DIGI-Invitel merger control: the HCA imposes additional HUF 20 M in administrative penalty on DIGI

The lengthy merger control proceeding initiated in July 2017 by DIGI Távközlési és Szolgáltató Kft (DIGI) for the acquisition of Invitel Távközlési Zrt (Invitel) eventually comes to an end with the 28 July 2020 order issued by the Competition Council. This time DIGI is obliged to pay additional HUF 20 M penalty (following the earlier amount of 45M) due to providing (once more) inaccurate information and data to the Hungarian Competition Authority (HCA). The HCA considers the penalties a reminder to corporations about the value of data accuracy and the significance of credibility. DIGI duly reported the acquisition of Invitel to the HCA in August, 2017, in line with Section 24 para (1) of the Competition Act, because the merger qualified as a direct acquisition of control. Subsequently during the merger control proceeding initiated in September 2017 DIGI erred in providing misleading data to the HCA. The purpose of the proceeding was to clarify whether the merger could possibly result in substantial fallback in competition in the involved telecom service market. In this respect, DIGI provided misleading data in specifying the settlements where DIGI and one of its corporate affiliates, i-TV Digitális Távközlési Zrt (i-tv) provided wire broadcasting services by using other network infrastructures while Invitel was also simultaneously present as wire service provider. Due to the incorrect data the HCA had to revoke its May 2018 decision. For the procedural infringement DIGI was imposed HUF 90M penalty (which the Metropolitan Tribunal reduced to only HUF 45M). Even this revoked decision would have authorized the merger only conditionally, if DIGI were to fulfil obligations to reduce anticompetitive effects with respect to the settlements involved in the simultaneous service-providing. The repeated merger control proceeding started in November 2018, and this time DIGI failed to update information on one involved settlement, Szécsény, where market conditions changed in the past year, and the former agreements for lease and operation were no longer in effect between the settlement’s network provider and i-TV. The new HCA decision was accordingly, mistaken in identifying Szécsény among other settlements involved in anticompetitive practices, and extended the obligations imposed on them without accurate factual grounds. When HCA was informed of the data error, DIGI presented as an excuse that i-TV informed it too late of the change in the agreements, only after the HCA requested the submission of its certificates. According to the Competition Council, any omission of communication between DIGI and a member of its company group, i-TV will not exempt DIGI from its obligation to provide full-scale and accurate information to the HCA. According to Section 61 para 3 of the Competition Act, the lowest amount of administrative penalty is HUF two hundred thousand, its highest amount is one per cent of the net profit realized in the business year that preceded the HCA order imposing the penalty. When specifying the amount, the HCA considered DIGI’s financial performance, the severity of omission (impeding HCA in clarifying the facts) and its consequences (the decision had to be modified). At the same time the HCA also considered the fact that inaccurate data-providing affected only one settlement this time, and DIGI did not benefit from the omission. Eventually HCA imposed a penalty of only HUF 20 M which is substantially (4,2%) lower than the statutory maximum.

Author: dr. Viktória Villányi