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Competition and Laws and Regulations in Hungary

Competition Comparative Guide: 2024
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Contributed by Bird & Bird.

1. What are the main competition-related pieces of legislation in Hungary?

The cornerstone of the Hungarian regulatory regime with respect to competition is Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition (Competition Act), which lays down fundamental competition law prohibitions. Competition law within the European Union is a fully harmonized area of law, and consequently, the rules of EU competition law are directly applicable to Hungarian legal practice. The key item of legislation for EU competition law is the Treaty on the Functioning of the European Union (TFEU).

The Competition Act encompasses the key elements of Hungarian competition law, covering a broad spectrum, from antitrust matters and merger control regulation to unfair competition. Additionally, it outlines regulations concerning the Hungarian Competition Authority (Gazdasagi Versenyhivatal, GVH) and sets out detailed rules governing competition control procedures as well as private enforcement with respect to competition law infringements.

Consumer protection is a central element of the Hungarian competition law landscape, in which the main legislative instrument is Act XLVII of 2008 on the Prohibition of Unfair Business-to-Consumer Commercial Practices (Consumer Protection Act). There are also several other laws containing certain competition law or consumer protection law requirements that must be met in corporate business practice, such as Act CLXIV of 2005 on Trade (Trade Act), Act XCV of 2009 on the Prohibition of Unfair Trading Practices Applied Against Suppliers Relative to the Marketing of Agricultural and Food Products (Unfair Agricultural Trading Act) and Act XLVIII of 2008 on the Basic Requirements and Certain Restrictions of Commercial Advertising Activities (Advertising Act).

Furthermore, there are sector-specific government decrees providing exemptions for specific categories of agreements restricting competition, such as (i) vertical agreements (Government Decree No. 306/2022, Hungarian VBER), (ii) technology transfer (Government Decree No. 86/1999), (iii) specialization (Government Decree No. 467/2023), (iv) vehicle aftermarket (Government Decree No. 204/2011), and (v) research and development (Government Decree No. 456/2023).

These laws are supported by the GVH’s soft law tools, which include frequently updated non-binding guidelines, notices, and communications as well as extensive case law.

2. Have there been any notable recent (last 24 months) updates of Hungarian competition legislation?

Competition law is one of the fastest-changing areas of law, as regulation follows market changes, as well as EU developments and legislation. There have been a few notable changes in competition legislation recently, such as:

i. increase in the maximum fine for infringements: the maximum fine has been increased from 10% to 13% of the worldwide net turnover of a whole group of companies for the preceding financial year.

ii. increase in merger thresholds, filing fees, and fines for gun-jumping: the merger thresholds for triggering a notification obligation were significantly increased compared with the previous thresholds, with the legislator expecting the new thresholds to lead to fewer notifications and a lighter administrative burden on businesses. Filing fees have risen by 30% on average, while the maximum daily fine for gun-jumping has been increased by 50%.

iii. new notice on relevant markets: the GVH must annually publish on its website a list of the markets affected by mergers that have been cleared without a detailed decision issued by the authority. The notice is non-binding, it is still a valuable resource for current GVH case law on market definition.

iv. new Hungarian VBER: Hungarian VBER entered into force following the implementation of Commission Regulation (EU) 2022/720 (EU VBER) and regulates the exemption of certain categories of vertical agreements.

v. new tool: formal notice for suspected infringements: the GVH may preventively inform businesses of suspected infringements without opening a competition control procedure in a formal notice, giving them 45 days (or 60 for small businesses) to respond.

vi. GVH can initiate investigations pursuant to the DMA Regulation: the GVH is appointed as the authority in Hungary for cooperating with the European Commission (Commission) on enforcing the Digital Markets Act (Regulation (EU) 2022/1925 (DMA Regulation). The GVH is authorized to initiate proceedings to determine whether a gatekeeper complies with obligations under the DMA regulation.

vii. GVH can shut down websites in the event of a breach of the DSA Regulation: the Digital Services Act (Regulation (EU) 2022/2065 (DSA Regulation) applies to businesses established in Hungary or providing internet intermediary services in Hungary. Where such businesses act in breach of the DSA Regulation, the GVH, from March 1, 2024, may order the inaccessibility of electronic data (e.g., a website) where doing so is necessary to prevent a risk of serious harm to consumers.

viii. GVH can launch investigations based on the FSR Regulation: the GVH was appointed as the authority responsible for the Commission’s requests for investigation pursuant to Regulation (EU) 2022/2560 on foreign subsidies (FSR Regulation – directly applicable in Hungary) distorting the internal market. The GVH may launch targeted investigations to examine the legality of foreign subsidies granted to market players. 

Additionally, the implementation of EU Directive 2019/2161 (Omnibus Directive) introduced several new rules into existing consumer protection laws, with respect to, for example, price displays, sale prices, reviews, and endorsements. Finally, the introduction of a price monitoring tool was designed in support of the GVH’s fight against inflation in the food retail sector.

3. What are the main concerns of the national competition authority in terms of agreements between undertakings? How is the sanctioning record of the authority?

Cartel (mainly public procurement cartels) and resale price maintenance (RPM) cases have dominated recent GVH practices. The GVH regularly carries out accelerated sector inquiries, as well as market studies (recent ones have concerned green claims and artificial intelligence) of products/services/practices most affecting Hungarian consumers. GVH uses this approach to explore market circumstances and then initiate individual investigations (if needed).   

Over the past ten years, GVH’s cartel practice has been cyclical, both in terms of fines imposed and the number of cases initiated and closed. Traditionally, however, cartel cases were those that attracted significant fines. In 2019 GVH’s enforcement focus shifted towards consumer protection cases, as seen in the drastic increase in the magnitude of fines imposed by the GVH in those cases. While previously fines extended to a maximum of a few hundred million HUF, this went up to billions of HUF, with the highest consumer protection fine reaching HUF 2.5 billion.

In 2021, this trend reversed when the GVH reallocated resources towards cartel investigations, resulting in a record fine of HUF 16.3 billion (approximately EUR 42.5 million) imposed on companies involved in agreements restricting competition (mostly cartel cases) and a record-breaking HUF 14.1 billion (approximately EUR 36.8 million) imposed in the fertilizer cartel in Hungary. Since 2021, the GVH remained vigilant by discovering several public procurement cartels concerning the construction, road construction, anesthesia equipment, shipping services, and road salt and imposing hundreds of millions of forints (million euros) in each case. Nevertheless, in 2023 the GVH again imposed higher fines in consumer protection cases (mostly against tech giants) than in antitrust matters. 

4. Which competition law requirements should companies consider when entering into agreements concerning their activities in Hungary?

The requirements for competition law when entering into agreements within Hungary are, in most cases, identical or largely similar to those established within the European Union.

The same legal framework applies to both horizontal and vertical agreements. Nevertheless, agreements between companies under the same control (i.e., belonging to the same group of companies) are not deemed to restrict competition.

Section 11 of the Competition Act (and Article 101 of the TFEU) prohibits any agreements and concerted practices between companies that are aimed at the prevention, restriction, or distortion of competition, or which may have such an effect. This non-exhaustive list of prohibitions includes price fixing, market allocation, preventing market entry, limiting production, bid rigging, and sharing commercially sensitive information.

There are exemptions (de minimis, block, and individual) to this general prohibition.

De minimis: agreements of minor importance (where the combined market share of the participants does not exceed 10% in horizontal agreements and 15% in vertical agreements) are exempted from the prohibition, provided that they do not contain hard-core restrictions (e.g., price-fixing, market division, resale price maintenance).

Block exemption: certain groups of vertical agreements may benefit from the vertical block exemption regulations (notably the Hungarian VBER) and are exempted from the prohibition, provided that the combined market share of the participants does not exceed 30% and the agreements do not contain hard-core restrictions.

Individual exemption: an agreement can be exempted from the prohibition under the Competition Act if it leads to positive economic effects, while a fair share of these benefits reaches consumers, the agreement does not restrict competition more than is necessary to achieve these benefits, and competition is not completely eliminated as a result of the agreement.

It is advisable to exercise caution if one party to an agreement holds a dominant position/significant market power (see Section 6) or the agreement includes restrictions on resale prices, a non-compete clause, a non-solicitation clause, exclusivity clauses, joint selling or purchasing cooperation, as those could present a significant risk if they are not compliant with applicable competition law principles.

5. Does a leniency policy apply in Hungary?

Yes. The regulations governing the Hungarian leniency policy are set forth in the Competition Act and further detailed in the leniency notice (Notice No. 14/2017) issued by the GVH. In cartel cases, the cartel participant(s) that facilitate the GVH’s effective discovery of cartels may be granted immunity from or a reduction in fines.

Full immunity may be granted to a company that first:

  • provides the GVH with a basis for obtaining a court order in advance to carry out a dawn raid, provided that the GVH did not have sufficient evidence to carry out a dawn raid, or
  • proves that an infringement has been committed, provided that, at the time the evidence was provided, the GVH did not have sufficient evidence to prove the infringement and no undertaking fulfilled the preceding conditions.

A company may be eligible for a reduced fine, if:

  • the company provides the GVH with evidence of the infringement that represents significant added value compared to the evidence available to the GVH, but
  • there was a prior leniency applicant in the case, or
  • the evidence provided in the leniency application does not otherwise justify immunity from the fine.

The reduced fine is up to 30-50% for the first company, 20-30% for the second company, and 20% for any additional company meeting the above requirements.

To be eligible for immunity or a reduced fine, the leniency applicant(s) must comply with several conditions: (i) must cease its participation in the infringement immediately; (ii) must cooperate with the GVH until the end of the competition enforcement procedure; (iii) must not reveal, without explicit permission from the GVH, the fact that it has submitted a leniency application; (iv) must refrain from destroying, falsifying, or concealing relevant evidence, or from disclosing the existence or any details of its application while the GVH assesses the application. Furthermore, immunity cannot be given to a company that has acted to coerce another company to participate in the infringement.

6. How is unilateral conduct treated under Hungarian competition rules?

Unilateral conduct becomes a concern when a company enjoys a dominant position (as set out in the Competition Act) or has significant market power (as set out in the Trade Act and the Unfair Agricultural Trading Act) and exploits this power for its own benefit, negatively impacting other competitors and consumers.

Abuse of dominant position:

The Hungarian regulation is based on the provisions of Article 102 of the TFEU. According to Section 22 of the Competition Act, a market player is considered dominant in a relevant market if it can conduct its economic activities largely independently of other market participants. There is a presumption of dominance for companies with a market share exceeding 40%.

The mere existence of a dominant position is not considered illegal but the abuse of such position is not permitted.

The Competition Act provides a non-exhaustive list of exclusionary and exploitative practices that are deemed to constitute an abuse of a dominant position:

  • unfair purchase or selling prices: fixing selling or purchasing prices or imposing other inequitable contractual clauses;
  • restriction of output: restricting production, distribution, or technological development to the detriment of final trading parties;
  • discrimination: applying dissimilar business conditions (prices, terms, payment deadlines) for equivalent performances by creating disadvantages in their competitive position;
  • refusal to deal: refusing to establish or maintain business relations adequate for the nature of the transaction without any justification;
  • tying and bundling: rendering the sale or purchase of goods dependent on the sale or purchase of additional goods, or making the conclusion of a contract dependent on agreeing to commitments that are not typically part of the subject of the contract;
  • predatory pricing: using prices that are excessively low to force competitors out of the market or to prevent them from entering.

Abuse of significant market power:

The Trade Act prohibits the abuse of significant market power against suppliers. Significant market power differs from the dominant position and is deemed to be established if the consolidated net revenues generated by a group from trading activities for the preceding year exceeds HUF 100 billion (approximately EUR 261 million) or if it enjoys or is likely to enjoy a one-sided bargaining position in connection with a supplier. Under the Trade Act, abusive practices include undue discrimination, unjustified contract modification, undue restriction of access to marketing channels, imposing unfair conditions, and applying unjustified charges.

In 2020, the Trade Act introduced new requirements for agreements between beverage manufacturers with significant market power and the HoReCa (hotels, restaurants, cafes) units they contract with. The violation of these rules falls under the jurisdiction of the GVH.

The Unfair Agricultural Trading Act promotes fair business practices among companies involved in trading agricultural and food products and their suppliers and prohibits abusive practices by companies with significant market power.

7. Are there any recent local abuse cases of relevance?

In any year over the past 10 years, around or less than 5% of GVH’s cases were abuse of dominance cases. The GVH initiated about 2-5 cases per year and did not impose fines for the abuse of dominance more than twice a year. These numbers show that abuse of dominance caught by the GVH is rare in Hungary.   

2021 was a record year with the GVH launching eight abuse of dominance cases in the technology, beverages, and construction industry in Hungary, these are still ongoing, and no other case has been opened since.

8. What are the consequences of a competition law infringement?

Violating competition law can result in severe consequences for companies and in some cases for individuals. These consequences typically include:

  • an infringement decision: the decision-making body of the GVH, the Competition Council can establish a breach of competition law.
  • fines (warning): the Competition Council can impose a fine of up to 13% of a group’s worldwide turnover for the year preceding the decision. Instead of a fine, the Competition Council may issue a warning to first-time offender SMEs.
  • ordering the termination of an infringement: the Competition Council can order the termination of conduct in breach of competition rules. 
  • the prohibition of future infringements: the Competition Council can prohibit future conduct in breach of competition law. 
  • imposing commitments: the Competition Council has wide discretion in imposing prescribing commitments/obligations proportionate and necessary to eliminate the infringement. 

The Competition Council’s decision to impose the above sanctions may be challenged in court.

To mitigate or avoid the above sanctions, companies under investigation may (i) offer to undertake certain commitments (both in antitrust and consumer protection cases), (ii) engage in a settlement procedure (in antitrust cases), or (iii) submit a leniency application (in cartel cases – Section 5).

Voluntary commitments can help avoid competition fines and may include direct compensation elements, a modification of the infringing practice, educational campaigns, compliance programs, etc. A 10-30% fine reduction may be achieved by engaging in a settlement procedure during the investigation, where the company under investigation must acknowledge the infringement and waive its right to seek judicial remedy. GVH guidelines contain detailed rules on commitments, settlement, and leniency.

Additional consequences – outside of competition enforcement procedure – typically include:

  • nullity: contracts may be declared null and void by the court due to competition law infringements. The Court may also order the termination, amendment, or conclusion of a contract if it includes provisions breaching competition law. 
  • private damages actions: private antitrust damages actions may be initiated and damages sought against companies in violation of Section 11 of the Competition Act or Article 101 of the TFEU by anyone affected by the infringement (competitors, companies, or consumers). The Competition Act contains a rebuttable presumption that the cartel infringement influenced (raised) the price charged by the infringer by 10%.
  • exclusion from public procurements: companies must be excluded from public procurement procedures if, within the past three years, a final and enforceable decision by the GVH or any other Member State competition authority, has established that they engaged in behavior restricting competition in violation of Section 11 of the Competition Act or Article 101 of the TFEU, and consequently, these authorities have imposed fines on them.
  • criminal liability: criminal charges may be brought against individuals operating public procurement cartels.
  • reputational damages: beyond legal penalties, companies found guilty of violating competition laws often face bad PR. The GVH issues press releases (usually both in Hungarian and English) about its closed cases and those are often picked up by media outlets.

9. Is there any competition law requirement in case of mergers & acquisitions occurring or impacting the Hungarian market?

Hungarian merger control rules are set out in the Competition Act and enforced by the GVH. A transaction is notifiable to the GVH (i) if there is a change of control and (ii) the turnover of the parties involved meets the relevant thresholds set out in the Competition Act. 

Transactions subject to merger control:

  • The following transactions are subject to merger clearance:
  • the acquisition of sole or joint control over the whole or part of a previously independent company;
  • the merger of two or more previously independent companies; and
  • the creation of a full-function joint venture.

Notification thresholds:

The GVH must be notified of the transaction if:

  • the combined Hungarian net turnover of all parties (i.e., the acquirer(s) and the target) exceeds HUF 20 billion (approximately EUR 52 million) in the preceding financial year; and
  • the individual Hungarian net turnover of each of at least two parties exceeds HUF 1.5 billion (approximately EUR 3.9 million) in the preceding financial year (Mandatory Thresholds).

Concentrations that do not meet the above Mandatory Thresholds but: (i) involve parties with a combined Hungarian net turnover exceeding HUF 5 billion (approximately EUR 13 million), and (ii) may lead to a significant lessening of competition on the relevant market(s) can be voluntary notified to the GVH (Voluntary Thresholds).

For the calculation of the relevant turnover, the net turnover generated in the previous business year from goods and services sold in the territory of Hungary is taken into account, while intra-group turnover must be disregarded. Specific rules apply to the calculation of thresholds for mergers involving insurance companies, credit institutions, financial enterprises, or investment companies, which are largely in line with those set out in the EU’s Jurisdictional Notice.

Exemption under notification:

A special “public interest exemption” exists under the Hungarian competition regime, which permits the government to qualify a merger as “strategic” and exempt it from the merger control filing requirement.

Irrespective of the notification thresholds, a temporary acquisition for the purpose of resale does not need to be notified in cases where certain types of financial companies and investment funds acquire assets or shares of another undertaking if the resale is carried out within a one-year period.

EU merger control and foreign-to-foreign filing:

Mergers that meet the EU merger control filing thresholds will be assessed by the Commission in line with the “one-stop shop” principle.

Foreign-to-foreign mergers are also subject to Hungarian merger control review if they meet the local merger control filing thresholds.

10. What is the normal merger review period?

The merger control process has been significantly streamlined over the past few years, resulting from a combination of legislative reforms, the introduction of a new type of fast-track procedure, and higher thresholds for notification, as well as the reduction in the administrative burden on companies.

The typical timeline for reviewing a merger control process is as follows:

1. Pre-notification meeting with the GVH (optional but recommended): This initial step involves a voluntary meeting between the parties and the GVH to discuss the merger and receive preliminary feedback.

2. Submission of the notification form: the parties involved in the merger submit a detailed notification form to the GVH, officially starting the review process.

3. GVH assessment – three possible procedures:

Fast-track procedure: the GVH may opt for a speedy review if the merger appears unlikely to raise significant competition concerns and acknowledges the transaction by issuing an administrative certificate (the deadline is eight days provided that no additional information is requested); If this is not the case, the GVH opens the investigation phase:

Phase I Investigation: a more detailed review is conducted to assess the merger’s impact on competition. If concerns are minor or can be mitigated with commitments, the GVH may approve the merger at this stage (the waiting period is 30 days, which may be extended by 20 days);

Phase II Investigation: if the merger raises significant competition concerns or if the analysis from Phase I is inconclusive, a comprehensive investigation is undertaken to make a final decision (it lasts an additional three months, which may be extended by two months).

The clock stops until GVH’s requests for information are complied with. If the GVH fails to issue its decision within the applicable waiting period, its approval is deemed to be granted. The GVH uses the significant impediment to effective competition (SIEC) test for its assessment of mergers and will clear transactions that do not result in an SIEC, particularly by creating or intensifying a dominant position in the relevant market.

At the end of the GVH assessment, the GVH may (i) approve the transaction, (ii) prohibit the transaction or (iii) impose structural or behavioral remedies if the anticipated anti-competitive effects of the transaction can be prevented by the given remedy.

4. Possible follow-up investigation: depending on the outcome of the procedure and the conditions attached to any merger approval, the GVH may conduct further investigations to ensure compliance with the conditions.

Filing is mandatory in the case of mergers reaching the Mandatory Thresholds and voluntary in the case of reaching the Voluntary Thresholds. An application for clearance is submitted using the simplified filing forms that can be downloaded from the GVH website and is available in both Hungarian and English.

There is no deadline for filing, but a merger cannot be implemented prior to receiving GVH clearance. There are no specific sanctions for not filing per se, but severe sanctions, including suspension or reversion of all integration steps and financial penalties, apply for closing before clearance. The GVH may investigate transactions reaching the Voluntary Thresholds for six months after closing in the absence of notification.

11. Are there any fees applicable where transactions are subject to local competition review?

The applicable notification fee varies based on the level of analysis required before reaching a decision (i.e., Fast-track procedure, Phase I or Phase II procedure). The applicable fees are as follows:

(i) For a Fast-track procedure, a fee of HUF 1 million (approximately EUR 2,600) is to be paid at the time of submission of the notification form;

(ii) for a Phase I procedure, an additional HUF 4 million (approximately EUR 10,400) is to be paid;

(iii) for a Phase II procedure, an additional HUF 19 million (approximately EUR 49,600) is to be paid.

12. Is there any possibility for companies to obtain State Aid in Hungary?

State Aid is primarily regulated by EU law (i.e., Articles 107-109 of the TFEU). This means EU state aid principles and practices are fully applicable in Hungary. Therefore, the Hungarian legislator has not created a detailed set of rules for state aid, instead, it defers to the relevant EU legislation.

Hungarian companies are eligible to receive state aid, but the provision of such aid and the conditions under which it is provided must always adhere to the prevailing EU regulations. To ensure compliance, there may be instances where collaboration with the Commission or the submission of a notification to it is necessary regarding the state aid that is to be granted.

The main piece of legislation in Hungary is Government Decree No. 37/2011. on state aid procedure under EU competition law and the regional aid map (State Aid Decree). It lays down the core requirements for the granting of regional aid, the rules for the notification procedure, the legal foundation of the regional aid map, introduces provisions for the accumulation of aid from various sources, specifies transparency requirements, defines the necessary content of aid measures, and lists the different categories of aid.

Under the procedural regulations set forth by the State Aid Decree, all entities granting aid are required to inform the State Aid Monitoring Office (Tamogatasokat Vizsgalo Iroda) of their planned aid measures. The State Aid Monitoring Office is tasked with evaluating the conformity of each proposed measure with applicable EU rules and regulations.

13. What were the major changes brought by the COVID-19 pandemic? Have any of them stuck and how likely is it for these changes to continue to do so in the foreseeable future?

While the COVID-19 pandemic brought a few temporary (mostly procedural) measures affecting competition law, the core areas of competition law remained unchanged.

There are two notable permanent COVID-19 amendments in the Competition Act:

(i) A merger is exempted in regard to the notification obligation if it involves a venture capital fund or a private equity fund, where the state directly or indirectly controls the majority of ownership rights through a COVID-19-related refinancing scheme aimed at investment protection if the fund alone or together with other entities acquires controlling rights;

(ii) The introduction of the accelerated sectoral inquiry, which authorizes the GVH to quickly identify and address market problems if there are reasonable grounds to suspect that competition within a sector is distorted or restricted and urgent intervention is needed. This legal tool has been used by the GVH quite regularly (e.g., in ceramic bricks, construction wood, coronavirus rapid tests, COVID-19 antigen tests, non-perishable food, dairy, and online booking services).

Guide Contributors For Hungary

Gabor Kutai, Senior Associate
gabor.kutai@twobirds.com 
+36 1 301 8900