concentration does not disclose all significant information or contains false information.

EFFECTIVE DATE

Most of the new rules will be effective on the 31st day following the announcement of the amendments, ie on 15 January 2017. The new merger control regime applies only to transactions arising after the effective date of the provisions. "Arising" refers to the signing of binding agreements, the publication of the public bid or the actual acquisition of control, whatever occurs first.

COMMENTS

According to the official comments of the adopted bill, the changes aim to reduce red tape on business undertakings and accelerate competition proceedings. For example, it is argued that the changes of the merger control thresholds will result in a 10-15 % decrease in the number of mergers that have to be notified.

In light of the above, the latest amendments of the CA introduce a comprehensive change in the competition regime, which will probably have long lasting effects on the Hungarian market.