Increased general turnover thresholds 

The general turnover thresholds have been increased from HUF 15 billion to HUF 20 billion (approx. EUR 48.8 million), and from HUF 1 billion to HUF 1.5 billion (approx. EUR 3.7 million).

Accordingly, the HCA must be notified of a concentration if the aggregate net turnover of the participating undertakings exceeds HUF 20 billion and the net turnover of at least two groups of participating undertakings exceeds HUF 1.5 billion in the previous business year.

The above increases of the general thresholds follow recent inflation (the last adjustment of the thresholds was done in 2017) and are expected to reduce the number of notifiable transactions lessening the administrative burden on parties in smaller and less significant transactions.

Clarification on notifications based on the so called “soft” threshold

Based on the previous regulation, some concentrations which were not caught by the general turnover thresholds were still subject to merger control where the aggregate net turnover of the participating undertakings exceeded HUF 5 billion (approx. EUR 12.2 million) in the previous business year (an alternative, so called “soft” threshold), and it was not obvious that the concentration will not significantly decrease competition on the relevant market, especially as a result of creating or strengthening a dominant position. The aim of this specific rule was to enable the HCA to intervene in the case of concentrations which may have negative effects on the relevant market without reaching the general turnover thresholds.

According to the new rules introduced by the Amendment, the notification of a concentration will not be mandatory anymore but only optional based on the parties’ decision whether to notify their transaction or not. 

The rules on the HCA’s investigative powers, however, remain unchanged: if the transaction is not notified, the HCA may still initiate an investigation within 6 months following the implementation of the concentration. As there is no stand still obligation applicable in such cases, the transaction can be validly completed (without triggering gun jumping consequences) even during the ongoing HCA proceedings, without any fines being imposed by the HCA. However, in the case of serious competition concerns, the HCA may order various measures in order to restore competition, if necessary.

Merger control notifications before signing of transactional documents

Under the previously applicable rules, a merger notification had to be submitted after the signing of the relevant transaction documents, the acquisition of de facto control or the announcement of a public takeover bid. Under the new rules introduced by the Amendment, and similarly to the relevant EU rules, a notification for merger control can also be submitted to the HCA if the parties can substantiate their good faith intention to proceed with the transaction resulting in a concentration. 

This new rule will certainly allow more flexibility to the parties and their advisors to timely structure their transactions by preparing merger control notifications in advance and even proceeding with the submission to the HCA before the signing date.

Fines for early completion (gun jumping)

The HCA was able to impose a fine where a concentration was implemented by the parties without a clearance granted by the HCA in the case of the general turnover thresholds being met. 

According to the Amendment, such a fine may still be imposed, however, (i) there will no longer be a fine applicable for the period between signing and implementation of the concentration; (ii) the fine will also be applied even if the implementation takes place during the merger control proceedings before the HCA. 

The maximum daily amount of the fine will also be increased from HUF 200,000 (approx. EUR 490) to HUF 300,000 (approx. EUR 730). The new daily amounts will be applicable, as an exception from the other changes, from 1 February 2023.

Increase of procedural fees

The procedural fees applicable in the case of a notification of concentration before the HCA were also modified by the Amendment. The procedural fee to be paid in the case of a merger control proceeding will be increased from HUF 3,000,000 to HUF 4,000,000 (approx. EUR 9,800) for Phase I and from HUF 15,000,000 to HUF 19,000,000 (approx. EUR 46,400) for Phase II proceedings. The procedural fee for “simplified” proceedings HUF 1,000,000 (approx. EUR 2,450) remains unchanged.

Temporary acquisition of control by investment funds and fund managers

A notification of concentration will no longer be required if the control or assets are acquired by investment funds and fund managers with the aim to prepare a resale, and the acquiring undertaking does not exercise control rights or exercises them only to the extent strictly necessary for that purpose, and if the duration of the acquisition does not exceed one year.

Based on the Amendment, the list of entities benefitting from such exemption (already covering insurance companies, insurance holding companies, credit institutions, financial holding companies etc.) has now been extended to investment funds and fund managers.

Next steps

The Amendment does not significantly impact the entire merger control regime in Hungary, since the changes are rather technical, businesses can although benefit from some of the changes: the increase of the general turnover threshold will lead to the lessening of their administrative burden in the case of smaller transactions, or the possibility to notify transactions prior to signing will certainly allow more flexibility in structuring even if efficient discussions were already available with the HCA during prenotification meetings. 

The clarification on the application of the “soft” threshold specifying that notifications are optional and not mandatory anymore will not be much of a relief to businesses who will rather notify their transactions in advance, if there is a slight chance that anti-competitive effects may arise as a result of the transaction, avoiding any uncertainties, delay and a potential post-completion merger control review by the HCA.
 

Authored by Ákos Kovách.