Amendments to the Hungarian Competition Act (Act LVII of 1996 on the prohibition of unfair and restrictive practices) entered into force in June 2015. Both substantive and procedural amendments took place. The most important changes from a procedural point of view concern the shortening of the simplified merger procedures and the introduction of the ‘warning’ as a preventive sanction on small and medium-sized enterprises. Several smaller fine-tuning measures were also taken which provide for more efficient and consumer-friendly law enforcement. The activity of the Hungarian Competition Authority (Gazdasági Versenyhivatal – GVH) relating to the fight against cartels also played an essential role in 2015; consequently, the GVH launched an intensive campaign to raise awareness of both the serious consequences of a cartel and the leniency policy.
Last but not least, the GVH celebrated its 25th anniversary, which was marked with an outstanding international competition law conference.
Certain provisions introduced by Act CXXVIII of 2012 on agricultural associations and on the regulation of certain issues concerning the agricultural markets (Act on inter-branch organisations) stipulated that in the event of ministerial approval, restrictive agreements in the agricultural sector did not qualify as infringements according to the Competition Act, with the result that the parties under investigation could not be fined. This regulation has become more unequivocal and has been incorporated from the Act on inter-branch organisations into the Competition Act. It has been made clear that special rules taking into consideration the specificities of agriculture will only be applicable if the primacy of the competition rules of the European Union do not prevail.
A new type of sanction was introduced to the Competition Act. Instead of imposing a fine, the GVH can issue a warning as a sanction on small and medium-sized enterprises if they commit an infringement for the first time, with the exception of cases that involve an infringement of European Union law. However, it is not possible to set aside the imposition of a fine if the infringement was conducted in public procurement procedures or against vulnerable consumers.
In order to more efficiently combat the infringements committed in public procurement procedures and in procedures where European Union funds are used, an amendment to the Public Procurement Act now stipulates that if the minister responsible for these procedures notices or has reasonable grounds to suspect an infringement of the provisions regarding the prohibition of restrictive agreements contained in the Competition Act or the Treaty on the Functioning of the European Union, the minister may make this known to the GVH.
Procedural amendments affected merger control, access to the file and procedural costs. Amendments relating to merger control aimed at making the control of concentrations more efficient, transparent and predictable. The most important innovation is the regulation on the timing of an application for the authorisation of a concentration, and how the applicant has to support this application. The GVH generally made its decisions in a shorter time than the time limit provided for by the Competition Act and the time limit was not extended in any cases in 2015. In simplified merger cases, decisions were made in 19 calendar days on average, while in the rest of the cases (Phase II cases) decisions were made in 53 calendar days.
Since the change of the Phase I deadlines from 45 to 30 calendar days in 2014, the time limit has decreased even further: now a decision has to be made within eight days in merger cases which do not raise competitive concerns for the GVH. However, a decision can only be made within eight days if the party in question submits a fully completed application. Consequently, the applicability of this kind of procedure is dependent on the party submitting the application. The completeness and reliability of the data that are submitted by the party and the full and complete filing of the form that is used to submit an application substantially influence the duration of the procedure.
The pre-notification contact, which has been available since 2012, plays an important role because an adequately prepared pre-notification contact can decrease deficiencies in later procedures. It remains an essential measure in merger proceedings and its efficiency has improved significantly in 2015.
Further amendments relating to merger control entered into force in 2015, namely the additional rules relating to the request to grant a derogation from the ban on implementation. The new provisions specified the substantive requirements, the time limit for filing such a request and the time limit that the GVH has to decide upon the request.
Competition supervision activity
In 2015, 140 competition supervision proceedings were initiated, 15 more cases than in 2014. As in previous years, the number of consumer protection cases was the highest, although the number of merger cases increased greatly.
The number of cases closed in 2015 was 125, among which there were 59 unfair market practices, 49 mergers, 10 restrictive agreements, six abuses of dominant position and one abuse of significant market power. The GVH imposed fines totalling 5,078,903,000 forints (approximately €16.4 million) in 2015.
Most of the market notices the GVH received relating to cartels were in connection with public procurement, in particular concerning those supported by the European Union. The leniency policy and the informant reward remain efficient tools for detecting cartels. While no applications for the informant reward were accepted by the GVH in 2015 (due to the fact that the applications did not meet the legal criteria), it did accept three leniency applications.
The GVH continued the two market studies (on the film distribution and exhibition market and on the car and LCV distribution and repair market) which were initiated in 2014. These studies involve the surveying and analysing of the operation of particular markets, market developments, market trends, the application of particular market practices in multiple industries or a specific segment of an industry, and the effects thereof on competition and trading parties. The studies rely on information that is in the public domain, data that is collected on a voluntary basis and the involvement of external experts or consultants when required. In 2013 a sector inquiry on the online room reservation market of the tourism sector was initiated – as in many other EU countries as well. The GVH is evaluating the processes involved in the direct and intermediate sale of hotel rooms and other forms of accommodation online, particularly the ‘rate parity’ phenomenon used by online intermediaries. The results of the market studies and the sector inquiry will be published later in 2016.
In the scope of its competition advocacy activity, the GVH provided opinions on 113 draft pieces of legislation and concepts, a number which is significantly higher than in previous years. The suggestions mostly aimed at creating a competition-friendly regulatory environment, reducing administrative bureaucracy and improving the decision-making among consumers.
In addition to competition supervision and competition advocacy, the development of competition culture is the third pillar of the activities of the GVH for the purpose of protecting competition.
The GVH is committed to increasing the awareness of both undertakings and the contracting authority in public procurement, in order to help them notice the signs of cartels in time. As a continuation of the general competition law compliance campaign from 2014, on 1 December 2015 the GVH initiated a communication campaign to popularise the leniency policy with the following slogan ‘It cannot be kept secret’. The GVH attaches great importance to the fight against cartels as cartels have an extremely harmful impact on the development of the whole economy, causing a serious and direct consumer detriment, as well as a reduction in overall efficiency. In December 2015, the GVH developed and put into operation the ‘CartelChat’ system in order to improve undertakings’ knowledge of cartels and competition law abiding business behaviour, and to also provide for a further means of cooperation. CartelChat is an anonymous online contact platform for replying to questions about cartels and receiving information about alleged cartel infringements.1 The Authority has also created a microsite (www.kartell.gvh.hu), which aims to clearly explain what cartels are, why they are harmful and what action can be taken against them. The campaign aims to raise awareness, educate and incentivise.
As usual, the OECD-GVH Regional Centre for Competition in Budapest (RCC) held many seminars throughout 2015. Celebrating the 10th anniversary of its establishment, a jubilee conference was organised for the competition authorities of the RCC beneficiary countries. The current and past employees of the RCC discussed the achievements of the past 10 years and they delineated the future of the RCC.
The Competition Policy Advisory Bureau Network continues its operation in five big cities (Debrecen, Eger, Szeged, Pécs and Győr) in Hungary. The Network assists the GVH in the area of consumer protection and enhances the messages of the GVH by its communication activity.
In September 2015, a competition law history exhibition was opened, which presented the early acts from the 1920s and 1930s on cartel agreements, the Cartel Commission, the Cartel Court and cases. The exhibition was also available in universities and other institutions. The material of the exhibition was published.
In celebration of its 25th birthday, an international conference was held in November on the occasion of the jubilee year of the establishment of the GVH. The conference was an outstanding event hosting international professionals dealing with competition law and policy. The GVH published its interview collection with the title of ‘25 years – 25 articles’, reminiscing about the 25 years of the GVH, in which the interviewees looked back on the competition law issues and difficulties that were faced over the years when applying competition law. A special edition of the acknowledged professional journal of the GVH (Versenytükör – Competition Mirror) was also published. The jubilee special edition dealt with the major and important questions that the GVH has encountered in the course of the application of the Hungarian and European competition laws over the past 25 years.
Focus for 2016–2017
In 2016–2017 the GVH considers as a priority the further fine-tuning of the merger control regime, in particular faster and more efficient closure of merger procedures to reduce the risks immanent in the transactions, and the creation of a more consumer-friendly system. Fighting against cartels remains a long-term priority. The authority is applying a number of different tools in its attempt to convince market players that participation in a cartel is not profitable, or that if participation has already taken place, that the best solution is to cooperate with the authority. For this purpose, the GVH is planning to create more favourable conditions for the settlement agreement.
- In April 2016 for this system the GVH was awarded an ‘Honorable Mention’ by the International Competition Network and the World Bank Group in the 2015–2016 Competition Advocacy Contest.