April 2024 – The latest proposed amendment to the Hungarian Competition Act, recently submitted to the Hungarian Parliament, would enter into force on 1 July 2024, but it has not yet been adopted. The package of amendments would cover several areas, including the introduction of a new concept of undertaking and a new exemption category from the prohibition of restrictive agreements.
Undertaking of fundamental principle
The proposed amendment would introduce the concept of undertaking of fundamental principle. The Hungarian Competition Authority (HCA) would be able to determine in the context of a competition supervision procedure that an undertaking is of cross-market significance for competition and consumers. To do so, the HCA must examine, inter alia:
- the undertaking’s market share, financial strength and its access to resources,
- the essential importance of the service it provides or the goods it produces or distributes for consumers or the economy, or
- any other circumstances from which it can be inferred that the undertaking has market power, whether in relation to its competitors, consumers or business partners (e.g. suppliers, distributors).
The HCA may impose additional obligations on undertakings of fundamental principle, such as prohibiting them from:
- treating their own offers more favourably than that of their business partners (prohibition of self-preference), or
- using business partners’ data without their explicit consent.
The HCA would have locally unprecedented tools to intervene in the organisational and structural operation of undertakings of fundamental principle. Where an undertaking of fundamental principle is unable to carry out its activities, in order to maintain or restore the operations necessary for the security of supply, the HCA could even oblige the owners to sell the entire undertaking or parts of it, it could suspend their voting rights and intervene in the undertaking’s organisational decisions (management body, general assembly).
New exemption from the prohibition of restrictive agreements
In line with EU law, the Hungarian Competition Act generally prohibits restrictive agreements and concerted practices between companies. This also applies to the relationship between the so-called full-function joint venture and its joint controllers, as such joint ventures are considered to be independent undertakings of their owners. The proposed amendment would no longer prohibit restrictive agreements or concerted practices between the undertaking (full-function joint venture) and its jointly controlling shareholder, provided that the restrictive agreement or the concerted practice relates exclusively to conduct in the relevant market(s) in which the jointly controlled undertaking operates.
Sector inquiries
The HCA can currently conduct sectoral and accelerated sector inquiries, which have resulted in the opening of competition supervision proceedings or even legislative proposals (e.g. in case of online travel agents or OTAs). Now the proposed amendment explicitly lays down the rules for competition supervision proceedings resulting from sectoral and accelerated sector inquiries.
According to the proposal, where the HCA finds, on the basis of a sector inquiry or an accelerated sector inquiry, that there is a significant and continuous restriction or distortion of competition in a given market, it may open competition supervision proceedings against undertakings suspected of restricting or distorting competition. A significant and continuous restriction or distortion of competition exists or is likely to exist if it has existed continuously or recurrently for at least 3 years. In such cases, the HCA could even impose a structural remedy (e.g. divestment of a particular business) as a sanction.
The principle of effective enforcement of competition law
The proposed amendment would also add a new general principle to the Hungarian Competition Act, namely that in administrative court proceedings against competition supervision decisions of the HCA, the adjudication of the dispute would need to ensure that the requirement of effective enforcement of competition law is not infringed.
Next steps
The above amendments are only at the draft stage before the Parliament and may be subject to further amendments during the legislative process, but given their importance, it may be worthwhile to start preparing for compliance with the amended Hungarian Competition Act.