Hungary: HCA uses new investigative tool under merger control regime

The amendment increased the second mandatory notification threshold from Ft500 million (approximately €1.6 million) to Ft1 billion (approximately €3.2 million), while maintaining the first mandatory threshold of the combined turnover of the undertakings concerned (Ft15 billion, approximately €48 million). However, the amendment also introduced a new, lower voluntary notification threshold of Ft5 billion (approximately €16 million).

Voluntary notification threshold

The legislature imposed a condition for using the voluntary notification threshold: the HCA must be notified if a transaction could significantly restrict competition (ie, if it is unclear whether the transaction will not significantly restrict competition on the relevant market, particularly by creating or strengthening a dominant position). Although the increased mandatory threshold has reduced the number of notifiable mergers, the respective surplus resources seem to have been immediately allocated to investigative tasks. Should parties decide not to submit a voluntary filing when meeting the voluntary notification threshold, the HCA can:

• initiate an investigation on its own accord within six months; and
• undertake a fully fledged merger control proceeding, if necessary.(1)

Recent investigation

The HCA recently announced that it has commenced its first such ex officio merger control investigation, with the involvement of two telecoms companies. The acquirer, DIGI, is a television, internet and phone services provider and a significant player on the Hungarian market, while the target, Greencom, is a smaller regional player. DIGI took over Greencom's entire telecoms system and client list for 20 Hungarian towns. Although the relevant net turnover was above the voluntary notification threshold, the parties decided not to notify the HCA – a step that many market players would have been inclined to take. The HCA was notified of the transaction following a complaint by a private individual. It decided to initiate an investigation, as the transaction could significantly restrict competition in one of the towns affected by the takeover.

If only the voluntary notification threshold is met, the transaction may be implemented without or before notification. Such action will not entail a breach of the standstill obligation, which applies only where the obligatory merger control thresholds are met. Therefore, the parties will not face a potential fine. Nonetheless, the HCA will examine the potential restriction of competition and may – in the most severe scenario – order a divestment.

Comment

This ongoing case is another example of the proactive nature of the HCA and Hungarian consumers. Consumer complaints – if well founded – are often taken seriously by the Hungarian watchdog. The above case demonstrates that the voluntary notification option has been introduced as part of a well-designed framework to provide more investigative options to the HCA, which will not fail to use such powers and take action if a significant restriction of competition is likely. An in-depth assessment of the potential markets may be necessary for undertakings to be able to decide whether the voluntary notification is triggered. Voluntarily notifying and pre-filing (preliminary notification) before the HCA may gain significance in ensuring that a transaction over the voluntary notification threshold will not be the subject of an unexpected ex officio investigation.

This article was first published on www.internationallawoffice.com