Hungarian Competition Authority

Not only democracy but the free market economy is in danger in Hungary

We have often talked about the hundreds and hundreds of new laws and amendments Fidesz politicians “propose.” Naturally, very few of these laws and amendments are genuine in the sense of actually originating with the MPs who turn them in. Individual members’ proposals are just a convenient way of avoiding thorough preparation and discussion. The preparation of these laws and amendments is often farmed out to Fidesz-friendly law firms whose members with great speed throw together something that often turns out to be very poor legislative work.

The purpose of amendments is frequently obscure. It can happen that something that didn’t seem at all significant at the time it was adopted turns out to be of huge importance. It has happened more than once that the “evil” intent of the piece of legislation became clear only months later.

On October 11 László Koszorús, a Fidesz MP, turned in an amendment to the Competition Act of 1996 which entrusted the Hungarian Competition Authority (Gazdasági Versenyhivatal) with surveillance control of all mergers and acquisitions that might be “essential” from the point of view of the national economy. The Authority can scotch a merger or acquisition if it significantly reduces competition. Article 24 of the Competition Act defines the thresholds above which the authorization of a merger has to be approved by the Competition Authority. László Koszorús’s amendment to this article adds a new section which would allow the government to approve a merger without its being scrutinized by the Competition Authority “in case that merger is considered to be significant from the point of view of national strategy, especially in the case of mergers that would save jobs, would strengthen international competitiveness, and would secure basic supplies to the population.”

Hungarian journalists miss a lot of new amendments, which is not surprising given the tsunami of legislative work, but this one was not overlooked. Index immediately picked it up and explained to its readers what the amendment means. Even if a merger of two companies would contravene competitiveness, would negatively influence the price of products, would be harmful to the consumers, the government despite all that could allow the merger to go ahead. With this amendment the government would seriously limit the jurisdiction of the Competition Authority which is, after all, the guardian of competition and which serves the interests of the consumers. Index learned that this latest move of the Orbán government came as a surprise to the Competition Authority itself. But there is nothing unusual in that. This is how things go in today’s Hungary.

Hungarian Competition Authority / Photo István Fazekas, HVG

Hungarian Competition Authority / Photo István Fazekas, HVG

Speculation followed the announcement. What can possibly be afoot? Surely, as is usual in Orbán’s Hungary, the amendment serves a specific purpose. What large merger is in the offing which the Orbán government wants but which the Competition Authority would most likely veto? One thing is sure, concluded Index, Koszorús’s explanation of saving jobs is not the true reason; it has to be something else.

Today HVG picked the topic up and offered several possible reasons for the amendment and for the curtailment of the Authority’s competence. One is the potential nationalization and merger of the utility companies. The paper also pointed out that the merger for which the amendment was most likely designed must involve companies that belong to national competence, i.e. they are not so big that one would need the permission of the European Commission to go ahead with a merger. HVG learned from a Fidesz official in charge of economic matters that the government is currently working on the creation of “non-profit” utility companies. In the case of nationalization the government would have to determine the optimal size of these companies so they could be run on a non-profit basis with the least amount of loss.

Others speculated that this amended law would also be useful if the newly nationalized credit unions were to be sold to a single person or company. Some suggested the merger of Ringier, the Swiss media firm, and Axel Springer, the German newspaper giant. But others think that this is unlikely to be the case. When HVG turned to László Koszorús for an explanation, he sent them to the press department of Fidesz. A rather odd answer from someone who turned in the amendment as a private member proposal. So at the moment this is where we are.

Viktor Orbán’s interview in The Daily Telegraph coupled with recent domestic developments which have turned Hungary into a “laboratory” for an authoritarian nation state and state capitalism have aroused considerable interest in opposition papers.

This is the theme of Róbert Friss’s opinion piece in yesterday’s Népszabadság. He calls attention to the so-called “strategic agreements” certain companies are invited to sign with the government. These companies, foreign and domestic, really have no choice. Those who don’t get into this charmed circle don’t stand a chance of thriving financially in Orbán’s Hungary. Instead of true competitiveness an “informal struggle is developing for loyalty.” Some multinational firms, utility companies, and banks are in trouble because of their refusal to cooperate. These companies are threatened: either comply or receive more “punishment.” For example, for the time being the Bankers’ Association is resisting the pressure to “help the debtors in foreign currencies,” but Mihály Varga, minister of economics, already promised a further government squeeze in November if the CEOs of the banks don’t play ball. With his “strategic agreement” program Orbán is weaving  “a corporative net.”

Removing the threat posed by Viktor Orbán to democracy and the free market will be difficult. As the Baja by-election proved, Fidesz will make sure that one way or the other they will win the next national election. If necessary by fraud. Or, if not outright fraud, by legal maneuvering. In the next by-election in Békéscsaba on November 10 there might not be an opposition candidate at all because the local electoral commission found that the opposition’s candidate, Katalin Kovács, was ineligible because of a technical mistake committed by the Párbeszéd Magyarországért (PM), one of the parties supporting her.

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