1) Is a merger control regulation in force?

Yes. The first merger control regulation was introduced as early as in 1991. The 1996 Hungarian Competition Act substantially reformed the merger control regime and brought it in line with the European merger control rules. 

2) Which authorities enforce the merger control regulation?

The Hungarian Competition Authority (in Hungarian: Gazdasági Versenyhivatal – hereinafter: GVH) enforces the Hungarian Competition Act including the merger control specific rules in it. The GVH has a dual structure: the Merger Control Unit does the preparatory work (processes the merger filings, reviews the markets, does the market test if necessary, etc.), whilst the independent decision making body within the GVH, the Competition Council brings the final decision in merger cases. 

3) Relevant regulations and guidelines with links:

The merger control rules applicable in Hungary are contained in Chapter VI of the Hungarian Competition Act. The GVH has published notices on some merger control related issues to provide further guidance on how it interprets the relevant provisions of the Hungarian Competition Act. Those notices are also listed below.

4) Does general competition regulation apply to mergers or ancillary restrictions?

Hungarian competition law is structured and interpreted in accordance with EU law (Hungary was obliged to harmonize its domestic competition laws to EU law as a pre-condition to the accession of the country to the EU in 2004). 

Restrictions of competition that are ancillary to mergers, for instance non-compete clauses, non-poaching agreements etc. necessary for the protection of the acquirer’s investment are covered by the merger control clearance automatically and by the force of law under Article 30 (7) of the Hungarian Competition Act and the general provision on the prohibition of anti-competitive agreements under Article 11 of the Hungarian Competition Act are not applicable. Restrictions that go beyond what may be considered ancillary may be caught by the general prohibition on anti-competitive agreements under Article 11 of the Hungarian Competition Act. 

To those restrictive merger clauses which do not qualify as ancillary restrains, the cartel prohibition (Chapter IV of the Hungarian Competition Act) remains applicable. Otherwise, where a transaction qualifies as a merger within the meaning of Chapter VI (the merger control regime) of the Hungarian Competition Act, the application of the prohibition of anti-competitive agreements is excluded relating to the cooperation of the merging parties. The only exception is the fields of full-function joint ventures (see below under topic 13) where, if the joint venture also serves the purposes of coordination of the activities of the parents, antitrust prohibitions may apply, despite the fact that the establishment of the joint venture originally constituted a merger.

5) May an authority order a split-up of a business irrespective of a merger?

No.

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

Sector specific regulations may require merging parties to seek the approval of the sector specific regulator. These rules are however independent from whether or not the given transaction qualifies as a merger within the meaning of Hungarian competition law and the powers of the sector specific regulators are also separate from those of the GVH (e.g. pharmacy, electricity, gas and banking sectors, district heating, banking, insurance and investment firms).

Media

In relation to media mergers that are caught by the Hungarian Competition Act, the Hungarian Media Council has specific powers pursuant to Article 171 of the Act CLXXXV of 2010 on Media Services and on the Mass Media: the GVH may only provide clearance to a media-related transaction if the Media Council has also consented to the deal. The Media Council reviews the transaction from media plurality aspects. If it clears the transaction, the GVH may nevertheless block it due the competition reasons whereas if the Media Council declines to clear the merger, the GVH is under an obligation to also block the deal.

Foreign investment control

The Hungarian regulation currently has two parallel FDI screening regimes, the FDI screening for national security interests and the new “2020” FDI screening:

FDI screening for national security interests

This is based on Act LVII of 2018 on the Control of Foreign Investments Offending the National Security of Hungary (official English translation is not available), using the framework of Regulation (EU) 2019/452 of the European Parliament and the Council of March 19, 2019, on screening foreign direct investments. This regime requires a notification to and approval of the Ministry of the Interior.

FDI screening under the FDI screening for national security interests apply to the following investments and ownership levels:

1. investors from outside of the EU, EEA, and Switzerland, where they aim to acquire, directly or indirectly, at least a 25% stake (or 10% in public limited liability company) or a majority influence defined in the Civil Code in a local company which carries out the activities defined below
2. investors from the EU, EEA, and Switzerland and Hungary in which a legal person from outside of the EU, EEA, and Switzerland holds majority influence according to the Civil Code if such investors acquire a majority influence (control) in a local company defined below
3. if the event that an investment pursuant to item a) does not exceed a 25% stake, but as a result multiple foreign investors in the same company jointly realize more than 25% of ownership of the Hungarian company.
4. foreign investors establish a Hungarian branch office for the purpose of carrying out national security related activities (see below).
5. foreign investors of a local company modify its activity to a national security related activity
6. foreign investors acquire the right of operation of infrastructures, facilities, and assets essential for activities which are governed by the following legislation:
   • services covered by the Electricity Act,
   • services covered by the Law on the Supply of Natural Gas,
   • services covered by the Law on Water Utilities,
   • services covered by the Electronic Communications Act.

National security related activities of target caught:

• military technology,
• intelligence tools production,
• certain banking, investment and insurance services,
• certain public utility activities,
• certain electronic communications services; and
• specific electronic information systems of state bodies.

Remedies and sanctions

The Minister may investigate whether the acquisition of ownership or operating rights by the foreign investor or the newly started activity is detrimental to Hungary's security interests. If so, the minister can prohibit the transaction.

If the investor fails to comply with the notification obligation, the minister imposes a fine of up to HUF 10,000,000 on the investor if it is a legal entity and up to HUF 1,000,000 if it is a natural person.

New “2020” FDI screening:

Sometimes referred to as the “new” FDI regime, as it has no distinct naming and can be confused with the earlier (and still existing) “national security” FDI screening regime. It is based on Government Decree of 561/2022. (XII. 23.) (official English translation is not available) on temporary rules following the termination of state of emergency and on pandemic preparedness. This regime requires an approval of the Ministry of Economic Development.

The new “2022” FDI regime apply to investments reaching or exceeding HUF 350 million value in Hungary, provided that the following investors are involved and ownership levels met:

• investor from the EU, EEA, and Switzerland and Hungary in which a legal person from outside of the EU, EEA, and Switzerland (mother company of investor) holds majority influence according to Civil Code acquire directly or indirectly a stake by ownership transfer, capital increase or transformation, merger or division of a strategic company, bond ownership or usufructuary right in a local strategic company as a result of which it acquires, directly or indirectly, a majority influence in the strategic company according to the Civil Code,
• investor from outside of the EU, EEA, and Switzerland which acquire directly or indirectly stake, bond ownership or usufructuary right in a local strategic company as a result of which it acquires, directly or indirectly 5 % stake in a strategic company (3 % in case the strategic company is a public limited company)

Strategic activities caught by the new “2022” FDI regime includes:

• certain military activities,
• IT,
• agriculture,
• medical,
• construction,
• education, waste-management,
• energy,
• commerce,
• financial and
• communication activities.

A formalistic approach is applied as to what qualifies as “strategic” based on its Hungarian/European classification of activities (NACE). Activities under the following NACE codes are considered strategic: 01-03, 05-12, 19-21, 23-30, 35-39, 41-43, 45-47, 49-53, 55, 56, 58-65, 84, 86-88, 254, 304, 325, 782, 2446, 4291, 6820, 8422, 8424, 8425, 8542 and 8560.

Taking security over and acquisition of operation rights over strategic assets

Approval of the Ministry is required if security is taken over assets of strategic importance or assets of strategic importance or operation rights of such assets are acquired by foreign investors (in all cases without a threshold).

Uncertainties

The regulation of this regime is quite vague and open to the interpretation of the Ministry, and case-law is minimal, so careful assessment of the transaction is required when deciding whether a notification is necessary. Uncertain issues include transfers of security (e.g. loan portfolio transfers or change of security agent) and security over shares/business quotas for the benefit of foreign investors.

Procedure

The transaction under which the foreign investor acquires stake or majority influence in a strategic company will have to be notified with Ministry of Economic Development within 10 days from signing the SPA and the transaction will only be effective if the Ministry approves the transaction. The Ministry has 30 days to approve or reject the transaction which can be prolonged with another 15 days. In lack of notification and approval the acquirer may be subject of fine and the transaction is deemed to be invalid.

Sanctions

The minister oversees the fulfillment of the notification obligation arising from the “2022” FDI regime.

If the minister concludes that the investor has failed to comply with the notification obligation, the minister imposes a fine on the entity which may vary between 1% of the net revenues of the target strategic company generated in the last financial year and twice the transaction value.

Simultaneously, if there is no circumstance preventing the approval of the transaction, the minister provides the written approval. If, however, the transaction cannot be approved, the minister also adopts a prohibition decision together with imposing a fine on the investor.

An investigation cannot be initiated, i.e. the investigation right of the minister lapses if 6 months have passed since the minister gained knowledge of the transaction (subjective deadline) or 5 years have passed as of the circumstance giving rise to the notification obligation, which is typically the conclusion of the transaction (objective deadline).

The minister has a deadline of 30 working days (which may be extended by 15 further days) to complete an investigation.

The decisions imposing a fine or prohibiting the transaction cannot be appealed within the ministry, but an administrative court proceeding can be initiated for the judicial review of the decisions.

7) Are any parts of the territory exempted or covered by particular regulation?

No.

8) Is merger filing mandatory or voluntary?

Above a certain threshold, merger filing is mandatory in Hungary, whereas a voluntary filing can be made above a lower “soft”-threshold. 

The first set of thresholds is stated in Article 24 (1) of the Hungarian Competition Act. On the basis of this set of thresholds, a classical mandatory system exists.

The second set of thresholds is stated in Article 24 (4) of the Hungarian Competition Act. Under Article 24 (4), the merger filing is voluntary and failure to notify a merger (not subject to Article 24 (1)) is not subject to sanctions (but may be subject to corrective measures). Most importantly, the parties are free to implement the merger without filing for or receiving clearance, and the GVH does not have the power to impose a fine for failure to notify or for gun jumping in Article 24 (4) cases. Furthermore, the GVH is barred from intervening in a merger that would have been notifiable under Article 24 (4) of the Hungarian Competition Act, if 6 months have lapsed since implementation of the merger. In other words, if the parties to a merger decide not to notify under Article 24 (4) and the GVH does not initiate the proceedings within the 6-month time-limit, the GVH forfeits powers to start proceedings.

The thresholds are detailed in topic 14.

9) Is there a general definition of transactions subject to merger control?

Yes, Article 23 (1) of the Hungarian Competition Act lists the types of transactions that qualify as mergers within the meaning of Hungarian law. The three types of mergers are, as follows: 

1. two or more previously independent undertakings merge or a part of an undertaking becomes part of another, previously independent undertaking;
2. one undertaking, or more undertakings jointly, acquire control, directly or indirectly, over one or more previously independent undertakings;
3. independent undertakings establish a jointly controlled venture which performs, on a lasting basis, all functions of an economic entity (full-function joint venture).

10) Is "change of control" of a business required?

Yes, in principle, a change of control is a necessary pre-requisite of a merger in the sense that at least one undertaking or a part of an undertaking must lose its previously existing independence from the other parties concerned with the merger. For instance in a transaction whereby two independent entities merge whilst none of them is under the control of another undertaking and the merged entity remains also to be independent from any other undertaking, the fact that one undertaking lost its independence from the other is seen as a change in the control structure and thus requires merger filing if the thresholds are met.

11) How is “control” defined?

Article 23(2) of the Hungarian Competition Act defines control as either of the three scenarios: 

1. the acquisition of the majority of voting rights in the target;
2. the power to appoint, elect or dismiss the majority of the board members or executive officers of the target;
3. the ability to exert decisive influence over the market behaviour of the target (either by virtue of contractual arrangements or as a result of specific factual circumstances)

Control may be direct or indirect. If only one entity fulfills one or more of the conditions leading to control, sole control is acquired. If more undertakings are jointly in a position to exercise control, joint control is acquired. Joint control may stem from

1. equality of voting rights (typically a 50-50% joint venture);
2. veto rights in strategic questions such as the composition of the board of directors, the appointment of the managing director, the adoption of the business plan or the yearly financial budget;
3. an agreement among jointly controlling parents to vote together in strategic questions, provided that they jointly achieve majority in the shareholders meeting;
4. exceptionally joint control may arise factually (e.g. two or more minority shareholders being able to achieve blocking positions in a public company due to the inactivity of the shares held by the public etc.)

Hungarian Competition law recognises the notion of both positive and negative control. Positive sole control arises if one shareholder is capable of exercising a decisive influence over the undertaking controlled, typically by way of having voting rights over 50%. Negative sole control arises where there is only one shareholder that is capable of blocking strategic decisions: a shareholder with 50% of the voting rights will in principle not be able to push through decisions if other shareholders do not support his agenda, but will be able to block all other initiatives. In such a scenario, this shareholder will be considered to have acquired negative sole control.

The same applies to joint control scenarios: positive joint control arises where the jointly controlling entities have the ability to adopt strategic decisions, whilst negative joint control arises where at least two shareholders are each in a position to block strategic decisions and hence they must come to an agreement over the course of business of the controlled entity, if they wish to avoid a deadlock situation.

12) Acquisition of a minority interest

Acquisition of purely minority interests will not result in a merger under Hungarian law. It is however important to recall that the given stake will only qualify as “purely minority” if no blocking positions are attached to it in terms of strategic business decisions. A minority shareholding may, combined with other factors, lead to de facto sole control (for instance a 49% shareholding with a call option to acquire majority and some positions in key management roles will likely enable the shareholder to exercise decisive influence).

Control and change of control are interpreted under Hungarian law in accordance with EU competition law, i.e. in principle in light of the Commission’s Consolidated Jurisdictional Notice as well as the case-law of the European Court of Justice.

13) Joint ventures/joint control – which transactions constitute mergers?

The following transactions regarding businesses subject to joint control may be subject to merger control under Hungarian law:

1. the establishment of a full-function joint venture – this arguably includes i) if an already existing full function joint venture significantly extends its activities to new fields, and ii) if the shareholders of a non-full function joint venture decide to change the conditions of their venture and make it a full-function one (even if many years have passed since its establishment in terms of corporate law); 
2. the change from sole control to joint control over an entity (which must also fulfill the criteria of full functionality in accordance with the Austria Asphalt judgment of European Court of Justice);
3. the increase in the number of jointly controlling shareholders over an undertaking (again, the undertaking must fulfil the criteria of full functionality);
4. the decrease in the number of the jointly controlling parties over an undertaking (as opposed to European law, under Hungarian law also the decrease in the number of jointly controlling shareholders qualifies as a merger);
5. the change in the composition of the undertakings exercising joint control over another undertaking (even if the number of jointly controlling parties remains the same, if one of the parent companies leaves and another, previously independent undertaking steps in, this again results in a merger under Hungarian law).

It is to be noted that even if a joint venture qualifies as a full function one and hence has been subject to merger control clearance, this does not exclude that the GVH can review whether the full function joint venture serves as a forum for the coordination of the parent undertakings.

14) Which thresholds decide whether a merger notification must be filed?
(Unless explicitly stated otherwise, the thresholds described under one threshold category are not cumulative with those described under another category. Thus for instance if there is a market share threshold and a turnover threshold, it is sufficient to meet one of these, unless stated otherwise.)

a) Turnover thresholds

There are two set of thresholds under Hungarian law: one (mandatory) is purely turnover based whilst the other one (voluntary) is a mixed one, consisting of a turnover related and a competitive assessment related pillar. 

Under  Article 24 (1) of the Hungarian Competition Act a merger must be notified to the GVH if

1. the aggregate turnover in Hungary of all of the undertakings concerned exceeded HUF 20 billion in the previous business year and
2. at least two undertakings concerned have each achieved turnovers in Hungary over HUF 1.5 billion in the previous business year.

Under Article 24 (4) of the Hungarian Competition Act, a merger can be (voluntarily) notified to the GVH if 

1. the aggregate turnover in Hungary of all undertakings concerned exceeded HUF 5 billion in the previous business year and 
2. it is not obvious that the merger will not substantially lessen competition in particular by the creation or re-enforcement of a dominant position.

The parties to a transaction that fulfils the turnover related threshold under Article 24 (4) must therefore undertake a self-assessment exercise and review whether it is possible to conclude that it is obvious that the merger will not substantially lessen competition. In order to assist this self-assessment, the GVH has published a notice (not available in English) on the circumstances under which an undertaking can comfortably conclude that the given transaction will obviously not lead to a substantial lessening of competition. The main learnings from the GVH’s notice may be summarised, as follows: 

The GVH presumes that “obviously” no SLC arises, if (among others):

1. the merger would not lead to any horizontal, vertical or portfolio (conglomerate) effects;
2. the merger has horizontal and/or vertical and/or portfolio effects, but there is no market where the parties’ joint market share exceeds 20% and neither undertaking is present solely on the purchasing or selling side of a market where the purchaser or seller undertaking has more than 30% market share on its own;
3. if the joint market share exceeds 20% on a relevant market, but (i) all of the undertakings excluding the one with the biggest market share do not have more than 5% joint market share on the given relevant market and (ii) this relevant market has a competitor with similar market share to the undertaking excluded for the purpose of condition (i) or (based on the practice of the European Commission) the Herfindahl-Hirschman index remains under 1000, or between 1000 and 2000 with an increase of less than 250, or above 2000 but with an increase of less than 150;
4. in a vertical or portfolio merger, if an undertaking with an individual market share of more than 30% on the relevant market has a competitor with similar market share, and the other undertaking of the merger has no more than 5% market share on that relevant market or the undertaking with more 30% individual market share on the relevant market is already present on both purchasing and selling fulfills the conditions 2. and 3. above.

Moreover, the GVH is open for confidential guidance discussions with the parties involved in the merger where the parties may obtain feedback on whether the merger needs to be notified to the authority. However, this feedback is not legally-binding.

b) Market share thresholds

N/A (but as mentioned above, one part of the two-limbs threshold under Article 24 (4) of the Hungarian Competition Act is the condition that “it is not obvious that the merger will not substantially lessen competition”.)

c) Value of transaction thresholds

N/A

d) Assets requirements

N/A

e) Other

As mentioned above, one part of the two-limbs threshold under Article 24 (4) of the Hungarian Competition Act is the condition that “it is not obvious that the merger will not substantially lessen competition”.

15) Special thresholds for particular businesses

The thresholds stated in topic 14 apply to all transactions.

16) Rules on calculation and geographical allocation of turnover

Turnovers must include the turnover of the undertakings concerned as well as their respective groups. The turnover of a joint venture has to be divided equally among the jointly controlling parent entities (it is not the size of the actual shareholding that matters, but the fact of joint control).

The turnovers must be calculated in light of the most recent closed and audited financial year prior to the merger (that is to say the last closed and audited financial year prior to the signing of the contract or the publication of the public offer or other instance giving rise to the merger). If however the merger has already been implemented (without filing), it is the last closed and audited financial year prior to such implementation that matters under Article 26 (6) of the Hungarian Competition Act. 

In terms of the allocation of turnovers, for “parts of undertakings” it is the turnover achieved by way of “utilizing the assets and rights constituting the given part of undertaking” that matters from the last business year.

As regards the geographical allocation of turnovers, only the turnovers matter that were generated in the territory of Hungary. It is therefore immaterial where the undertakings concerned have their domicile or registered seat or indeed where their production or manufacturing or sales activities take place. What matters is where the turnover stems from, that is to say, to what geographical markets and to what customers the given undertakings directly sell their products. For instance, if a large manufacturing entity conducts its production in Hungary but sells all its output abroad, the turnover for Hungarian merger control purposes of this manufacturing entity will be zero.

Turnover is the net turnover derived from the sale of products and services within the undertaking’s ordinary activities, after the deduction of value added tax.

The turnover generated within a group of companies (so-called group–internal turnovers) must also be deducted.

The turnover must be adjusted to take account of any divestments and acquisitions since the last closed and audited financial statements. In this respect, it is the date of the submission of the notification that matters: any divestments or acquisitions until this point in time (provided that they are consummated) must be taken into consideration.

Is the seller/seller’s group turnover relevant in a standard acquisition of sole control?

No.

17) Special rules on calculation of turnover for particular businesses

Businesses controlled by the state or local municipalities

As regards undertakings “in the majority ownership of” the state or state emanations, as well as local municipalities, the undertaking concerned will be the economic unit which “has a separate decision making power in terms of its market conduct”. This usually means that state-held company groups will constitute separate units within the state, provided that they can separately decide on their market strategy. One important factor is how the strategic business plan is decided on: those state owned companies where the same minister has the final say on the strategic business plan, are usually held to belong to the same group of entities. This has a large impact on the turnover that needs to be considered. 

Financial service providers

The Hungarian Competition Act has specific provisions for financial service providers. Instead of the turnover, the followings income items must be taken into account:

1. in the case of insurance companies, the value of gross insurance premiums;
2. in the case of investment firms, income from investment service activities;
3. in the case of commodity dealers, payment institutions, electronic money institutions and companies engaged in the intermediation of financial services, the total of net turnover of sales and income from financial transactions;
4. in the case of stock exchanges, the income from the total of annual fees paid by traders which is based on the income of exchange market operations;
5. in the case of funds, the membership fees;
6. in the case of financial institutions (banks) the total of: gross income consisting of interests received and similar incomes, incomes from securities, commission incomes, net income of financial operations and other incomes coming from business activities.

18) Series of transactions that must be treated as one transaction

Transactions that are interdependent, because they are linked by contractual conditions, must be treated as one single merger, provided that the acquirer in each transaction is ultimately the same group of undertakings. It is immaterial whether there is an identity of the other party (it is for instance possible that an undertaking buys the assets, rights and stocks of another undertaking from different sellers). 

If the same parties enter into transactions within a period of two years, those transactions must be treated as a single transaction and hence if a target group is sold piece by piece, the turnovers of its parts must be taken into consideration during such a period of two years. 

19) Temporary change of control

Merger filing is required only if there is a change of control on a lasting basis.

If an undertaking is acquired solely with the purpose of being divided and sold further to ultimate purchasers, only this second step will be considered as a merger. Interim transactions therefore do not in themselves constitute a merger, if they form part of a broader transaction structure. The GVH is strict in this respect and accepts transactions as intermediary ones, only if there is already a legally binding broader transaction structure in place. 

See also topic 20 about temporary ownership by financial institutions.

20) Special industries, owners or types of transactions

The Hungarian Competition Act includes an exception as regards the notification obligation of temporary acquisitions of control or assets by financial institutions, if the following three conditions are fulfilled: 

1. the purpose of the acquisition is preparation for onward-sale;
2. the undertaking acquiring control does not exercise its rights of control or does so only insofar as it is strictly necessary in relation to the preparation for sale;
3. the duration of control does not exceed one year.

If the resale is not implemented within one year, the acquisition of control must be notified to the GVH within 15 days after the expiry of the one-year period. 

In addition to the above, a special “public interest exception” also exists under the Hungarian competition regime which permits the government to qualify in a dedicated government decree a merger as “of strategic importance” and thereby exempt it from the merger control filing requirement (Article 24/A of the Hungarian Competition Act). The Hungarian government has made use of this power so far in more than a few dozen cases.

21) Transactions involving only foreign businesses (foreign-to-foreign)

Foreign to foreign mergers are subject to Hungarian law, if the undertakings concerned do have turnovers from Hungary that fulfill the relevant turnover thresholds. 

22) No overlap of activities of the parties

There is no exemption for mergers with no overlap of activities (but the absence of horizontal overlaps will lead to accelerated procedures). 

23) Other exemptions from notification duty even if thresholds ARE met?

A merger is exempt from the notification obligation if it is implemented through an equity scheme set up for that purpose, by way of financing required as a result of COVID-19 coronavirus with the involvement of a venture capital fund or private equity fund under direct or indirect majority state ownership.

Furthermore, a merger where a venture capital fund under direct or indirect state control acquires joint control rights in a company - whose net turnover for the previous year did not reach 1 billion HUF - through an equity investment carried out via state aid that has been declared compatible with the internal market by the European Commission is also exempt from the notification obligation. In this case, however, the venture capital fund acquiring control must inform the GVH of the implementation of such a merger within 30 days of the date of implementation.

As a consequence of the EU "one-stop shop" principle, Hungarian merger control law will not apply if the merger also fulfills the EU merger control thresholds and hence has to be notified with the European Commission.

24) May a merging party file voluntarily even if the thresholds are not exceeded?

No, merging parties cannot voluntarily notify mergers that do not fulfil either of the two threshold sets under Article 24 (1) or 24 (4) of the Hungarian Competition Act. There is a voluntary filing possibility if the threshold specified in Article 24 (4) (HUF 5 billion combined turnover) is met, but the thresholds for mandatory filing (HUF 1.5 billion each and HUF 20 billion combined) are not met. 

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

No, the GVH has no power to intervene with a merger that does not fulfil the thresholds under the Hungarian Competition Act. It is only if the European Commission refers parts of a merger to the GVH (which part in itself would not have been notifiable in Hungary) that the GVH could act under the applicable national competition rules. No such referral has so far taken place so far. 

26) Referral within the jurisdiction

No such referral system exists. 

27) Referral from another jurisdiction

The GVH cannot handle mergers based on referrals from other jurisdictions, except referrals from the European Commission. The European Commission may refer a merger or a part of a merger to the GVH in which case the GVH may review the merger even if the domestic Hungarian thresholds for merger notification in Hungary are not satisfied. Such referral may be requested either by the GVH or by the merging parties. 

28) Referral to another jurisdiction

The GVH cannot refer any merger to any competition authority of any other jurisdiction. The only exception is the possibility to refer a given merger to the European Commission under the European Merger Control Regulation. 

29) May the merging parties request or oppose a referral decision?

Referral to the GVH

If a merger is subject to EU law, the parties may, prior to notification to the Commission, request that the merger be referred to the GVH if the merger may significantly affect competition in a distinct market in Hungary. If the GVH does not oppose such referral, the European Commission may decide to refer the case in whole or in part.

The European Commission must decide on the referral within 25 working days following receipt of the reasoned submission of the parties.

The European Commission may also, on its own initiative or upon request from the GVH, decide to refer a merger that has already been notified to the European Commission to the GVH. Such a referral decision must be taken within 25 working days after the merger notification has been filed with the Commission. The merging parties cannot oppose such a referral decision.

Referral from the GVH

If a merger is not subject to EU merger control but is subject to merger control in Hungary and at least two other EU member states, the parties may request that a single merger notification is made to the European Commission in place of notifications to each of the relevant national authorities. If none of the relevant authorities oppose the referral, the European Commission will handle the merger notification and no notifications are needed in Hungary or any other EU member state. If any of the national authorities in question oppose the referral within 15 working days, the merger must be notified to each of the relevant national authorities.

30) Stage of transaction when notification must be filed

A merger notification can be filed when a binding agreement has been concluded or a public takeover bid has been published or de facto control has otherwise been acquired. A merger notification can also be filed before a formal binding agreement, if the merger has been concluded in good faith and the parties provide sufficient evidence thereof. There is no specific deadline for the submission of the notification, but the transaction may not be implemented prior to the approval by the GVH. 

31) Pre-notification consultations

The GVH strongly encourages pre-notification consultations. It has published a notice on the process of pre-notification consultations (see topic 3). Pre-notification consultations is available prior to the signing of a binding agreement or the publication of the takeover bid. The aim of pre-notification consultations is to clarify market definition, the calculation of market shares, the appropriateness of the sources on which the parties wish to rely to argue their case as well as any procedural aspects that may arise. The GVH is however reluctant to discuss, in the pre-notification phase, whether the transaction qualifies as a merger. 

Typically, the pre-notification phase takes 1-2 working weeks and, optimally, by the end of the pre-notification stage, the parties will receive the confirmation from the GVH that the draft notification is considered to be complete and can be submitted, once a binding agreement has been concluded or a public takeover bid has been published or de facto control has otherwise been acquired.

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

N/A

33) Forms available for completing a notification

There is one form available for all types of notifications. The form is available in Hungarian. In simplified cases, the notifying parties are not requested to fill out Part V.9 of the notification form.

Simplified notification is possible in the following scenarios:

1. no overlapping markets can be identified;
2. on overlapping markets, the parties joint market share remains less than 20%;
3. in a vertical or portfolio merger, the market share of any of the parties in any of the related markets remains below 30%;
4. on the overlapping markets the parties joint market share exceeds 20%, but the increment in market share is negligible.

If a given merger does not qualify for the simplified procedure, the GVH will ask the parties to provide information for all questions of the notification form. The parties may ask the GVH to waive answers for some questions if information is objectively unavailable for the parties or is otherwise irrelevant in terms of the given merger.

34) Languages that may be applied in notifications and communication

In principle, the notification must be submitted in the Hungarian language. The GVH does not request translation of original English documents and may waive translation in case of French and German documents. 

35) Documents that must be supplied with notification

The following documents should always be supplied with the merger notification whether simplified or full:

1. power of attorney for each of the parties; 
2. copies of the final or most recent versions of all documents bringing about the transaction;
3. a company group chart for both the acquiring party and the target;
4. all other documents which are necessary to prove data required by the form (e.g, size of the relevant market and calculation of the market shares).

For full notification, the following further documents may be relevant:

1. analyses, reports, minutes of board meetings and similar documents related to (preparation of) the merger; and
2. any documentation on which the parties have based their market definition and assessment of market shares.

36) Filing fees

As of 1 February 2023, the filing fee for Hungarian merger notifications is, as follows:

1. for notifications that can be dealt with in expedited proceedings: HUF 1 million;
2. for notifications that can be dealt with in Phase I: HUF 5 million;
3. for notifications that can be dealt with only in Phase II proceedings: HUF 20 million.

In media related mergers, the notifying parties have to pay an additional fee of HUF 2 million for the proceedings of the Hungarian Media Council.

37) Is implementation of the merger before approval prohibited?

Yes. Article 29 of the Hungarian Competition Act strictly prohibits implementation of the merger prior to the clearance by the GVH. 

38) May the parties get permission to implement before approval?

The merging parties may ask the GVH to consent to the preliminary implementation of the transaction prior to clearance. According to Article 29/A (1) of the Hungarian Competition Act, the GVH may grant such consent in light of, in particular 

1. the effects the implementation has on the merging parties and other undertakings;
2. potential harmful impacts on competition; and
3. whether implementation is objectively necessary because of investment protection reasons.

39) Due diligence and other preparatory steps

In the course of deal negotiations or due diligence, information may, as a general rule, only be exchanged to the extent that is reasonably necessary for the negotiation of the transaction. There is no explicit list available under Hungarian law relating to those types of information which are allowed to be exchanged during due diligence. However, Notice no. 2/2023 issued by the GVH includes the following guidelines which are to be considered in the course of the assessment of the effect of such information exchange: 

• the disclosure of competitively sensitive business information (in particular: prices, costs, profits, research/strategic business plans, customer lists, commercially sensitive contractual terms, names of suppliers) should be avoided at all costs or only be shared with the assistance of an external counsel (in particular a lawyer) who is bound by the obligation of professional secrecy;
• any other types of business information may only be exchanged to the extent absolutely necessary to achieve the aims of business negotiations; 
• if it is necessary for the buyer to have access to this information, it should be provided at the lowest possible level, preferably to a member of staff who is under a non-disclosure agreement, and who is not involved in marketing or pricing matters;
• it is also to be carefully considered to limit the number of persons who are granted access to the most sensitive business information of the target or to set up a “clean team”.

40) Veto rights before closing and "Ordinary course of business" clauses

Granting veto rights for the buyer over the target before closing is considered to be a breach of standstill obligation in the established case-law of the GVH.  

An "ordinary course of business" clause that prevents the target from taking decisions outside the course of its ordinary business until the closing date is generally considered acceptable under Hungarian competition law. However, it must be assessed on a case-by-case basis to what extent the parties may discuss – or provide each other with veto rights concerning – any decisions in their respective businesses.

41) Implementation outside the jurisdiction before approval – "Carve out"

There are no specific rules on the “carve out” of the Hungarian part of a transaction with a view to avoid delays in implementation in the rest of the world pending the Hungarian approval.

It must be assessed on a case-by-case basis whether it is possible at all to carve out the Hungarian part of a transaction. If the Hungarian part of the transaction is interdependent with the other transactions, the whole transaction will be subject to notification due to the single transaction doctrine (see above at topic 18).

42) Consequences of implementing without approval/permission

If a merger is implemented before clearance, the party or parties acquiring control (or in case of an amalgamation the parties concerned) may be fined. The fine is essentially a daily penalty for the period until the clearance by the GVH. The fine will be between HUF 50,000 and 200,000 per day. In case implementation occurred in spite of a prohibition decision, the GVH may impose a fine up to 13% of last year’s turnover of the undertakings concerned.

43) Phases and deadlines

44) Tests or criteria applied when a merger is assessed

The Hungarian Competition Act applies the so-called substantial lessening of competitions (SLC) test. The GVH assesses, when reviewing a merger, whether the merger will likely lead to SLC in particular by way of the creation or reinforcement of a dominant position. When reviewing mergers, the GVH essentially follows the approach of the European Commission: the guidance given by the European Commission for the review of horizontal and vertical mergers is also very useful for the Hungarian assessment.

45) May any non-competition issues be considered?

No, generally, the GVH cannot take into consideration aspects other than those encapsulated by the SCL test.

It is to be noted, however, that for media related mergers, the GVH cannot give a clearance, even if no competition law issues, strictly speaking, arise, if the Media Council decides to block the merger due to media plurality issues. In this sense, in media related mergers, non-competition issues can lead to a prohibition decision.

46) Special tests or criteria applicable for joint ventures

The assessment for full function joint ventures is the same as for any other mergers. Nonetheless, if the joint venture also has coordinative affects, those must be reviewed under the rules pertaining to anti-competitive agreements (Article 11 of the Hungarian Competition Act). 

47) Decisions and remedies/commitments available

If the GVH cannot provide an unconditional clearance for the merger, it may either impose structural or behavioral remedies or may prohibit the merger.

If the merger’s projected anti-competitive effects can be prevented by imposing structural or behavioral remedies, the GVH can clear the merger subject to such appropriate remedies. The GVH has a clear preference for structural remedies, due to the ease of monitoring. Timing and conditions of such remedies are imposed on a case-by-case basis. However, all remedies have to comply with some requirements: they must be capable of removing competition concerns; and they must be proposed by the parties and be exact, consistent and verifiable. Commitments are normally subject to market testing and the GVH also holds hearings to discuss proposed remedies.

The GVH has published a Notice on commitments and remedies which provides helpful guidance for merging parties (see topic 3).

The GVH may revoke its unconditional or conditional clearance decision, if it finds that the parties have provided misleading or incomplete information or if the parties have not complied with the remedies imposed. The GVH may also impose a procedural fine in this event.

If the parties implemented the merger without notification and, following in-depth review, the GVH concludes that the merger leads to substantial lessening of competition, the GVH has the power to order the merger to be reversed, the merged entities to be separated, the target company to be sold to a viable competitor etc. The GVH also has the power to order any other measures necessary and appropriate to restore effective competition.

48) How and when will details about the merger be published?

The GVH makes a public announcement when it has received a formal notification and invites third parties to submit comments. Similarly, the GVH publishes, on its website, the decision in relation to the given merger. 

The content of both public statements is aligned with the parties and no business secrets are disseminated to the public. Fully reasoned final decisions are also published in non-confidential versions.

Certificates issued in the expedited procedures (cases where the merger does not have to be examined in detail) are only one page long and only contain minimal details regarding the merger. 

49) Access to the file for the merging parties and third parties

The merging parties:

Merging parties have access to the file. This access to the file is however only available if the GVH issues a statement objections and contemplates to prohibit the merger. If the merger is cleared in expedited proceedings or as a result of Phase I proceedings, the merging parties have access to the file only following the conclusion of the proceedings. Third parties’ submissions will only be available to the merging parties in non-confidential versions. 

Third parties:

Third parties do not have access to the file, but the GVH may decide to provide third parties with non-confidential versions of the notification or other documents in the file if third parties wish to challenge the outcome of the merger proceedings in front of the court, or substantiate other legal grounds for requesting access to non-confidential files (e.g. market analysis for an upcoming merger filing).

50) Who can appeal and what may be appealed?

Merging parties have the right to seek judicial review of the decision of the GVH in merger cases. This naturally only happens if the GVH decides to prohibit the merger. Judicial review is also available for any other type of decision made in relation to merger control proceedings (for instance fines imposed for early implementation, fines imposed for misleading or incomplete information etc.)

Theoretically, third parties also have the possibility to turn the court, yet it is difficult for them to show standing (i.e. a direct interest in the outcome of the proceedings).