Recent developments in Hungarian merger control

1. Recent developments in Hungarian merger control dr. SZILÁGYI Pál Competition Law Research Centre PPKE-JÁK

2. Changes in European Merger Control • Change in 2004 • Filling in the ‘GAP’ • Q: was there a ‘GAP’? • In theory there was a ‘GAP’ • In practice questionable • Cf. presentation of Ioannis Kokkoris: YES dominance test significantlessening of competition test

3. Legislative changes in Hungary (2009) • Until 2009: dominance test; from 1 June 2009: new test • New test in the HCO : significant reduction of competition + dominance • New test according to the official interpretation by the legislator: SLC-test . Art. 30 (2) HCO: “The Hungarian Competition Authority may not refuse to grant authorisation for a concentration where, with a view to the [advantages and disadvantages], the concentration would not significantly reduce competition on the relevant market [...], in particular as a result of the creation or strengthening of a dominant position.” (official translation by the authority)

4. Legislative changes in Hungary (2009)cont. • NB: the legislator equals SLC to SIEC in theory, but it explains the change in the following words: „The SLC test compared to the dominance test allows to prohibit concentrations which do not create (strengthen) a dominant position if they significantly reduce competition, while on the other side allows to clear concentrations which create (strengthen) a dominant position if this is counterbalanced by efficiency gains.” • But Cf. Recital (25) Reg. 139/2004! SLC or SIEC? Wasthechangenecessary?

5. Case study 1: HTCC/Matel (Vj-19/2007) • Concentration between two telecom companies • On the Internet- and data-communication services market: Notincludedinthedecision, butcan be foundinothersources. E.g. Csorba, Gergely: A fúziókontrollmódszertanáról. Dominancia- vagyversenyhatásteszt? In Valentinyés Kiss: Versenyésszabályozás 2007. (MTA KözgazdaságtudományiIntézet, Budapest, 2008)

6. Case study 1: HTCC/Matel (Vj-19/2007) – cont. • The concentration combines the second and third player • HHI raises to more 2500 with a change of 300-400 (source: Csorba op.cit.) • Bidding study: HTCC and Matel express only a limited pressure on each other; GTS-Datanet exerts stronger pressure • Not a merger of the closest competitors. • No SLC, no dominance. • Allowed 1st: 40-60% 2nd: 25-30% 3rd: 5-15% HHI > 2500 ∆HHI: 300-400

7. Case study 2: Hungarian Telekom/ViDaNet (Vj-158/2008) • Full acquisition of ViDaNet by HT • Battle over the issue: is mobilenet in the same market as broadband DSL? • Bottleneck of the case: Internet service providing • Market shares rise to 55-70%. • The two companies are the owners of the networks and no entry is expected. • Creation or strengthening of a dominant position: prohibited

8. Case study 3: Ringier/Híd (Vj-155/2008) • Full acquisition of Híd by Ringier: two sided markets; tabloids. • Market shares (sale; advertising revenues on the nationwidetabloid market):

9. Case study 3: Ringier/Híd (Vj-155/2008) • Merger of the first and second player • Extremely high market shares • In principle this could also be allowed (!) if there is entry. • Weighting of pros and cons by the GVH (under the dominance test!): „the creation or strengthening of dominant position does not automatically lead to the conclusion that the concentration has to be prohibited”. • Notification withdrawn.

10. Sophisticated economic analysis • Customer and consumer surveys • Large sample questionnaires • Regression analysis • Bidding studies • It is clear that sophisticated economic analysis is not only present in SIEC/SLC test, but also under dominance.

11. Statistics

12. Questions Hungary has a small-medium sized traditionally open market. Questions which have to be answered in light of experience: • Is it justified to spend valuable resources of both the market players and the authority on real or imagined GAP cases in such an economy? • Or is a clear cut dominance test more suitable?