The GVH amended its Merger Control Notice with practical clarifications

At the end of 2021, the Hungarian Competition Authority (“GVH”) published Notice No. 3/2021. on certain aspects of applicable law in merger control proceedings (“Notice”). According to the GVH, the adoption of the revised Notice was necessary due to the recent legislative amendments to the Hungarian Competition Act as well as based on the GVH’s enforcement experience regarding merger clearance procedures.

The newly updated Notice contains important additions and clarifications regarding the definition of control, calculations of the relevant thresholds and turnovers. The Notice is applicable in merger control proceedings which have started after 1 January 2022. Below, we have highlighted the most important additions and clarifications to the Notice.

1. Definition of “control”

  • The relationship between the definition of ‘control’ under the Hungarian Competition Act and the Accounting Act is clarified, namely that inclusion in or exclusion from the scope of consolidation as defined in the Accounting Act does not necessarily imply the existence or absence of control within the meaning of the Competition Act.
  • In connection with contractual control, a practical example has been added to the Notice explaining that control may be also established by a long-term exclusive service contract, if there is no possibility for regular termination and the contract enables the contracting party to exercise decisive influence over the market behaviour of the other party.
  • Contractual control is also reinforced if, for example, the expiry of the contract is accompanied by a bilateral option agreement (purchase and sell option) on the shares of the contractually controlled undertaking. This is an important addition as the earlier version of the Notice already discussed the scenarios where option agreements, together with other circumstances, may be interpreted as a final agreement between the parties to create a concentration.
  • According to the merger control chapter of the Hungarian Competition Act, one or more undertakings have direct control over a company if they acquire the actual ability to exercise decisive influence over the market behaviour of the controlled undertaking. This “effective control” is further specified by the amended Notice as it can only be considered that an undertaking is able to exercise effective control over the controlled undertaking, if

(i) it is able to exercise a lasting influence; and

(ii) the existence of this lasting influence is based on objective circumstances (meaning, the legally established presence of the controlling undertaking in the decision-making process of the controlled undertaking, which must be reflected in the relevant documents such as minutes of general meetings, statements made in public procurement proceedings etc.). If this objectivity condition is not fulfilled, the conduct is not considered as a merger, but an agreement that restricts competition.

2. Threshold calculation

  • Clarification on the difference between the Hungarian and EU calculation of “double counting” of the jointly controlled undertaking’s turnover in case the joint control becomes sole control. Pursuant to the Hungarian rules, if the jointly controlled undertaking’s turnover exceeds HUF 15 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 turnover of more than HUF 1 billion (which is a requirement of a notifiable merger).

3. Calculation of turnover

  • The relationship of the Competition Act and the Accounting Act is also refined in connection with the calculation of group level turnover, as calculation under the two Acts is not necessarily the same. First and foremost, the scope of consolidated companies under the Accounting Act and the scope of controlled undertakings under the Competition Act may differ. Furthermore, the two Acts also contain different calculation provisions regarding the net turnover of undertakings jointly controlled by the concerned company group and other undertakings.
  • If the invoicing address is a Hungarian address, but the goods are not transported to Hungary but to another country, they are not considered as goods sold from abroad to the territory of Hungary, and therefore, must be disregarded from the calculation of turnover.

The new additions to the Notice will most likely bring further clarifications to the practical assessment of the potentially notifiable mergers to the GVH.

You may find the amended Notice here (in Hungarian).

For more information, please contact Dániel Arányi, Gábor Kutai or Adél Gelencsér.

Latest insights

More Insights