Market competition is a mechanism of the market economy, which in general conveys most effectively the needs of society to undertakings, and is capable of encouraging them to operate effectively and innovatively, thus contributing to the increase of the welfare of society (ultimately economic growth, employment and standard of life). The competition rules protect the adequate operation of that mechanism in order to prevent the infringement or distortion of economic competition, useful for the entire economy by momentary gains, available only for a few operators.
Hungarian Competition Authority
The rules are worth nothing, unless there is an organisation that has appropriate rights to ensure compliance with them. The Hungarian Competition Authority (GVH) / Gazdasági Versenyhivatal (GVH) is an agency, designated to safeguard the competition rules and to prevent any restriction or distortion of economic competition.
Tasks of the Hungarian Competition Authority
It is the responsibility and mission of the GVH to enforce the rules of competition in the interest of the public and for the purposes of increasing consumer welfare and facilitating economic growth. It enforces the provisions of the competition law falling within its scope of competence, supports the development and continuation of competition in the economy or promotes state regulations aimed at the introduction or replacement of competition wherever it is not possible, or it does not lead to the best results:Consequently, the activities of the GVH conducted in order to protect competition are based on three pillars:
1. Competition Supervision
In the course of its competition supervision work the GVH enforces the provisions of the Hungarian competition law and other legal acts falling within its scope of competence, as well as the rules of the EU competition law. It investigates any suspected fraud, distorting or restricting competition. In the case of any actual fraud the GVH may apply various sanctions, i.e. it may prohibit the undertaking from the specific conduct or may impose a fine.
What conducts trigger a GVH procedure?
E.g., the following cases:
a. deceit or misinformation of consumers
b. deceit or unfair manipulation of undertakings
c. abuse of a dominant position of an undertaking
d. a secret agreement of several undertakings violating the law
e. a social organisation of undertakings adopts a decision, aimed at, or resulting in, the distortion of competition
f. any intended merger of two or several undertakings (merger) needs to be approved by the GVH over the threshold specified by law.
2. Competition advocacy
Within the framework of its competition advocacy, the GVH intends to use all available tools and instruments to affect the government’s decisions, and legislation, i.e. tries to convince public actors not to adopt legal regulations unreasonably restricting competition. Another objective of the GVH is to promote its introduction in areas where competition has not yet developed (an example for that is the liberalisation of the telecommunications market in the 1990-s).
3. Development of the competition culture
In order to make competition acceptable to society, it contributes to the development of a competition culture and the facilitation of well-informed consumer decisions by disseminating information on the competition policy and by giving a boost to the activities of professionals dedicated to the economic and legal issues of competition. In that aspect it especially tries to enable undertakings and consumers to learn the basics of competition and develop an approach to it. It achieves that goal with information provided in various forms on competition, the competition policy, and in relation to consumer decisions, influencing competition.
The freedom and fairness of competition is guaranteed by the consistent application and enforcement of several legal regulations governing the fair business practices of market operators. The economic acts distorting competition may take several forms, which may be eliminated and sanctioned pursuant to the provisions of several laws and regulations, which are indicated below.
Act LVII of 1996 on the prohibition of unfair and restrictive market practices (Competition Act)
The Competition Act summarises most material law rules of the Hungarian competition law, including general business, unfair practices, issues concerning unfair manipulation of the decisions of business partners and (anti-trust) issues of competition distortion. In addition, it also contains procedural rules for the enforcement of the provisions of the material law, applicable to the GVH and the courts.
The Competition Act generally prohibits unfair market practices, but also lists specific forms of unlawful conduct, falling within the scope of unfair business practices. They include disparagement of competitors, violation of business secrets, boycott appeals, imitation, or violation of the fairness of tenders and bidding. It is important to stress that in such cases the competition rules are not enforced by the GVH, but the parties may turn to a court, as the prohibited business conduct typically constitutes a legal dispute between two competitor undertakings.
In the other group of the rules specified in the competition law, the GVH proceeds in competition supervision procedures.Such category includes unfair manipulation of business decisions, concerted practices, other agreements restricting competition and abuse of dominant position.Apart from that, the GVH is also responsible for approving/controlling the concentration of undertakings over a certain size.
Act on the Prohibition of Unfair Commercial Practices against Consumers
Act XLVII of 2008 on the Prohibition of Unfair Commercial Practices against Consumers
The general framework of regulation on the information of consumers by undertakings is specified in the Act on the Prohibition of Unfair Commercial Practices against Consumers, which entered into force on 1 September 2008. Commercial practices towards consumers refer to any course of conduct, activity, omission, advertising, marketing or other commercial communication, directly relating to the sale, supply or sales promotion of the goods. The act in general prohibits the publication of unfair commercial practices, specifically any deceiving and aggressive commercial practices and specifies, in a separate annex (in a blacklist) 31 commercial practices, which constitute a violation of law based on the mere facts without any further consideration to the circumstances.
The application of the rules of the act on the prohibition of unfair commercial practices against consumers falls within the scope of competence of three authorities: the GVH, the National Consumer Protection Authority (NCPA) and the Hungarian Financial Supervisory Authority (HFSA). The NCPA and HFSA proceed in cases not relevant to competition, where the NCPA has general competence, while HFSA proceeds in cases, otherwise also supervised by it (i.e. with regard to financial organisations). The GVH proceeds in all cases relevant to competition because any distortion of consumer decisions, if exercised widely, may also restrict competition processes. However, the GVH does not investigate cases, where the law is violated only through the violation of information requirements applicable to labels, instructions for use, or specified in certain special, separate legal regulations. A.
Act XLVIII of 2008 on Essential Conditions of, and Certain Limitations to Business Advertising Activity (Advertising Act)
Apart from the provisions of the Competition Act applicable to unfair manipulation of business decisions, the business decisions of market operators, other than consumers and business parties (from private contractors through small and medium-sized enterprises to large companies), are protected by the provisions of the Advertising Act applicable to deceiving and comparative advertisements.
The Advertising Act lays down all the rules of advertising and, in two special provisions, prohibits the publication of deceiving advertisements and regulates the use of comparative advertisements. Pursuant to the act, it is prohibited to use deceiving advertisements, especially with regard to statements that relate to the specific characteristics or price of the goods, or the pricing method, or other contracting terms and conditions of their purchase, or the assessment of the advertiser (e.g., the rights, assets, rating and achieved awards of the advertiser. All information contained in advertisements must always be true and accurate, both in details and in full. Any deceiving information, as well as unlawful comparison may manipulate and distort the free business decision or choice of the party addressed by the information.
Act on Trade
Act CLXIV of 2005 on Trade (Act on Trade)
With the entry into force of the Act on Trade on 1 June 2006, the tasks and competences of the GVH in the application of the law, focusing primarily on the enforcement of the competition regulations, have increased. The provisions of the Act on Trade prohibit any abuse of suppliers by large traders (having significant market power and consumer base) (the agricultural and food industry products are governed by special rules); such abuse is supervised by the GVH pursuant to the material law provisions of the Act on Trade.
Community Competition Law
Naturally, Hungary’s EU membership also affects the application and enforcement of the competition law as well. Simultaneously with the accession of Hungary and the other Member States joining at the same time, the EU competition law reform package entered into force in the EU, which made enforcement of the Community competition regulations, the responsibility of not only the European Commission, but also the national competition authorities (GVH in Hungary). The competition rules laid down in Article 101 and 102 of the Treaty of the Functioning of the European Union (TFEU) prohibit restrictive agreements in the Common Market and the abuse of dominant position and, in terms of content, comply with the respective provisions of the competition law (concerning restrictive agreements and prohibition of the abuse of dominant position).
Whenever any violation of law is suspected, the GVH is entitled and also obliged to apply the EU legislation (i.e. launch proceedings for the assumed violation of the EU competition law), if the conduct may have an impact on the trade between the Member States or on the internal market. The relevance of trade between Member States is a complex concept, referring to the fact that such a conduct can have an actual or potential, indirect or direct impact on competition even between Member States. That effect may be achieved by manipulating actual cross-border market conducts (e.g., agreements on export, import activities), or by modifying the structure of competition (e.g., agreements closing the national market, or restricting competitions from outside, conducts involving the abuse of dominant position). In its procedures, the GVH must apply, as material law regulations, primarily the competition rules of the TFEU, and other EU legal acts (directives, regulations and Commission communications), as well as the legal principles established in the case law practice of the European Commission and the European Court, in compliance with the Hungarian procedural law, while the material law provisions of the Competition Act may also be applied simultaneously.
In the course of applying the TFEU competition rules, the members of the European Competition Network (ECN) cooperate with each other closely in order to ensure the efficiency and uniformity of law enforcement. The main rules of cooperation are laid down in the /1/2003/EC Council Regulation that defines the procedural framework of application of the EU competition rules.
The accession to the European Union also brought a change in the field of merger control. Mergers having a Community dimension, through which more than one Member State is affected and where the turnover of the undertakings concerned accedes the threshold provided for in Council regulation EC No. 139/2004, now fall within the competence of the European Commission instead of being assessed by the national competition authorities (e.g., by the GVH).