A recent amendment of the Competition Act, adopted by the Hungarian Parliament on 6 December 2016, will bring about significant changes to, inter alia, the authorization of concentrations, private enforcement of competition law and assessment of resale price maintenance. Most of the changes will enter into force on 15 January 2017.
One of the most important changes with respect to merger control is the amendment of the turnover thresholds:
- On the basis of the previous turnover thresholds, those concentrations were subject to notification, where the combined turnover of the undertakings exceeds HUF 15 billion and there are at least two undertakings involved that have a turnover exceeding HUF 500 million. After the amendment, the HUF 15 billion threshold remains unchanged, but the other threshold will be increased to HUF 1 billion.
- Another novelty is the introduction of a secondary threshold, on the basis of which mergers not meeting the above thresholds must be notified if the combined turnover of the participating undertakings exceeds HUF 5 billion (so-called investigation threshold). An interesting feature of these transactions is that unlike the concentrations meeting the higher thresholds, the stand still obligation does not apply, and the HCA may only commence an investigation for failure to notify within 6 months after the merger has been implemented.
Apart from the above changes, the amendment of the rules on calculation of turnover is also important: unlike under the previous rules, in case of Hungarian undertakings only the domestic turnover is relevant, not the worldwide turnover.
With respect to the merger control procedure itself, a conceptual change is that the authorization system has been replaced by a notification system under which concentrations meeting the turnover thresholds will have to be notified to the Hungarian Competition Authority (HCA), but a formal procedure will only be commenced if it is not clear whether the merger will lead to a significant lessening of competition. This conceptual change enables the further acceleration of procedures. If the concentration is simple and unproblematic on the basis of the notification, the HCA will adjudicate it within eight days and issue an official certificate. This applies if the notification was filed using the form issued by the HCA, by the undertaking responsible for notification, not prematurely and the HUF 1 million notification fee was paid (formal requirements), furthermore, it is apparent that the concentration will not lead to a significant lessening of competition (material requirement). This is particularly important, because if these requirements are met and after a thorough preliminary consultation (so-called pre-notification consultation) the notification form can be submitted unaltered, the HCA plans to issue the official certificate even faster than within the 8-days deadline, within 1 working day.
Apart from the acceleration of merger control procedures, the HCA will be stricter in acting against mergers problematic from a competition law viewpoint: in the future the HCA can carry out unannounced on-site inspections (so-called dawn raids) if it suspects that a merger subject to notification was implemented without notification. Also, the implementation of mergers without notification is subject to a fine imposed by the HCA, the upper limit of which is the same as for fines imposed on cartels (10% of the group turnover of the undertaking responsible for notification).
The new rules are applicable to concentrations created after the entry into force on 15 January 2017.
The HCA plans to issue several notices that should provide guidance on interpretation of the new rules, including when it is apparent that the concentration will not lead to a significant lessening of competition.
The amendment of the Competition Act implements the EU Antitrust Damages Directive, on the basis of which damages claims stemming from competition law infringements must be adjudicated in accordance with the new chapter of the Competition Act. An important distinction is that while the rules on liability apply only to competition law infringements carried out after the entry into force, the procedural rules may be applied to pending litigation.
Among the rules of liability, the most important are the three limitations of joint and several liability of infringers. Undertakings paying damages on the basis of out-of-court settlements are only liable in accordance with the settlement. Undertakings that received immunity from fines as a result of a leniency application, as well as small- and medium-sized infringers, are only liable towards their own business partners.
According to the new rules, the contractual limitation or exclusion of liability for antitrust damages is null and void.
The amendment of the Competition Act introduces two legal presumptions with respect to liability: on the one hand, in case of hardcore infringements the occurrence of damages is presumed; on the other hand, it is presumed that undertakings paying a cartelized price passed on the increased prices to their own purchasers.
The rules on limitation periods are also different in case of damages stemming from competition law infringements: the limitation period starts only if the injured party is aware of the infringement, the damages and the infringer. If a competition authority procedure is commenced on the basis of the infringement, the limitation period is suspended until the final and binding end of the competition authority procedure and eventual judicial review, plus one year.
The most important procedural rule is the introduction of evidence disclosure similar to American discovery or English disclosure. In the course of this, the litigating parties can request the court to obligate the other party to provide evidence. An important novelty is that evidence disclosure may refer not only to specific documents, but also to a range or category of documents, evidence or data. An equally important change is that if the obligated party fails to provide the requested evidence, the court is entitled to accept the fact for the support of which the evidence was requested as true. Only limited exceptions apply to evidence disclosure, including the leniency statement or the settlement submission, but also legally privileged documents.
The new rules intend to increase the role of competition authorities: on the one hand, the decisions of competition authorities finding an infringement are binding on courts adjudicating damages claims (even the decisions of foreign competition authorities is accepted as a fact), on the other hand, the court may request the HCA to contribute to the litigation with respect to the occurrence of damages, the extent of damages and causality.
Among other changes, the most important is the change in the assessment of resale price maintenance. On the one hand, such infringements will not be exempted with respect to their de minimis nature, i.e., that the market share of the participating undertakings is less than 10%. On the other hand, undertakings may submit a leniency application in case of such an infringement, which was reserved only for horizontal hardcore infringements until now. Latter is part of a process: the HCA already extended the possibility of a leniency application to infringements mixed with vertical elements (e.g. hub & spoke) in the summer of 2016. Although the rule providing for more strict assessment of RPM applies only six months after entry into force, leniency applications may be submitted directly after entry into force.
The amendment of the Competition Act also influences the reduction of fines due to a settlement procedure. Until now, the HCA was obligated to provide a 10% reduction in any case if the settlement procedure was successful, while in the future the HCA may even provide a reduction up to 30%. This change is effective since December 2016 and was already successfully applied by the HCA in the case against real estate agencies recently closed.
Another novelty is that damages paid on the basis of an out-of-court settlement are considered as a mitigating circumstance in the imposition of a fine by the competition authority.