The Hungarian government's agreement with domestic oil and gas company MOL Nyrt. (MOL.BU) to exempt it from a recent increase in hydrocarbon mining fees may be against the European law on competition, the European Commission said Tuesday.

"The commission is concerned that MOL may be favored vis-a-vis its competitors," Competition Commissioner Neelie Kroes said.

The commission added that it has begun an in-depth investigation into the exemption, dating back to 2005, which allows MOL's royalty payments to remain fixed for the majority of its hydrocarbon mining fields until 2020, whereas the mining fee for other market players was increased considerably in early 2008.

The commission is concerned that this agreement gives MOL an unfair advantage over its competitors in Hungary.

-By Peppi Kiviniemi, Dow Jones Newswires; +32 (0)2 741 1483; peppi.kiviniemi@dowjones.com

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