INVENTIO – INVESTITIO – INNOVATIO
The latest “traps” in the act on Competition Law
It is vital for every undertaking to conduct their market behaviours in accordance with the provisions of the competition law of Hungary and the European Union, since any lack of the compliance may be detrimental to our clients. Therefore it is particularly important to Germus & Partners Attorneys-At-Law to inform our clients on those recent changes – in this present case – prescribed by the Act CLXI of 2016 on the Amendment to the Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition and to the Act XLVII of 2008 on the Prohibition of Unfair Business-to-Consumer Commercial Practices (referred to as: „Amendment”) – to the Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition (referred to as: “Act on Competition Law”), which could be especially relevant to the business decisions of our clients.
What are the main changes set forth by the Amendment in relation to the claims for damages caused by the infringements of the Act on Competition Law?
The provisions of the Treaty on the Functioning of the European Union (referred to as: “TFEU”) and the Act on Competition Law prohibit the agreements restricting economic competition and the abuse of dominant position. Although these provisions generally authorises the competition authorities to enforce these prohibitions, the latest amendments increasingly put greater emphasis on the private law enforcement of the claims for the infringements of competition law beside the public law enforcement.
Therefore, if someone – either a direct buyer (or seller) or indirect buyer, that is, a person, who did not directly pursue the goods, products or services in question, or the goods manufactured from the goods in question or the goods including the goods in question from the infringer party – suffered harm from damages caused by the infringement of competition law, this infringed party is definitely entitled to the right to compensation.
It is necessary to highlight, if the direct buyer (or seller) as the infringed party passes on its harm suffered from the damages caused by the infringement of competition law as on overcharge to the indirect buyer (or seller) in the supply chain, the direct buyer is not entitled to the compensation to the extent of the overcharge that has been passed on.
As the significant characteristic of the damages caused by the infringement of competition law, the information asymmetry could impede or hinder the successful enforcement of the claim for damages on behalf of the infringed party, including the gathering of the evidence and the quantifying of the claim. According to the Amendment the fact of the harm must be presumed in relation to those cartels where the gathering of the evidence seems to be the most difficult. However, the infringer is entitled to rebut this presumption, and the presumption does not cover the extent of the harm.
Since gathering of evidence on the cartel-agreements – usually secretly concluded and performed – proves to be difficult, the competition authorities put great emphasis for ensuring the effective actions against the cartels by “breaking the silence” of the companies in the cartels and obtaining invaluable evidence on those cartels. The leniency policy is aimed to support the competition authorities for obtaining evidence by exempting from the full amount of the fine or a part of it those companies at the end of the competition control proceedings, which have given their assistance for unveiling the cartels by handing over information and evidence on the legal harm. But we have to underline the fact that in the case of the claims for damages caused by the infringement of competition law the courts are not allowed to require from the party involved or any third parties the disclosure any documents or information on the leniency policy or any settlements.
The infringements of competition law are mostly caused by more than one company. Therefore, it is necessary to add special provisions in relation to the joint liability of the infringers. Furthermore, if certain conditions are met more favourable rules than the rules of joint liability in general are applicable to the small and medium-sized enterprises. The more favourable rules are applicable – for the accurate definition of the market share it is indispensable the complex analysis of the market structure, especially from a legal point of view – if the market share of the small and medium-sized enterprises is not significant, in other words, it does not reach the 5%.
The more favourable rules are applicable, – for the accurate definition of the relevant market it is indispensable the complex, from specially a legal point of view, analysis of the relevant market – of the SMEs are not significant, that is, it does not reach the 5%.
The Amendment promotes to settle the damages caused by the infringement of competition law by the way of alternative dispute resolutions. Therefore the position of the infringing companies in relation to either in case of the damages for the infringed party or the obligations among the infringers to cover the damages equally, which conclude settlements are defined in a more favourable way than those infringing companies which do not conclude any of them.
How do the recent changes in connection with the mergers prescribed by the Amendment affect the provisions of the Act on Competition Law?
The Amendment states that the Hungarian Competition Authority (referred to as: “HCA”) must be informed on the mergers, if the combined net sales revenue of all groups of companies involved, and the net sales revenues of the companies controlled jointly by members of the groups of companies involved with other companies in the previous financial year exceeded fifteen billion forints, and among the groups of companies involved there are at least two groups with net sales revenues of one billion forints or more in the previous year together with the net sales revenues of companies controlled by members of the same group jointly with other companies.
It is required to submit a compulsory notification to the HCA in the merger cases, which does not automatically initiate the competition control proceedings. However, the notification on the merger must be investigated without delay by the investigator of the HCA.
The administrative service fees of this notification are determined in the amount of one million forints. But in certain cases even the full amount of the administrative service fees could be refunded by the person who submitted the notification.
The ongoing problem with the mergers – which do not reach the threshold level in the markets with relatively low combined turnover, and a result of this, these mergers could easily lead to the significant decrease of the competition, particularly, if they create or strengthen a dominant position – is strongly bolstered by fact that the Amendment increases the former five hundred million forints threshold level to one billion forints. Therefore the Amendment authorises the HCA for initiating ex office proceedings in those mergers, when the mergers do not reach the threshold level, however, it is expected that the mergers could presumably lead to the significant decrease in the competition, especially if they create or strengthen a dominant position. In preparing the mergers the analysis of the relevant market from a legal point of view is absolutely necessary for avoiding any problems arisen from the field of competition law.
If you wish to consult your options on conducting your market behaviour in compliance with the above –detailed changes or if you have any questions with the recent changes, please do not hesitate to contact Germus & Partners Attorneys-At-Law, who have extensive expertise, theoretical and practical experience in the field of competition law. Germus & Partners Attorneys-At-Law is at your kind disposal in providing you with practical and client-oriented solutions.
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