Blog » LUXEMBOURG RULED – THE HUNGARIAN STATE MOBILE PAYMENT SYSTEM BREACHES EU LAW
LUXEMBOURG RULED – THE HUNGARIAN STATE MOBILE PAYMENT SYSTEM BREACHES EU LAW
03 December 2018
Whether a mobile payment system can be nationalized in an EU member state relying on the doctrine of services of general economic interest? The Luxembourg court this time examined the Hungarian national mobile payment system. We analyze the reasons of the decision in our article.
From 2014, Hungary set up a state monopoly on the market of mobile payment services, in the framework of which the Nemzeti Mobilfizetési Zrt. a 100% state owned entity was created. From this time, public parking charges, tolls for use of the road network, and fees connected with all the other services offered by a State body can be paid by mobile device only through the national mobile payment system, operated by the Nemzeti Mobilfizetési Zrt.
The European Commission was of the view that the Hungarian mobile payment system, as nationalization of the market of mobile payments breached EU law, since the Nemzeti Mobilfizetési Zrt., endowed with an exclusive right, created an obstacle for wholesalers to enter the mobile payment market, and therefore the provisions of the service directive, and the freedom of establishment and provision of service within the EU were not respected.
Since the Hungarian government disputed the infringement and failed to comply with the notification of the European Commission, the case continued in Luxembourg, in front of the Court of the European Union.
The case in Luxembourg
The Hungarian court firstly invoked the doctrine of services of general economic interest (SGEI), alleging that the national mobile pay system is a SGEI, in respect of which the service directive is not applicable at all, or may be applicable with restrictions, so Hungary is not obliged to liberalize an existing SGEI.
The EU court highlighted in this respect, that even if the mobile pay system is considered as a SGEI, the EU law allows exceptions only for SGEI and state monopolies which were already in existence when accessing to the EU. However, the Hungarian national mobile payment system was created with effect from 2014, as a new system, therefore, in addition to being non-discriminatory, it shall comply with the requirements of necessity and proportionality.
In the above context, the Hungarian government argued that the former mobile payment services, operated by private undertakings, have not provided whole country-coverage and equal access, while the state monopoly ensures the protection of consumers, the fairness of commercial transactions and the fight against crime.
Despite of the above, the EU Court stressed that the interference into the free market was unnecessary and disproportionate, since the above objectives could have been achieved by less restrictive measures, for example, instead endowing a state monopoly to the Nemzeti Mobilfizetési Zrt., the government could have introduced a system of concessions based on a competitive process.
Based on the above the EU court established that the Hungarian national mobile payment system breached the provisions of the service directive and the freedom to provide cross-border services within the EU.
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