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20 November 2017

Hungarian Competition Authority assumes jurisdiction over a merger - the new investigative tool in action

The recent amendments to the Hungarian competition act not only raised the turnover thresholds for an obligatory merger control filing, but introduced the possibility of a voluntary filing if the parties achieved a combined domestic turnover of more than EUR 16 million in the preceding business year, and the transaction has the potential to restrict competition significantly. 

Should the parties decide not to submit a voluntary filing when meeting the requirements, the Hungarian Competition Authority ("HCA") has the option – within six months from closing the transaction – to investigate the transaction and demand a merger control filing. For a more detailed description of the thresholds and the recently introduced amendments please see our update here.

The HCA recently announced that the first ever such ex officio merger control investigation had been commenced in the telecom sector (for the press release of the HCA in English see here). The acquirer DIGI is a significant player on the Hungarian market, while the target Greencom is a smaller regional player. Even though the relevant net turnover of the parties was above the voluntary (but below the obligatory) notification threshold, they decided not to notify the HCA of the transaction. The HCA received a complaint about the transaction, was not fully comfortable with the shift in market conditions, and so decided to investigate. The parties did not manage to convince the authority that the transaction does not threaten to significantly lessen competition in one of the Hungarian towns affected by the takeover. Hence, the HCA decided to open a formal merger control proceeding.

Three remarks in this regard:

  • Despite the investigation and the pending merger control proceeding, the fact that the transaction had already been closed does not entail a breach of the standstill obligation. The suspension clause only applies in cases where the obligatory merger control threshold is met. Nevertheless, the HCA will look into the potential lessening of competition in the coming weeks and may – in the most severe scenario – order a divestment.
  • This case once again draws attention to the proactive approach of the HCA. In our practice we have seen many cases where the HCA – even when facts were blurred – did not shy away from approaching / investigating a case or an alleged infringement. Consumer complaints – if founded – are taken seriously by the Hungarian watchdog.
  • In light of this, companies that are below the obligatory turnover thresholds but above the threshold for the voluntary filing should evaluate thoroughly whether to notify the HCA of a transaction. Undertakings should seriously consider the guidance received by the HCA as to when a lessening of competition can be ruled out (for this guidance see here). Carelessness in this regard will likely have the downside of a transaction being interrupted by an ex officio investigation by the HCA.



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