An assessment of public procurement related cartels under competition law and criminal law – the joint conference of the GVH and PPKE

Public procurement cartels qualify as the most egregious violation of competition law and are considered so harmful to society that they are qualified by the criminal law as a crime. The bid rigging activity of bidders in public procurement or in concession situations endanger the rational use of public resources, with cautious estimations suggesting that these practices may increase prices by 10 percent. The conference on the competition and criminal law related aspects of cartels was organised by the Gazdasági Versenyhivatal (GVH – Hungarian Competition Authority) and the Faculty of Law and Political Sciences of the Pázmány Péter Catholic University (PPKE) under the title: “Who bears the actual responsibility? – i.e. the criminal consequences of hard-core cartels”.

In her introductory speech Ms. Tevanné Annamária Südi, the Secretary General of the GVH, emphasised how the GVH has been devoting a huge amount of effort and resources to fighting cartels including bid rigging activities in public procurement cases. The speaker stated that the detection of these practices is particularly important from a social and material point of view, as the “effective and responsible management” of public resources and also the requirement of fair competition are violated by agreements restricting competition. To inform the contracting entities (e.g. heads of county municipalities, mayors of settlements) in the framework of its “Compliance Campaign”, the GVH published a leaflet in 2014 titled: “Suspected Cartels in Public Procurement”.

The key to successfully taking steps against cartels is to break the “rule of omerta” so that decisive proofs can be found and obtained. Based on the joint notice published in 2004 by the President and the Chair of the Competition Council of the GVH, the leniency policy came into effect. Since 2009, the rules concerning the Hungarian leniency policy have been contained in the Competition Act itself. In the European Union – contrary to the Hungarian situation – the leniency policy is one of the most important means of fighting cartels.

“This year the GVH is initiating a campaign to introduce the goals and background of its leniency policy with the aim of more effectively and successfully enforcing the public interest tied up with cartel detection” the Secretary General announced, emphasising that bid rigging in public procurement and concession procedures may result in criminal sanctions.

Dr. Ádám Békés, associate professor of the Faculty of Law and Political Sciences of the Pázmány Péter Catholic University, reported that “recently the GVH and the National Bureau for Investigation (NBI) investigated a public procurement related competition restriction in close cooperation. At the moment the case is pending before the court. In spite of the fact that the GVH has launched several actions and that since 2005 the Criminal Code has contained provisions dealing with restrictive agreements, no criminal court practice has evolved so far for this kind of violation.” As he said, the case pending at court has highlighted that the cooperation of the two distinct legal areas (competition law and criminal law) and of the two distinct institutional regimes (GVH and NBI) might bring new results in maintaining and developing the conditions of competitive markets. The associate professor added: “the goals of the conference are to share current practical experience and conclusions stemming from experience, the outlining of probable directions of future development, exchange of views about the possible ways, how still existing procedural difficulties could be overcome and to promote compliance by calling attention to the possible criminal consequences.

At the conference practitioners and theoreticians of the GVH and the Faculty of Law and Political Sciences of the PPCU spoke about the essential connections between competition law and criminal law and provided a comprehensive overview of the conducts that may result in imprisonment, the major types of public procurement cartels, the advantages of the cooperation of the two legal areas and the necessity of maintaining the threat of criminal law in a proportional form from a competition law point of view.

Budapest, 21 April 2015.

Hungarian Competition Authority

 

Further information:
Andrea BASA
Spokesperson
Mail: 1054 Budapest, V. ker. Alkotmány u. 5.
Postal address: 1391 Budapest, 62. POB 211
Tel: (+36-1) 472-8902
Email: ,
http://www.gvh.hu

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Proceeding initiated for suspected cartel

On 21 April 2015 the Hungarian Competition Authority (GVH) initiated proceedings against SCA HYGIENE PRODUCTS Kereskedelmi Kft., VAJDA-PAPÍR Gyártó, Kereskedelmi és Szolgáltató Kft., TESCO-GLOBAL Áruházak Zrt., AUCHAN MAGYARORSZÁG Kereskedelmi és Szolgáltató Kft., SPAR Magyarország Kereskedelmi Kft., METRO Kereskedelmi Kft. and DM-Drogerie Markt Kft. At the same time the GVH held unannounced inspections at the premises of the undertakings.

The GVH believes that the undertakings under investigation are directly or indirectly conducting negotiations on the price increases of certain household paper products in order to concert the pricing of these products and that they are also sharing other related sensitive business information with each other to conduct negotiations on price increases of certain household paper products in order to concert the pricing of the products in question and they share other related sensitive business information with each other. The undertakings under investigation have presumably violated the provisions of the Hungarian Competition Act and the Treaty on the Functioning of the European Union with regard to the prohibition of restrictive agreements.

According to the Hungarian Competition Act, the GVH may hold unannounced inspections. The provisions of the Act require the GVH to obtain prior judicial consent before holding such inspections.

The initiation of the competition supervision proceeding does not mean that the undertakings in question have actually committed the infringement. The proceeding seeks to clarify the facts and to prove that the presumed infringement has been committed. According to the Act these proceedings must be closed within 6 months, however, this time limit can be extended two times by a further 6 months, depending on the complexity of the case.

Case number: Vj/22/2015

Budapest, 21 April 2015

Hungarian Competition Authority

 Further information:
Andrea BASA
Spokesperson
Mail: 1054 Budapest, V. ker. Alkotmány u. 5.
Postal address: 1391 Budapest, 62. POB 211
Tel: (+36-1) 472-8902
Email: ,
http://www.gvh.hu

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More than 1 billion HUF fine on Auchan for abusing its significant market power

The Gazdasági Versenyhivatal (GVH - Hungarian Competition Authority) in its decision on 23 March 2015 imposed a total fine of 1.061.300.000 HUF (3.6 million Euro) on Auchan Magyarország Kft. for infringing Act CLXIV of 2005 on Trade by demanding after sale price discounts from its suppliers in order for the suppliers’ products to be stocked, or continue to be stocked, by Auchan.

The investigation of the GVH revealed that between 1 June 2006 and 31 December 2014 Auchan demanded after sale price discounts from three-fourths of its non-food product suppliers in order for the suppliers’ products to begin to be stocked, or continue to be stocked, by Auchan. Each requested price discount was calculated on the basis of the entire net commodity value purchased from the supplier. The GVH was not able to identify any services for which the aforementioned after sale price discount may have served as compensation; it did not have any performance incentive function and in practice effectively operated as a fee.

The Act on Trade prohibits a dealer from imposing a unilateral charge on a supplier in order for a supplier to secure a place on a merchant supplier list and to be stocked by a retailer; furthermore, a dealer is not allowed to impose any fee for other services not required by a supplier.

When determining the fine, the GVH based its calculation on the net turnover achieved by Auchan from the after sale price discounts.

The GVH considered it a serious aggregating factor that Auchan continued its unlawful market behaviour even after the GVH published its SPAR decision (Vj/47/2010) in June 2012 in which it condemned similar behaviour.

A mitigating factor that was taken into account by the GVH was the fact that a proportion of (average 44%) the suppliers – small and medium-sized – were not considered to be vulnerable market participants.

Case number: Vj/60/2012.

Budapest, 23 March 2015.

Hungarian Competition Authority

 Further information:
Andrea BASA
Spokesperson
Mail: 1054 Budapest, V. ker. Alkotmány u. 5.
Postal address: 1391 Budapest, 62. POB 211
Tel: (+36-1) 472-8902
Email: ,
http://www.gvh.hu

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Proceeding initiated for suspected cartel

On 10 March 2015 the Hungarian Competition Authority (Gazdasági Versenyhivatal – GVH) initiated a competition supervision proceeding, against seven undertakings (ALCUFER Ipari Kereskedelmi és Szolgáltató Kft., FE-GROUP INVEST Vagyonkezelő, Tanácsadó és Nagykereskedelmi Zrt., JÁSZ-PLASZTIK Kft., Észak-dunántúli MÉH Nyersanyag-hasznosító Zrt., Észak-magyarországi MÉH Nyersanyaghasznosító Zrt., AKKUCITY Akkumulátor és Akkumulátorhulladék Kereskedelmi Kft. and VENTUM Kereskedelmi és Szolgáltató Kft.). At the same time the GVH held unannounced raids at the premises of the undertakings.

GVH noticed that since 2013, the above-mentioned undertakings have been negotiating a market sharing agreement on the lead-acid battery recycling market. The undertakings under investigations have presumably violated the provisions of the Hungarian Competition Act and the Treaty on the Functioning of the European Union with regard to the prohibition of restrictive agreements.

According to the Hungarian Competition Act, the GVH may hold unannounced inspections. The provisions of the Act require the GVH to obtain prior judicial consent before holding the inspections.

The initiation of the competition supervision proceeding does not mean that the undertakings in question have actually committed the infringement. The proceeding seeks to clarify the facts and to prove that the presumed infringement has been committed. According to the Act these proceedings must be closed within 6 months, however, this time limit can be extended two times by a further 6 months, depending on the complexity of the case.

Case number: Vj/2/2015.

Budapest, 11 March 2015.

Hungarian Competition Authority

 Further information:
Andrea BASA
Spokesperson
Mail: 1054 Budapest, V. ker. Alkotmány u. 5.
Postaddress: 1391 Budapest, 62. POB 211
Tel: (+36-1) 472-8902
Email: ,
http://www.gvh.hu

Printable version in PDF


Proceedings against UPC for suspected abuse of dominance

The Hungarian Competition Authority (GVH) initiated proceedings against UPC Magyarország Telekommunikációs Kft. (UPC) for its conduct in its numerical district 29.

The GVH commenced supervisory proceedings on 20 February, based on a large number of consumer complaints, claiming that in district 29 of UPC (Monor and its surroundings) the quality of the internet service provided is lower (the upload and download speeds are slower) while the price of the internet subscription is higher, compared to the rest of the districts in the country. UPC is the sole telecommunication service provider in Monor and its neighbouring villages.

Through the above-described practice, UPC has presumably abused its dominant position, in contrary to the provisions of the Competition Act. The initiation of an investigation is necessary in order to protect the public interest, taking into account the fact that the conduct of UPC affects a large group of consumers and that the GVH has received a significant number of consumer complaints.

The initiation of the competition supervision proceeding does not mean that the undertaking in question has actually committed an infringement. The proceeding aims to clarify the facts and to prove that the presumed infringement has been committed. According to the Competition Act, proceedings must be closed within 6 months; however, this period can be extended on two occasions by a further six months each time, depending on the complexity of the case.

Case number: Vj/15/2015

Budapest, 2 March, 2015

 

Hungarian Competition Authority

Further information:
Andrea BASA
Spokesperson
Mail: 1054 Budapest, V. ker. Alkotmány u. 5.
Postal address: 1391 Budapest, 62. POB 211
Tel: (+36-1) 472-8902
Email: 
http://www.gvh.hu

 

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