Based upon the experiences of the years passed since the commencement of the
1996 Act on the Prohibition of Unfair Market Practices and Restriction of
Competition ("Act"), a package of modification affecting almost the complete
Act came into effect on February 1, 2001. When drafting the respective bill,
legislators paid special attention to the competition laws of the European
Union, thus the modified Act is even more harmonized with the respective rules
of the Union.
Below the most important new provisions are highlighted concerning cartel,
abuse of dominant position, merger control, the organization and procedure of
the Economic Competition Office ("Office").
It is an important novelty that according to the Act the so-called "hard-core"
restricting agreements containing price-fixing and division of market will get
out of the effect of the de minimis rule (until now generally 10% market
share). The reason for changing is obvious: such agreements have exclusively an
effect restricting competition, even in the lack of significant market share.
However it is query if the Office will in practice check up violations of law
of such small importance.
A package of modification relates to the exemption from the general cartel ban:
according to a new section, the respective block exemptions shall not apply, if
due to the cumulative effect of agreements otherwise to be exempted, the
grounds for the exemption do not sustain. This rule is the equivalent of
cancellation well known in the EC, which has been really lacking
(theoretically) from the Hungarian system. Because of the separation of the
Hungarian adoption and application of law (i.e. the government adopts the
Decrees on block exemptions, the Office merely applies them) the cancellation
cannot come into question, so the statutory exception is the appropriate
solution, that raises however several serious problems: the retroactive effect,
fining and so the question of legal security. The legislator settled this
question by the rule that the Office may state only for the future - and
without imposing a fine - that a block exemption does not cover a specific
agreement. The chosen solution is correct from the point of view of rule of
law, however dogmatically it can be queried.
In the rules of individual exemption it is new that the exemption will be
granted for a definite period and it can be granted even bound to preliminary
(suspensive) or posterior (resolutive) condition(s).
In this regard, the definition of dominant position has changed applying the
principle of real independence of a business operation from the competitors,
instead of the former approach, which was based rather on the reasonable
replaceability of the concerned goods or services at largely the same
conditions.
As to the rules of concentration, a more precise provision has been worked out
concerning the definition of concentration expressly referring to both direct
and indirect control. The definition of significant influencing of an
undertaking by another one includes now also the mere de facto ability to
influence, furthermore a slight widening in the scope of obligation of
registration with the Office has been implemented.
The rules of merger established by holdings, banks, insurance companies and
investment funds exempt from the duty to register has become stricter:
permission is not required only if the direction after obtaining control lasts
not more, than one year (however extendable upon request), and if the rights of
control are used only to a necessary extent of remarketing. This modification
has been induced by the demand of legal harmonization with the European
Directive.
The altered provisions of the Act affecting the organisation of the Office do
not show any radical intervention in the actual structure, however, they affect
the competence and appointment of its Chairman as well as Deputy Chairmen.
The Chairman of the Office jointly with the Chairman of the Competition Council
may issue announcements not legally binding, which are adequate to diminish the
legal insecurity deriving from the general clauses by making the competition
authority’s practice more calculable. It should be noticed that such
announcements – beside that they really serve with some support for
undertakings – cannot substitute for an instrument which is legally binding,
serves for inner use, but a public legal instrument, that could really
integrate the practice with consideration to the total independence of the
members of the competition council.
According to a new section the Chairman of the Office – when perceiving
disturbance on the market during conducting sectorial inquiries – can oblige
the undertakings in a given sector of business to supply data and has also the
right of fining with immediate enforceability. This order will have a function
in the case if only a general suspicion arises and investigation is in course
against those not drawn under concrete procedure.
It is a significant novelty that the appointment of the Members of the
Competition Council will change from the previous undetermined period to a
determined 6-year period. This change indicates the unsaid perception that the
Competition Office – and the Competition Council as part of it – is not a court
but an administrative authority, to which no such severe guarantee requirements
should be stipulated as to courts, considering also that against the decision
of the Competition Council one can file a lawsuit before the independent
courts.
The new procedural regulations support a more effective procedure of the Office
implementing even more provisions which render the competition procedure exempt
from the applicability of the general administrative procedure in many aspects.
The amount of procedural fine - which can be imposed on a party causing delay
to or putting obstacle in the way of the procedure - has become higher (instead
of HUF 10,000 up to HUF 100,000 (cca. USD 330) as a minimum and from HUF 50,000
to one percent of the total net turnover of the company as a maximum). It is
still a question of future practice, whether the Office would tend to impose
high procedural fines frequently.
The legislator in conformity with the EC law has corrected a continuously
criticized insufficiency of the former Act by fixing the maximum amount of
leviable fine at 10 percent of the yearly total net income of the concerned
undertaking. At the same time this regulation is informative for the
undertakings and for the Competition Council as well. The former ones get
supposedly influenced according to the legislator’s intention, the latter one
will presumably result in considerable higher fines in practice.
In the case of mergers the proceeding fee has been also increased from the
previous HUF 500,000 to HUF 2,000,000 (cca. USD 6,600) in simple cases and to
HUF 10,000,000 (cca. USD 33,000) in complicated cases.
Another modification results in the extension of the procedural deadlines, as
the previous short time limits often made the inquiries symbolic in complicated
matters. With respect to the fact that e.g. in the EC there is no such time
limit, the newly set deadline of 90 days or 180 days if lengthened cannot be
considered as too long deadline (that can be extended twice). Naturally so much
time is not always necessary to arrange, so in simpler merger cases the new
deadline is 45 days.
A really important strengthening to the Office is that the examiner of the
Office - further its previous rights - is entitled to enter the premises of the
company and to examine the same with the consent of the Court. The examiner is
entitled to exercise these rights also using the help of the police.
The competition office has the new power that in its decision it can oblige an
undertaking to a certain activity, which is really justified mainly in dominant
position cases - in conformity with the EC regulations (e.g. establishing
business contact).
The new Act also contains a clause on supporting informants such like the laws
of the EC and the USA. Betrayal is not nice, but apparently considered as
useful for the Office, for the informant, for the economy - of course not for
the betrayed other parties, but nothing is perfect.
A very important modification is that the decision of the competition office is
immediately enforceable irrespectively of any challenge of the same at court.
This provision reflects a new principle, which obviously will result in more
imminent serious effects (such as heavy fines) on companies, therefore to seek
for in advance professional legal advice on competition law aspects in Hungary
will be more advisable in the future.