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Mobile payment systems monopoly in Hungary ruled unlawful

Laws restricting the operation of a mobile payment system in Hungary to a state-owned company have been deemed unlawful by the EU's highest court.08 Nov 2018

The Court of Justice of the EU (CJEU) took issue with the restrictions the laws placed on businesses providing mobile payment services to rival those of the state-owned operator.

According to the CJEU's ruling, Hungary's national mobile payment system has been run, since 1 July 2014, by a business wholly owned by the Hungarian Development Bank which is itself wholly owned by the Hungarian state.

The European Commission had complained that Hungary's mobile payment system law had created a "national monopoly of mobile payment services" since it provided the state-owned operator with "an exclusive right to conclude contracts with car park operators and to charge tolls for use of the road network". This, the Commission claimed, "creates an obstacle to entry to the wholesale market in mobile payments, which was previously open to competition".

The CJEU ruled that by "instituting and maintaining in force the national mobile payment system", Hungary had breached the EU's Directive on services in the internal market and constituted an unjustified restriction on business' freedom to provide services under the Treaty on the Functioning of the European Union.

Under the EU's Directive on services in the internal market, EU countries have to justify laws which make access to a service activity or the exercise of it subject to certain requirements, including in most cases requirements which reserve access to the service activity in question to particular providers by virtue of the specific nature of the activity.

The restrictions can be justified if they can be shown to be non-discriminatory, necessary and proportionate.

Hungary had claimed that the national mobile payment system it has established was set up to address a market that was "not working satisfactorily", where services were not available across the whole country and lacked interoperability. It said the system stimulates competition and enables "the provision of a satisfactory service", and that the introduction of the system was justified for "overriding reasons in the public interest" because it helps provide for consumer protection, fairness in commercial transactions and in combating fraud.

However, the CJEU said there were "less restrictive measures" that Hungary could have implemented than a state-owned monopoly in the market to attain the objectives it was pursuing. It could have, for example, backed "a system of concessions based on a competitive process", the court said.