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VJ-64/2001
INDIVIDUAL EXEMPTION OF AN AGREEMENT BETWEEN THE MUNICIPALITY OF SZOLNOK AND BOROSTYÁNKERT BT
(Restrictive agreement)
Summary
The Competition Council has exempted section 3 of the operating agreement concluded by the Municipality of Szolnok (hereinafter municipality) with Borostyánkert Bt (hereinafter Borostyánkert) concerning the funeral parlour of the only cemetery in town, with the condition that Borostyánkert may not apply in the next three years a price increase higher than the official inflation rate.
Legal background and the market
The Act on cemeteries and funerals states that cemeteries can be owned either by municipalities or churches, and that the owner has the obligation to ensure the maintenance and the operation of the cementary. The operator of the cemetery should provide without discrimination the funeral parlour, storage and refrigerator facilities to other funeral operators. Two separate fees can be determined concerning the laying out in state. One is the fee for the use of the funeral parlour (the facility), the other is the fee for the laying out in state as part of the funeral service. Laying out in state is only part of the funeral service as a whole, which contains for example the conveyance, or preparation of the deceased. These services can be provided separately as well.
In the city of Szolnok there is only one operating cemetery, which is owned by the Roman Catholic Church. The funeral parlour of the cemetery was built by the municipality and operated by the Church until 2000. In this period the use of the parlour could have been regarded as "open", which means that the laying out in state was provided by funeral operators offering the whole range of services.
In April 2000 the mayor of Szolnok concluded an agreement with Borostyánkert concerning the operation of the funeral parlour. Section 3 of the agreement states, that no other funeral operator may be involved in the laying out in state service. Under these circumstances Borostyánkert has exclusivity to offer the services.
The decision
The Competition Council investigated whether section 3 of the agreement, that excludes other funeral operators and "compelling" the relatives from choosing Borostyánkert for the laying out in state besides using the parlour facility, constitutes an infringement of competition law.
According to the Competition Council the relevant product market is the service of laying out in state while the relevant geographic market is the territory of Szolnok. The Council states that section 3 of the agreement has an anticompetitive effect since consumers besides leasing the funeral parlour, had to accept Borostyánkert`s offer for the laying out in state as well. This constitutes an infringement of Article 11 (2) (c) and (h). The Competition Council found that the leasing of the funeral parlour and the service of laying out in state cannot be regarded as belonging to the same contract by their nature. As a result of the restrictive practice in addition to the detrimental effects of the agreement on consumer interests, potential competitors are hindered in entering the market. In the absence of the restriction there could be several other funeral operators offering the service in competition. Admitting the fact that by its nature the operation of the funeral parlour can be exercised only by one undertaking, the Competition Council found no reason for this in the case of the actual service.
According to Article 77 (1) (b) of the Competition Act the Competition Council may exempt restrictive agreements in proceedings initiated ex officio as well. In assessing the agreement under the provisions of Article 17 the Competition Council accepted Borostyánkert`s arguments stating that the exclusivity ensures reasonable organization both from a technical and economical point of view. In the Competition Council` opinion consumers are allowed a fair share of the above-mentioned benefits only if Borostyánkert is prevented from applying excessively high prices in the absence of competitors. The Competition Council found the restriction necessary to attain the economically justified goals, namely the preservation and maintenance of the funeral parlour.