What to Expect from the Hungarian Competition Authority in 2022?

What to Expect from the Hungarian Competition Authority in 2022?

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The Hungarian Competition Authority ("HCA") has published a summary report of its 2021 activities. The HCA opened 51 competition proceedings against 124 undertakings, almost 25% more than in the previous year, and 42 cases were closed in 2021.

Record amount of fines

In 2021 the HCA has established a competition law infringement in 28 proceedings against 71 undertakings. The HCA imposed a fine in 25 cases amounting to around HUF 18.2 billion (approx. EUR 50 million) fine on 62 undertakings in total. This is a record amount compared to previous years (2020: HUF 8.4 billion (approx. EUR 22.7 million); 2019: HUF 8.8 billion (approx. EUR 23.8 million), although a very significant proportion of this relates to the high-profile fertiliser cartel, in which the HCA imposed fines totalling HUF 14 billion (approx. EUR 38 million). However, this decision, together with many others, is not necessarily final, as the fined companies may turn to court against the HCA's decision, as was the case in the fertiliser cartel. Excluding the fertiliser case, the total amount of fines imposed in 2021 has decreased compared to previous years.

2021: the year of cartels

It is not an exaggeration to state that 2021 was the year of cartels, given that more than 90% of the HUF 18.2 billion (approx. EUR 49 million) fines, namely HUF 16.2 billion (approx. EUR 43.8 million), was imposed for agreements restricting competition (mostly cartels). Last year 8 such cases were closed: an infringement was established for 4 public procurement cartels, 2 non-public procurement cartels and 2 other anti-competitive agreements.

The HCA carried out dawn raids with the suspicion of cartels or other market distortions at 56 market players last year, during which it processed around 14 TB of data. This is not at all an indication that the coronavirus pandemic deters or limits the HCA's enforcement or dawn raid activities.

Consumer protection: targeting infringements linked to COVID-19

Consumer protection cases accounted for more than 50% of the closed cases. Fines were imposed in half of the consumer protection cases, totalling HUF 2 billion (EUR 5.4 million). Here the HCA prioritised the detection of COVID-19 related infringements and imposed fines around HUF 449 million (approx. EUR 1.2 million), i.e., a quarter of the total fines imposed in consumer protection cases were imposed for COVID-related infringements.

The most exciting consumer protection case of 2021 was not related to the pandemic, but to one of the most popular social media platforms. The HCA had previously found that Facebook had committed an infringement when it advertised its service as free, given that users did not have to pay a fee for using the service, but their user activities and data resulted in commercial benefits for Facebook, thus it had meant in fact paying for the service. The HCA imposed the largest consumer protection fine in its history until that date on Facebook, HUF 1.2 billion (approx. EUR 3.2 million) (there have been higher fines since then). However, the courts have ruled recently in Facebook's favour and annulled the fine in its entirety.

New tool in the HCA's hands: accelerated sector inquiry

Last summer the Hungarian Government introduced a new legal instrument to extend the powers of the HCA, allowing it to order an accelerated sector inquiry if competition is distorted or restricted in a specific market and an urgent intervention is required to identify and address these market disturbances. The HCA initiated the first accelerated sector inquiry in the construction sector on the Hungarian market of ceramic masonry elements (bricks), then another one on the Hungarian market of construction wood materials. Most recently it has conducted an accelerated sectoral inquiry on the market of COVID-19 antigen tests due to the extraordinary high prices by regional comparison.

Abuse of dominance

In 2021 the number of suspected abuse of dominance investigations increased compared to previous years, with a total of eight cases, but these are still ongoing, with the exception of the Budapest Airport case.

Merger Control: clearance is granted in an average of 4 days

The HCA received a record number of notifications of concentration in 2021 and cleared 64 transactions last year. As no competition concerns were identified in any of the cases, the HCA issued a clearance certificate in 92% of the cleared transactions in a very short time (average clearance time of 4 days). The HCA is one of the most effective authorities in handling notifications of concentration that do not raise competition concerns in Europe, which is also important from a competitiveness perspective. The excellent statistics are also helped by the possibility of a prenotification procedure, also favoured by the Authority, whereby the notifying party can discuss all relevant matters with the HCA before formally submitting the notification, making the actual proceeding more efficient and faster.

The Beer Act has entered into force: proceedings against two fast food chains and three breweries

In 2020 the Hungarian Parliament amended certain provisions of the Trade Act and from 2021 further extended the powers of HCA: in the HoReCa sector, catering businesses may not conclude any exclusive agreements on the procurement of beverages with beverage companies with significant market power. Furthermore, catering businesses shall offer the products of at least two beverage companies for all categories of beverages sold (not only beer). These trade rules are enforced by the HCA. The competition authority recently announced that it had launched the first competition proceedings under the new trade rules against two fast food chains, KFC and Burger King, and three beer producers, Dreher, Borsodi and Heineken.

It pays off to cooperate with the competition authority

The competition authority provides a wide range of opportunities for market players to cooperate with the authority. By cooperating with the HCA, the legal consequences of competition law infringements can be significantly reduced: fines can be avoided or significantly reduced, and in cases resulting in commitments, the HCA does not even establish an infringement. Last year, 24 companies obtained a reduction or waiver of fines totalling more than HUF 7.6 billion (approx. EUR 20.5 million), which represented 29% of the total amount of competition fines imposed last year.

What to expect in the coming year(s)

The importance of consumer protection cases has steadily increased in recent years, and the fines imposed in such cases have in many cases approached or even reached the level of fines imposed in cartel proceedings. While in 2021 the COVID-19 infringement related cases played a significant role, an emphasis will be on sustainability, environmental aspects and green marketing in the upcoming years. This is also supported by the fact that the HCA published its guidance on green marketing for businesses at the end of 2020.

The pandemic has been part of our everyday life for two years now and it has resulted in permanent or temporary disturbances on several markets, which required the prompt investigation and intervention by the HCA. However, as the published data show, these tasks (e.g., conducting accelerated sector inquiries) have not impeded the authority in carrying out its traditional enforcement tasks.

In the last two years the HCA closed roughly the same number of proceedings for cartels, consumer protection infringements or merger control as it did in 2019, before the pandemic. The number of proceedings opened (including sector inquiries) has increased, not only compared to the previous year, but also compared to the year before the pandemic. Thus the pandemic has not reduced but intensified the HCA's activity in the protection of competition and consumers, and we can expect the same in 2022.

By Anna Turi, Head of Competition, and Balint Szabo, Associate, Schoenherr