Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices (hereinafter referred to as "PURA"): contains provisions relating to the merger control regime.

Act V of 2013 on the Civil Code: provides a number of general principles and relevant provisions including those relating to the merger and demerger of companies, the increase and decrease of the subscribed capital of companies etc.

Act CLXXVI of 2013 on the Transformation, Merger and Division of Certain Legal Persons.

The national regulatory agency is the Gazdasági Versenyhivatal (Hungarian Competition Authority).

Yes, the European Commission if the thresholds described in Article 1 of Council Regulation (EC) No 139/2004 of 20 January 2004 are met. The Hungarian Competition Authority is a member of the European Competition Network ("ECN").

Merger filing requirements are set out in the PURA.

The Pre-Merger filing must be made in the case of:

• Mergers (as described in "What kinds of transactions are "caught" by the national rules?") of independent companies;
• If the thresholds (as described in "What are the relevant thresholds for notification?") are met; or
• Mergers of independent companies even if the thresholds (as described in
• "What are the relevant thresholds for notification?") are not met, but it is not obvious that the contemplated merger would not significantly decrease the competition in the relevant market, particularly in consequence of creating or intensifying a dominant position in the market, and the total net sales revenue of all groups of undertakings involved exceeded 5 billion forints (approx. EUR 16 million) in the previous financial year together with the net sales revenue of undertakings controlled by members of the same group jointly with other undertakings. 

In addition, please note that with respect to the mergers of companies having their registered seat in Hungary the Act CLXXVI of 2013 is also applicable according to which companies must publish their decision regarding their merger in the Official Company Gazette within 8 days after the decision.
 

The concentration shall be deemed to arise:

• When two or more previously independent companies merge, or one merges into another, or a part of a company becomes a part of another company that is independent of the first company;
• When a company or more companies jointly acquire the right of direct or indirect control over a previously independent company, or more, previously independent but related companies; or
• When several independent companies jointly set up a company to be controlled by them that is capable to function in all respects as an independent company.

Direct and indirect control:

Subsection (2) and (3) of Section 23 of PURA contains the definitions of direct and indirect controls.

• One or more companies acting jointly shall be deemed to have direct control if:
  • it holds over 50% of the shares, stocks or voting rights in the controlled company; 
  • it has the power to designate, appoint or dismiss the majority of the executive officers of the other company; 
  • it has the power, by contract, to assert major influence over the decisions of the other company; or
  • it acquires the ability to assert major influence over the decisions of the other company.
• A company shall be deemed to have the right of indirect control over another company:
  • That is controlled directly, whether independently or jointly, by one or more companies under its direct control;
  • That is controlled jointly by the companies under its direct control;
  • That is controlled in accordance with Subsection (2) or Paragraph a) or b) by the companies it controls indirectly according to Paragraph a) or b); or
  • That is controlled in accordance with Paragraphs a)-c) by the companies it controls indirectly according to Paragraphs a)-c).

Exemptions:

No notification is required for the temporary (not exceeding one year) acquisition of control or assets by an insurance company, credit institution, financial holding company, mixed-activity holding company, investment firm or property management organization if such acquisition is made in preparation for resale, and if the company acquiring control does not exercise its rights of control, or if such rights are exercised only to an extent that is absolutely necessary. If the alienation (resale) could not have been accomplished within the one-year period, the merger shall be notified to the Competition Authority within 15 days following the expiry of the one-year period, at the latest. In the absence of notification, the merger qualifies as a merger implemented in breach of the implementation prohibition as set out in Section 29 of PURA.

If the merger takes place by the participation of a venture capital fund or a private equity fund of which the majority of the ownership rights are directly or indirectly controlled by the state through a financing scheme set up for the purpose of COVID-19-related refinancing by which the fund itself or together with other companies acquires controlling rights with investment protection purposes, the requirement of notification does not apply.

There is no need to submit a notification to the Hungarian Competition Authority in the case of a concentration where a venture capital fund directly or indirectly controlled by the state acquires joint control rights in an undertaking whose net turnover in the previous year was less than one billion and five hundred million HUF resulting from an equity investment carried out with state aid declared compatible with the internal market by the European Commission.

Please refer to our response to the section "What are the relevant thresholds for notification?".

Unless otherwise provided for by law, PURA applies to the market conduct displayed in Hungary by:

• Natural and legal persons; and
• With the exception of the forms of conduct described in Chapter VI. of PURA- the Hungarian branches of foreign- registered companies.

National market effect means that it does not matter where the merging undertakings are geographically located, provided that their market conduct has an effect in the territory of Hungary and the control thresholds are met. This is an application of the "effects doctrine”, also applied at EU level.

The test:

Notification to the Hungarian Competition Authority shall be required for the merger of companies if the combined net sales revenue of all groups of companies involved (Subsection (5) of Section 26 of PURA), and the net sales revenues of the companies controlled jointly by members of the groups of companies involved with other companies in the previous financial year exceeded 20 billion forints, and among the groups of companies involved, there are at least two groups with net sales revenues exceeding one billion five hundred million forints in the previous year together with the net sales revenues of companies controlled by members of the same group jointly with other companies.

The calculation of the net sales revenues:

The one-billion-forint threshold shall cover all the mergers executed during the two-year period preceding the merger between companies that used to be part of the group that lost control due to the merger with companies of the group that acquired control, where no competition control proceedings had been opened, except if the merger was notified and acknowledged in accordance with Paragraph b) of Subsection (1) of Section 43/N. (24. § (2)of PURA)

Instead of net turnover the following shall be taken into account: a) in the case of insurance companies, the value of gross insurance premiums; b) in the case of investment firms, income from investment service activities; c) 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 from sales and income from financial transactions; d) in the case of stock exchanges, from the income from exchange market operations the total of annual fees paid by traders; e) in the case of funds, revenues from membership fees; f) in the case of financial institutions, the gross income consisting of interests receivable and similar income, income from securities [income from shares held for trading, income from participating interests (dividends and profit-sharing), income from participating interests in affiliated companies (dividends and profit-sharing), income from companies linked by virtue of major participating interest (dividends and profit-sharing), income from other companies linked by virtue of participating interest (dividends and profit-sharing)], commissions receivable, net profit or net loss on financial operations and other operating income. (24. § (3) of PURA)

Where the notification requirement provided for in Subsections (1)-(3) of Section 24 does not apply to a specific merger, it shall be notified to the Hungarian Competition Authority nonetheless if it is not immediately apparent that the merger does not significantly reduce competition in the relevant market (Section 14), particularly in consequence of creating or intensifying a dominant position in that market, and if the total net sales revenue of all groups of undertakings involved exceeded 5 billion forints in the previous financial year together with the net sales revenue of undertakings controlled by members of the same group jointly with other undertakings. (24. § (4) of PURA)

For the purposes of Section 24, in the course of calculating net sales revenues, the turnover between the undertakings of the same group concerned or between the business units thereof shall be disregarded. (27. § (1) of PURA)

In the course of calculating the net sales revenues of the undertakings, the net sales revenues generated in the previous business year from the goods sold in the territory of Hungary shall be taken into account. (27. § (2) of PURA)

In calculating the net sales revenues of the companies, under the majority control of the State or by local self-governments, that company comprising a business unit shall be taken into account which has an independent right of decision-making in respect of defining its market policy. (27. § (3) of PURA)

In respect of business units, the net annual revenue of the previous year from the utilization of assets and rights shall be taken into consideration. (27. § (4) of PURA)

The net sales revenues of a company under joint control shall be divided equally among the controlling companies, whereupon the companies of the same group shall be treated as a single entity for the purposes of calculating the controlling share. (27. § (5) of PURA)

The net sales revenue shall be determined relying on the annual account or simplified annual account adopted for the last financial year for which the books are closed officially, relative to the time of submission of the notification of merger, or - if the merger has already been implemented - to the time of implementation of the merger. (27. § (6) of PURA)

The sums indicated in a foreign currency shall be translated to forints by the medium rate of exchange published by the Magyar Nemzeti Bank (National Bank of Hungary) in effect at the time of closing the financial year of the company in question. (27. § (7) of PURA)

The notification of the merger to the Hungarian Competition Authority is mandatory if the turnover thresholds are met or as set out in Section 24. § (4) of PURA (see questions 4 and 8).

Where the merger under Section 24 of PURA is realized by way of merger by formation of a new company or merger by acquisition, or by way of setting up a joint company, it shall be notified by the direct participant, or in all other cases by the party acquiring the business unit or direct control, or the company having control thereof. 

The competent Competition Council may impose a fine:

• For any infringement falling within the jurisdiction of the Hungarian Competition Authority, other than those governed in Chapter VI of PURA;
• An administrative penalty may be imposed upon the client for any infringement of control restriction provisions and for providing incorrect or false information or withholding essential information in the notification of concentration and competition control proceedings were subsequently held for that reason; 
• For the execution of a merger in spite of the prohibition imposed by the competent Competition Council by way of a resolution;
• For noncompliance with the obligation prescribed in the resolution for the merger, or if the merger is carried out without compliance with the condition prescribed in the competent competition Council's resolution; and/or
• For carrying out the merger in spite of the prohibition under Section 29, also if the competent competition Council declared in its resolution that the merger does not significantly reduce competition in the relevant market. (The amount of the fine regarding this case - having respect to the provisions about the maximum fine- shall be between 50,000 and 200,000 HUF daily for a period beginning on the day of the announcement of the public bid for the merger, the day of conclusion of the merger agreement or the date of acquisition of control rights, whichever is earliest and ending on the date of the opening of competition control proceedings.)

The fine shall be a maximum of ten per cent of the company’s net sales revenue, or the net sales revenue of the group - of which the company penalized is identified in the resolution as a member - for the financial year preceding the year when the resolution was adopted.
 

The notification of the merger shall be submitted following the time of publication of the public bid for the merger, the conclusion of the contract, or the acquisition of the right of control, whichever occurs the earliest.
 

No, there is not an automatic waiting period. 

No specific legal provisions on formal requirement concerning the application. However, the notification of merger provided for in Section 24 shall be submitted on a duly completed merger notification form issued by the Hungarian Competition Authority. The notification of merger shall contain all the facts and data necessary for processing the notification and shall be accompanied by the documents specified in the form. One copy of the application form must be submitted, with the authorized signature of the applicants or their proxies on it.

Content of merger notification form:

• Subject of the notification
• Participants of the merger
• Thresholds and jurisdiction
• Description of the merger
• The overlapping or related markets
• Appendices
• Other applications

The administrative service fee:

• HUF 1 million shall be paid at the time of submission of the notification of the merger ("basic fee");
• In addition to the basic fee, HUF 15 million shall be paid for proceedings of the Competition Council opened under Section 67 (4a) of PURA, i.e. if - upon the notification of the merger - the investigator orders the examination of the merger because it is not immediately apparent that the merger does not significantly reduce the competition in the relevant market, OR under Section 69 of PURA (i.e. if the investigator orders the full examination of the merger); ("full proceedings"); and
• In addition to the basic fee, HUF 3 million shall be paid for proceedings not covered by point b) ("simplified proceedings")

If - upon the receipt of the notification of the merger - the investigator decides to open a competition control proceeding for the examination of the merger, he shall adopt a ruling ordering the notifier to pay the administrative service fee described in point c) above (described above, depending on the reason for opening the proceedings). The fee shall be paid within eight days.

If the investigator orders in the proceedings opened under Subsection (3a) of Section 70 of PURA the full examination of the merger, he shall order the notifier to pay the administrative service fee described in point b) above, where any extra sum may be required in addition to what has been already paid. The administrative service fee shall be paid within the prescribed eight-day time limit as well.

The final decision of conclusion of the merger review proceedings shall be adopted:

• Within 8 days from the date of receipt of the notification of concentration in the absence to order the examination of the merger; 
• Within 30 days from the date of receipt of the notification of the merger in proceedings opened under Paragraph b) of Subsection (1b) of Section 70 of PURA, if the investigator orders the examination of the concentration, if it is not immediately apparent that the concentration does not significantly reduce competition in the relevant market (simplified proceedings). This time limit may be extended on one occasion up to 20 days; and
• After the 8-day deadline, within 4 months from the date of receipt of ordering the examination of the merger, if the investigator orders the full investigation of the merger (full proceedings). This time limit may be extended on one occasion up to 2 months.

The authority takes into account the advantages and disadvantages resulting from the merger, such as:

• The structure of the relevant markets; the existing or potential competition, the purchase and sales opportunities of the relevant markets; the costs and risks, as well as the technical, economic and legal requirements for entering into and exiting from, the market; the foreseeable impact of a concentration upon competition in the relevant markets;
• The market position and strategy of the companies concerned, their economic and financial capability, their business policy, their competitiveness on national and foreign markets, and any expected changes therein; and
• The effect of concentration on the suppliers and trading parties.

The Gazdasági Versenyhivatal (Hungarian Competition Authority) shall authorize the merger if, in accordance with what has been described above, the concentration does not significantly reduce competition in the relevant market (Section 14), particularly in consequence of creating or intensifying a dominant position in that market.

In general, in its decision on the merits of the case, the Hungarian Competition Authority may: a) establish that the merger does not significantly reduce competition in the relevant market (i.e. approval), b) impose a prior or subsequent condition, or an obligation in connection with the merger of companies (i.e. approval with conditions or obligations), or c) prohibit the merger (i.e. prohibition).

Please find below certain other types of decisions of the Hungarian Competition Authority:

1. The notification of the merger provided for in Section 24 shall be submitted on a duly completed merger notification form prescribed by the Hungarian Competition Authority. The notification of the merger shall contain all the facts and data necessary for processing the notification, and shall be accompanied by the documents specified in the form. The investigator may issue a request for remedying deficiencies within fifteen days following receipt of the application.

2. Within eight days from the date of the receipt of the notification of the merger, the investigator shall:

• order the examination of concentration if necessary,
• issue an official instrument to the notifier in the absence of circumstances to order the examination of the merger,
• refuse the notification of the merger if submitted in spite of non-compliance with the merger control threshold provided for in Subsection (4) of Section 24 of PURA, OR
• in agreement with the Competition Council, refuse the notification of the merger, if submitted by a person other than those provided for in Subsection (1) of Section 28, or at a time other than that specified in Subsection (2) of Section 28.

If neither of the above-mentioned actions is taken within the time limit, the merger may be carried out.

3. Otherwise, if it is not immediately apparent that the merger does not significantly reduce competition in the relevant market (Section 14), the investigator – in agreement with the competent Competition Council – shall order the examination of the merger. Upon conclusion of the examination, the investigator shall prepare a report and present it, together with the relevant documents, to the Competition Council.

4. Upon receipt of the investigators report, the competent Competition Council may return the documents to the investigator if it finds that further investigation is required in order to ascertain the relevant facts of the case, or if the proceedings should be extended or a new client should be involved in the case.

5. The competent Competition Council shall decide, within 15 days from the day next of the date of receipt of the application, based on the investigators report, relating to the application under Section 29/A of PURA for exercising control rights before the decision is adopted on the merits, with the imposition of control restriction provisions where deemed necessary.

6. On the strength of the investigators report, the competent Competition Council may impose provisional measures:

• To prohibit the further continuation of the conduct alleging probable cause for an infringement or may order the termination of the status quo alleging probable cause for an infringement, if it is required out of pressing necessity due to the protection of the legal or economic interests of the interested parties, and the endangering of the formation, maintenance or development of economic competition;
• And order the use of control restriction provisions in the case of a concentration that should have to be prohibited to the extent necessary with a view to mitigating the potentially harmful impact of the concentration, and to ensuring the applicability of the measures referred to in Section 31; or
• To withdraw under Subsection (3) of Section 29/A the permission granted under Subsection (1) of Section 29/A, or may decide to alter the control restriction provision ordered, if there is reason to believe that the merger is likely to result in a considerable reduction of competition in the relevant market.

The Competition Authority is entitled to set pre- or post-conditions. In order to reduce the detrimental effects of a merger, the Competition Authority may attach to its decision pre- or post-conditions and obligations.

If the considerable reduction of competition resulting from a merger can be effectively prevented upon the fulfillment of prior or subsequent conditions - such as the sale of specific business units or assets, or the termination of control over any indirect participant - in the event of compliance with the relevant codes of conduct and if the undertakings affected in this context undertake to modify the merger agreement accordingly or to follow the codes of conduct if the merger is executed under such conditions, Hungarian Competition Authority shall authorize the merger, instead of prohibiting it, subject to the fulfillment of prior or subsequent condition or an obligation agreed upon.

The preconditioned authorization takes effect from the date of the fulfillment of the conditions. The post-conditioned authorization takes effect from the date of it being granted. Should any of the conditions not be satisfied, the authorization ceases to have an effect.

Relating to not filing, see the answer to "Is the filing voluntary or mandatory?". 

Filing an incomplete notification: The investigator may issue a request for remedying deficiencies within fifteen days following receipt of the application.

Refer to the response to the question, "Is the filing voluntary or mandatory?".

Refer to the response to the question, "What decisions can the agency make in relation to a notified merger (e.g. approval, approval with conditions or prohibition)?".

Refer to the response to the question, "What decisions can the agency make in relation to a notified merger (e.g. approval, approval with conditions or prohibition)?".

The Competition Authority is the most modern administrative agency in Hungary. In general, it is cooperative and ready to discuss the controversial questions in the frame of a meeting.
 

Not applicable.