This competition newsletter is an update to our previous insight on the first gun jumping decision of the Hungarian Competition Authority ("HCA"), where we set out the background to the Hungarian suspension clause and the calculation of fines in more detail. Please find the respective competition newsletter here.

Gun jumping fines increasing

The HCA imposed fines amounting to HUF 14 million (approx EUR 45,000,-) on Dr. Riad Naboulsi ("Acquirer") for three separate but closely connected cases of gun jumping (cf Vj/10/2016.; Vj/13/2016; Vj/14/2016). The Acquirer originally notified the HCA in a joint submission, even though the concentration involved the direct acquisition of separate undertakings from different and independent sellers, all active in the production and sale of dairy products. The HCA concluded that the joint submission covered three separate concentrations and initiated separate merger control proceedings respectively. This logic ultimately led to three separate clearance decisions, all accompanied by gun jumping fines due to partial implementation of the concentrations prior to competition clearance. The fines were imposed on the basis of the principles set out in the first gun jumping decision of the HCA.

Measures giving rise to gun jumping and amount of fines

The HCA established that the amendment of a deed of foundation to include the acquirer replacing the seller as shareholder, qualifies as gun-jumping. This amendment was implemented prior to any merger control filing being submitted to the HCA. The HCA learnt of the change in the joint filing and the commercial register.

The early implementation of the acquisitions of Dráva Tej Kft. and Bábel Sajt Kft. led to fines amounting to HUF 2 million (approx EUR 6,500,-), while regarding the acquisition of Wassim Sajt Kft. ("Wassim"), the fine soared to HUF 10 million (approx EUR 32,000,-).

As we reported earlier, cases of closing without merger control clearance can be fined by up to 10 % of the respective company's annual turnover in the preceding year. The decisions suggest that during the assessment, the HCA among others (mitigating and aggravating circumstances) considers (i) the possible maximum amount of the fine and also (ii) the amount which could be imposed (on a daily basis) in the case of an ex officio proceeding. The difference in the actual fines at hand is attributable to the fact that the former cases were notified (proceedings were initiated) 83 and 94 days following the conclusion of the contract, while in the case of Wassim, this number was 321 days and the Acquirer had exercised its voting rights prior to the clearance.

The HCA's practice on gun jumping is developing in a comprehensive manner. Fines have been imposed based on uniform principles, providing direction to undertakings and fostering voluntary notification. These decisions send a clear message to businesses and to their legal advisors to take the suspension clause enshrined in the Hungarian competition act seriously.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.