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

Jurisdictional Notice No 2/2023 of the President of the Hungarian Competition Authority and the President of the Competition Council of the Hungarian Competition Authority on certain legal issues related to the procedure for investigating mergers (“Jurisdictional Notice”). 

Jurisdictional Notice No 3/2023 of the President of the Hungarian Competition Authority and the President of the Competition Council of the Hungarian Competition Authority on the conditions for non-disclosure applicable in cases of merger notification obligations, the initiation of competition supervision proceedings for the examination of mergers, and the declaration of proceedings as complete (“Proceedings Initiation Notice”).

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; “HCA”). 

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").

Yes, the merger filing requirements are set out in the Competition Act, which are interpreted in the HCA’s notices.    

Similar to the EU merger control regime, the concentration shall be deemed to arise:

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

Deviations in relation to EU merger control

Although the Hungarian merger control rules on concentration are substantially similar to those under the European merger control regime, there are some differences in the text of the legislation (e.g., in relation to notifiable concentrations), based on which HCA occasionally needs to deviate from the EU practice. The deviations identified so far are as follows:

1. Contrary to EU law, a reduction in the number of controlling entities from any number to any number constitutes a concentration.
2. The concept of a business (as part of an undertaking) is irrelevant, whether the business will perform an activity only for the acquirer or also for third parties. It is sufficient to consider that the assets or rights being transferred, alone or together with the assets and rights at the disposal of the acquirer, may be capable of carrying out the market activity.
3. Transactions between the same group of companies within two years – only the last deal that triggers the 1.5 billion HUF threshold is subject to merger review, the previous transactions are not. Targets acquired before triggering the deal will be assessed as part of the acquirer group.
4. The sales between a JV and any of its parent groups are not considered intra-group turnover. Thus, the respective turnover does not have to be deducted in the turnover calculation.
5. The entities acquiring indirect control through a full-function JV are also deemed to be direct parties to the concentration. There is also a difference between Hungarian and EU practice in cases where, as a consequence of a direct acquisition of control, the undertaking acquiring direct control acquires indirect joint control over another undertaking. According to the HCA’s practice, in such a case, the existing joint controllers of the jointly controlled undertaking are considered to be direct participants in the concentration. This has relevance with regard to the turnover calculations.
6. Turnover allocation of a JV being acquired fully by one of the parents. In the case of a conversion of joint control into sole control by one of the joint controllers, if the turnover of the jointly controlled undertakings exceeds HUF 20 billion, half of this turnover is accounted for the undertaking acquiring sole control and the other half is accounted for the previously jointly controlled undertaking. Consequently, regardless of the turnover of the group of undertakings acquiring sole control, there are at least two relevant groups of undertakings with a turnover of more than HUF 1.5 billion (which is a requirement of a notifiable merger).

Exemptions:

1. No notification is required for the temporary (not exceeding one year) acquisition of control or assets by an insurance undertaking, credit institution, financial holding undertaking, mixed-activity holding undertaking, investment firm or property management organization if such acquisition is made in preparation for resale, and if the undertaking 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) cannot be accomplished within the one-year period, the merger shall be notified to the HCA 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 the Competition Act.
2. 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 undertakings acquires controlling rights with investment protection purposes, the requirement of notification does not apply.
3. There is no need to submit a notification to the HCA 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.
4. Finally, the Hungarian Government is entitled to exempt a notifiable concentration from the competence of the HCA if such merger has been declared – by way of a Government Decree – as having a “strategic significance” (including the need to protect workplaces, the strengthening of international competitiveness of a given sector of the economy and in the interests of security of supply). It means that the exempted concentration need not be notified to the HCA and thus it will not be reviewed at all by the HCA.

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

Yes, foreign-to-foreign transactions are subject to the Hungarian merger control regime if the jurisdictional thresholds are met. Hungarian competition law does not apply a separate “local effects” test. According to the HCA’s Jurisdictional Notice no. 2/2023, the national turnover thresholds under Section 24 of the Competition Act serve as a concrete specification of the general territorial scope in Section 1. This means that even in the absence of demonstrable competitive effects in Hungary, a transaction may still be notifiable if the concerned undertakings’ turnover achieved in the territory of Hungary exceeds the statutory thresholds.  

The thresholds in Hungary

There are two separate thresholds in Hungary:

1. Mandatory Threshold
   

   A transaction shall be notified to the HCA if:

   1. 1. The combined turnover of the participating undertaking groups  generated in Hungary in the preceding business year exceeds HUF 20 billion;
         
         and
      2. The turnover of each of at least two of the participating undertaking groups generated in Hungary in the preceding business year exceeds HUF 1.5 billion.
2. Voluntary Threshold
   
   Even if the Mandatory Thresholds are not met, the HCA may investigate the given concentration within 6 months after its implementation if:

1. 1. It is not obvious that the concentration would not have a significant effect on competition (in particular by creating or strengthening a dominant position) in the relevant market (the same criterion as for Phase II proceedings and the Proceedings Initiation Notice details the applicable factors),
      and
   2. The combined turnover of the undertaking groups concerned in Hungary exceeds HUF 5 billion in the preceding business year.

The calculation of the net sales revenues

The 1.5 billion forint threshold shall cover all the mergers executed during the two-year period preceding the merger between undertakings that used to be part of the group that lost control due to the merger with undertakings of the group that acquired control, where no competition control proceedings had been opened, except if the merger was notified and acknowledged in the 8 days fast track process.

Special rules for calculating the thresholds: For calculating the threshold of merging financial institutions, the aggregate of the following revenue items must be taken into account: 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. For merging insurance companies, the threshold is calculated on the value of the secured gross insurance premiums. For investment firms and funds, the threshold is calculated on the revenue from investment services or membership fees, respectively. For commodities exchange service providers, payment institutions, electronic money institutions and intermediaries of financial services, the threshold is calculated based on the net sales turnover and revenue from financial transactions. For stock exchanges, the threshold is calculated based on the total of annual fees paid by traders from the income from exchange market operations. (Section 24 (3) of the Competition Act)

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. (Section 27 (1) of the Competition Act)

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. (Section 27 (2) of the Competition Act)

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

In respect of business units, the net annual revenue of the preceding year from the utilization of assets and rights shall be taken into consideration. (Section 27 (4) of the Competition Act)

The net sales revenues of a undertaking under joint control shall be divided equally among the controlling undertakings, whereupon the undertakings of the same group shall be treated as a single entity for the purposes of calculating the controlling share. (Section 27 (5) of the Competition Act)

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 have been audited, 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. (Section 27 (6) of the Competition Act)

The sums indicated in a foreign currency shall be translated into 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 undertaking in question. (Section 27 (7) of the Competition Act)
As it was set out above regarding the question "What are the relevant thresholds for notification?", there are two separate thresholds in Hungary. 

The notification of the merger to the HCA is mandatory if the Mandatory Threshold is met. Concentrations that meet the Mandatory Threshold must not be implemented prior to the HCA’s clearance or the lapse of the HCA’s relevant review period.

For the Voluntary Threshold, the absence of notification has no suspensive effect on the concentration, there is no nullity and no fines will be imposed for non-notification or late notification. However, the HCA may open proceedings to investigate the concentration within 6 months after closing.

As it was set out above regarding the question "What are the relevant thresholds for notification?", there are two separate thresholds in Hungary. 

The notification of the merger to the HCA is mandatory if the Mandatory Threshold is met. Concentrations that meet the Mandatory Threshold must not be implemented prior to the HCA’s clearance or the lapse of the HCA’s relevant review period.

For the Voluntary Threshold, the absence of notification has no suspensive effect on the concentration, there is no nullity and no fines will be imposed for non-notification or late notification. However, the HCA may open proceedings to investigate the concentration within 6 months after closing.

As a general rule, 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. However, formal merger filings can be submitted to the HCA even before the signing of the transaction document, in which case the notifying party shall submit proof that it has decided in good faith to contemplate the transaction. Such proof may include a memorandum of understanding or other evidence. While there is no statutory deadline for the submission of the notification, the transaction must not be implemented before the HCA’s clearance or the lapse of the HCA’s relevant review period.

It is possible to request consultations (with a draft notification/preparatory note) with the HCA even before the formal filing in the course of the so-called “pre-notification” process. The informal consultation procedure is treated as highly confidential and the parties may at any time decide to stop the informal consultation without entailing any negative consequence. Documents presented to the HCA during pre-notification can be used by the HCA for merger clearance purposes only.

Concentrations that fall under the Mandatory Threshold must not be implemented before the approval of the HCA or the lapse of the HCA’s relevant review period.. As mentioned before, the prohibition of implementation does not apply to concentrations only reaching the Voluntary Threshold.

Implementation is construed in a wide manner, thus encompassing the exercise of voting rights in the target company, the exercise of rights related to the appointment of management, and, in general, the obligation to act in accordance with the situation prevailing before the concentration. Any act or measure that violates this provision shall be considered null and void under Hungarian civil law, and the person in question could be subject to fines under the general rules. However, it is certainly permitted to conclude an agreement or to make other steps forming the basis of the given transaction (e.g, a share sale and purchase agreement or a public purchase offer).

As an exception, upon the application of the acquirer, the HCA may permit the acquirer to exercise its control rights already before clearance: in such a case, the acquirer has to submit a reasoned request to this effect. The HCA may grant the permission, in particular, if this would be necessary to maintain the value of the acquirer’s investment in the target. Specific conditions and obligations can also be imposed on the acquirer in the permit, and – in order to make such conditions and obligations effective - the HCA may request specific market/business information from the acquirer in question. Note that in fast-track procedures, no such request can be submitted.

The notification of merger provided for in Section 24 shall be submitted electronically on a duly completed merger notification form issued by the HCA. (There is a normal and a simplified form in place.) 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 (including the power of attorney and the relevant transactional documentation and other materials supporting the content of the notification form). Only Hungarian entities can submit the notification form directly, i.e., without a legal representative; foreign applicants must, in practice, authorize local legal counsel to represent them before the HCA. 

Content of the normal (non-simplified) merger notification form:

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

Where the merger under Section 24 of Competition Act is realized by way of merger by formation of a new undertaking or merger by acquisition, or by way of setting up a joint undertaking, 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 undertaking having control thereof.  

The administrative service fee:

1. HUF 1.3 million must be paid by the notifying party by the date of the filing for the notification phase.
2. If the HCA opens the clearance proceedings, a fee of additional HUF 5 million must be paid if simplified, similar to EU level’s Phase 1, proceedings are opened or an additional HUF 21 million must be paid if full, Phase 2 proceedings are opened, within 8 calendar days of the date the party receives the order opening the clearance proceedings. 
3. If the HCA decides to open the full proceedings after an initial review in simplified proceedings, the remaining part of the filing fee of HUF 22.3 million not yet paid during the simplified proceedings will need to be paid. 

The respective fees under points b) and c) shall be paid within eight days. 

The final decision of the 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 order to the examination of the merger in the so-called “fast track” process;  in this case, the HCA issues a no grounds to proceed certificate. 
• Within 30 days from the date of receipt of the notification of the merger in the simplified proceedings, i.e. Phase I, opened under Paragraph b) of Subsection (4) of Section 67 of the Competition Act, if (i) the filing is incomplete, (ii) or the HCA must review in more detail if the commitment offer of the parties set out in the filing is appropriate to tackle the potential competition concerns, or (iii) if the opinion of the Media Council must be obtained which is not available upon filing. This time limit may be extended on one occasion up to 20 days; and
• Within 4 months from the date of receipt of the notification of the merger, the investigator orders the full investigation of the merger (full Phase 2 proceedings). This time limit may be extended on one occasion up to 2 months. 

On the basis of general rules of administrative procedure, there are a number of events which  “stop the clock”, the most usual being the HCA's further requests for information, which will extend the administrative deadline by the time necessary for the party to respond to such request.

The HCA 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 undertakings 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 HCA 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 of the Competition Act details the product and geographical market), particularly in consequence of creating or intensifying a dominant position in that market. 

1. In general, in its decision on the merits of the case, the HCA 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 undertakings (i.e, approval with conditions or obligations), 
   c)    or prohibit the merger (i.e., prohibition). 

Please find below certain types of decisions/orders of the HCA: 

1. The notification of the merger provided for in Section 24 shall be submitted on a duly completed merger notification form prescribed by the HCA. 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 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 (i.e., no grounds to proceed certificate), 
   • refuse the notification of the concentration:
     • if submitted in spite of the fact that it does not reach the respective thresholds, 
     • which was declared to be of national strategic importance in the public interest,
     • if the case detailed under the exceptions point b) in the answer to question “What kinds of transactions are "caught" by the national rules? (Identify any notable exceptions.)” applies or
     • in agreement with the Competition Council if it is 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, the investigator – in agreement with the competent Competition Council – shall order the examination of the merger under Phase I or II proceedings. 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 investigator's 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 the Competition Act 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 investigator's 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;
   • 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 HCA is entitled to set pre- or post-conditions in the form of structural or behavioural remedies.

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, HCA 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 it is granted. Should any of the conditions not be satisfied, the authorization ceases to have an effect.

The competent Competition Council may impose a fine:

• For any infringement falling within the jurisdiction of the HCA, other than those governed in Chapter VI of the Competition Act. An administrative penalty may be imposed upon the client for any infringement of control restriction, gun jumping provisions and for providing incorrect or false information or withholding essential information in the notification of concentration and competition control proceedings, where 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 non-compliance 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, even 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 a maximum HUF 300,000 for each day from the triggering event (e.g. the implementation of the concentration) until the (a) date of the notification or the date of the initiation of the pre-notification, if a filing was made and the gun-jumping preceded the filing; or (b) the date of the decision if (i) a filing was made and the gun-jumping followed the filing, or (ii) in the absence of a filing). 

Under the Competition Act, the fine shall be a maximum of 13 % of the undertaking’s net sales revenue, or the net sales revenue of the group - of which the undertaking penalized is identified in the resolution as a member, for the financial year preceding the year when the resolution was adopted. However, under special governmental legislation, as of 1 August 2024, the statutory maximum of the fine is increased from 13% to 15% for the duration of the state of war emergency period, which currently lasts until 14 November 2025.

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, "Describe the sanctions for not filing or filing an incorrect/incomplete notification.".

The HCA may open proceedings to investigate the concentration reaching the Voluntary Threshold within 6 months after closing. However, in the case of transactions below the Voluntary Threshold, the HCA has no powers to review.

In the case of such unnotified transactions, the HCA may initiate competition surveillance proceedings.

The HCA is an efficient and well-organised authority when it comes to merger control. Approximately 60 merger cases are reviewed annually, with only 1–2 cases proceeding to Phase II. The authority encourages prenotification discussions as a standard practice, which are highly recommended; if conducted, the average review time under the fast-track procedure is approximately 4 working days.

Importantly, no competition surveillance proceedings were initiated before due to reaching the Voluntary Threshold.

Not applicable.