Commission Report 2002 (Hungary)

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 6: Competition policy

Progress since the last Regular Report

Since last year`s Regular Report, Hungary has made progress in this area.

In the anti-trust field, secondary legislation in the form of block exemptions in the area of vertical restraints and horizontal co-operation agreements came into force in April 2002. In January 2002, the EU-Hungarian Association Council adopted amended anti-trust implementing rules under the Europe Agreement, which entered into force in Hungary in April 2002.

The Office for Economic Competition, together with its decision-making Competition Council, has continued to build on its enforcement record over the past year. In 2001, it took 120 anti-trust decisions (compared to 144 in 2000), two prohibitions (two with fines). The decisions included 30 cases of abuse of dominant position, 10 cases of restrictive agreements and 80 merger cases. Staff has increased by 14 to a total of 124, and training efforts continue.

In the field of state aid, amendments to the state aid legislation, strengthening the previous state aid control system, entered into force in January 2002. The Act on Public Finance now includes a general prohibition of state aid. The new legislation on exemptions from the prohibition to grant state aid contains the basic principles of state aid control. However, important fiscal aid schemes are still excluded and regional aid ceilings remain too high. The legislation also provides for increased control and monitoring as regards aid granted by local authorities. Hungary's annual state aid report for 2000 was presented to the European Commission in April 2002.

The State Aid Monitoring Office within the Ministry of Finance has been further strengthened and now has a staff of 12. Training activities have continued. In 2001, there were 360 decisions/opinions taken in state aid cases.

Overall assessment

As regards anti-trust, the overall assessment is positive. The Hungarian Competition Act contains the main principles of Community anti-trust rules as regards restrictive agreements, abuse of dominant position and merger control. The Office for Economic Competition, together with its decision-making Competition Council, functions well with a continued high level of training. In view of the planned modernisation and decentralisation of the application of the EC anti-trust rules, efforts to further strengthen the enforcement record should continue by giving priority to cases concerning the most serious distortions of competition and by imposing more deterrent sanctions. Increased awareness of the rules is important, especially among the business community, as is training the judiciary.

As regards state aid, the overall assessment is not yet positive, in particular because of Hungary's incompatible fiscal aid policy. Hungarian legislation still needs to be further aligned with the acquis, in particular since the legislation does not allow for the full control of fiscal aid and does not include a regional aid map with acceptable maximum aid intensities (as justified by GDP figures). An immediate closure of incompatible fiscal aid schemes is required, as is a conversion of individual aid benefits (most of them lasting until 2011) into aid arrangements that are compatible with the acquis. As regards transparency, state aid reports have been submitted for the years up until 2000, which closely follow the methodology and the presentation of the European Commission`s survey on state aid in the EC and are of good quality. The State Aid Monitoring Office is functioning well (staff increases may have to be considered, depending on notification levels), and its decisions are generally respected by the Government. Increased awareness of the rules is important, especially among aid grantors, the business community and the judiciary.

Conclusion

In its 1997 Opinion, the Commission concluded that the progress in approximation of legislation was significant in the field of anti-trust and that the skills of and efforts made so far by the Hungarian anti-trust authority represented a significant step forward towards credible competition law enforcement. In the field of state aid, however, the Commission added that more needed to be done to achieve the degree of transparency required. The role and powers of the monitoring authority had to be clearly defined to ensure the compatibility with the Community rules of the aid granted. Furthermore, the Commission noted that a considerable effort would be necessary to fulfil the requirements in the field of state aid over the medium term. Close co-operation with the Commission would be necessary in this field.

Since the Opinion, Hungary has made steady progress in adopting anti-trust legislation, developing the Office for Economic Competition's administrative capacity and establishing an enforcement record. Steady progress has also been made in adopting state aid legislation and increasing the transparency of the system, as well as in developing administrative capacity in the State Aid Monitoring Office and establishing an enforcement record. Overall, on legislative alignment, administrative capacities and enforcement record Hungary is reasonably advanced, except in the area of fiscal aid.

Negotiations on this chapter continue. Hungary has not requested any transitional arrangements in this area.

In order to complete preparations for membership, Hungary's efforts now need to focus on ensuring that it continues to update its alignment as the acquis in this area evolves and, most importantly, on continuing to develop a track record of proper application and enforcement of both anti-trust and state aid legislation. In particular, Hungary will need to ensure the immediate closure of incompatible fiscal aid schemes, as well as the conversion of individual aid benefits into aid arrangements that are compatible with the acquis.

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