Hungarian Competition Authority

Vj-//

VJ-84/2001

THE INDIVIDUAL EXEMPTION OF THE AGREEMENT OF GLOBUS KONZERVIPARI RT AND NAGYKŐRÖSI KONZERVGYÁR RT

(Restrictive agreements)

Summary

The Competition Council gave individual exemption in force until 5 of March 2005 to the exclusive dealing agreement of two companies of the canning industry GLOBUS Konzervipari Rt (hereinafter GK) and Nagykőrösi Konzervgyár Rt (hereinafter NK).

The canning industry is characterised by oversupply and by fierce competition despite the diminishing of the huge number of competitors on the market.
The number of market participants changed in the last years as follows:

Because of the oversupply the entrance of new competitors is not likely.
The exaggerated canning capacity was reasoned by the booming export to Eastern countries of the last decades. After the transformation of the canning industry the major factories moved to areas with agricultural importance. Although the quality of their products meet the legal requirements their low transport capacities restrict their export activities.

GK with its 10 billion HUF of annual turnover of 2000 owns the 31 per cent of the Hungarian market of canned vegetables, meals, and meats.

The annual turnover of NK was 5 billion HUF in 2000. It supplies its canned products only in Hungary but it produces and supplies non-canned products as well, like stocks. Its market share was 7.6 per cent in Hungary.

The parties concluded a deal in 2001. In the contract NK agreed to sell a specific amount of its canned meat and meal products called `Kőrös` to GK. GK agreed to buy and then to transport and sell them. The contract would not affect the right of NK to sell the rest of its products. The agreement affected the 6.4 per cent market share of NK on the Hungarian market so it had disposition on its rest 1.2 per cent share.

The parties acknowledged that their agreement went against the Competition Act so they notified it to the OEC. They submitted that the agreement fulfils the criteria laid down in the Block Exemption regulation of the Government but in the case of the failure of their argumentation they asked for the individual exemption of the OEC.

The Competition Council established that as the parties` turnover exceeded a certain amount, their agreement did not fall under the block exemption regulation, but it added that as the agreement fulfils the criteria laid down in the Competition Act it might be exempted individually.

The agreement made possible to NK the use the existing infrastructure of its competitor and therefore to strengthen its market position and to export its products. Due to the agreement GK could reduce its transport costs, increase its market share and widen the scale of the products supplied.

The agreement allows the consumers a fair share of the benefits as it results in a widening scale of products and relatively lower prices.
Finally the Council established that the agreement would not exclude competition between the parties as NK would still have disposition over an amount of its products.