2.7 billion fine on several ready-mix concrete manufacturers in Budapest

The Gazdasági Versenyhivatal (GVH – the Hungarian Competition Authority) in its decision on 30 June 2014 imposed a total fine of  2 790 200 000 HUF (9 300 000 EUR) on eight ready-mix concrete manufacturers in Budapest and on the Hungarian Concrete Association, because between 2005 and 2007 they, divided among them orders on ready-mix concrete exceeding the amount of 1000 m3 in the area of Budapest by a previously agreed quota , and they also fixed the price level of ready-mix concrete, thus engaging in a single, continuous and complex infringement.

Based upon the – mostly documentary – evidence at its disposal (charts, journal entries and other records made at meetings), the GVH established that in the time period between 2005 and 2007, Betonpartner Magyarország Kereskedelmi és Szolgáltató Kft., Cemex Hungária Építőanyagok Kft., DBK-Földgép Építési Kft., Duna-Dráva Cement Kft., Osteuropäische Zementbeteiligungs AG, Magyar Betonszövetség “v.a.”, STRABAG Építő Zrt., Frissbeton Betongyártó és Forgalmazó Kft., and LASSELSBERGER HUNGÁRIA Termelő és Kereskedelmi Kft. regularly held negotiations in order to share the market and maintain price levels.

In its proceeding the GVH investigated whether Betonpartner, Cemex, DBK, Frissbeton, Holcim, TBG, Lasselsberger and Strabag, also within the framework of the Hungarian Concrete Association, had held negotiations between 2005 and 2007 in order to maintain price levels and share the market. The investigation of the GVH also dealt with whether the undertakings under investigation had exchanged information in which they mutually agreed not to serve certain clients during the investigated time period.

Based on the evidence, it was established that the senior managers of the concerned undertakings met once a year (in Hungary or Austria), and the middle managers met several times a month (in the office of the Hungarian Concrete Association). The aim of the coordination was to retain the previously agreed upon price levels and “protected” customers, and to share the customers between each other based on the market shares of the undertakings.

The fines imposed on the individual ready-mix manufacturers were as follows:

  • Betonpartner Magyarország Kft. 185 400 000 HUF
  • Cemex Hungária Kft. 643 900 000 HUF
  • DBK-Földgép Kft. 192 000 000 HUF
  • Duna-Dráva Cement Kft. 465 800 000 HUF
  • Frissbeton Betongyártó és Forgalmazó Kft. 53 500 000 HUF
  • Osteuropäische Zementbeteiligungs AG 550 000 000 HUF
  • LASSELSBERGER HUNGÁRIA Kft. 270 200 000 HUF
  • STRABAG Építő Zrt. 428 400 000 HUF

The GVH imposed a symbolic fine of 1 000 000 HUF on the Hungarian Concrete Association, because its role in the uncovered infringement was restricted to administrative tasks related to the cartel.

The calculation of the fine was based upon the 1/2012 Notice of the President of the GVH and the President of the Competition Council, which states the conditions of the imposition of a fine. During the procedure the GVH considered as relevant turnover the net revenue from orders on ready-mix concrete exceeding the amount of 1000 m3 in the area of Budapest during the time of the infringement.

When establishing the amount of the fine, it was an aggravating circumstance that price fixing and market sharing are considered as amounting to a hard-core cartel, and also that the undertakings significantly restricted competition through their behaviour. The GVH took into account the combined market shares (regards the city of Budapest) of the undertakings involved in the ready-mix concrete market of Budapest during the investigated time period, and regarded it as an additional aggravating circumstance that the undertakings actually implemented the previously agreed upon price level of the ready-mix concrete.

Secretly implemented, so-called hard-core cartels constitute the most severe forms of competition restrictive agreements. These agreements concern the direct or indirect determination of buying or selling prices between competitors, market sharing (also collusion on tenders), or the determination of production or selling quotas, and therefore may not fall under exemption or be regarded as exceptions.

Moreover, the GVH regarded imputability as an aggravating circumstance, to which significant weight was placed, that the undertakings in question were obviously aware of the unlawful nature of their behaviour. This could be seen by the fact that the undertakings implemented enhanced safety measures in order to keep their meetings secret. As Strabag Építő Zrt. was a repeat offender; the GVH increased the base amount of the fine imposed on it by +200%.

Due to lack of evidence regarding the undertakings’ agreement not to serve non-paying customers from 2008, the GVH terminated the proceeding regarding this behaviour.

The work of the GVH was aided by an informant, who was awarded an informant reward of 27 902 000 HUF (93000 EUR), which is equal to one percent of the amount of the fine imposed on the undertakings involved in the proceeding. The identity of the informant will not be revealed by the GVH in any form.

Case number: Vj-29/2011.

Budapest, 8 July 2014.

Hungarian Competition Authority

Further information:
Katalin GONDOLOVICS
spokeswoman
Hungarian Competition Authority
Mail: 1054 Budapest, V. ker. Alkotmány u.5.
Postal address: 1245 Budapest, 5. POB 1036
Tel: (+36-1) 472-8902
Email:
http://www.gvh.hu

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The GVH commenced proceeding because of suspected cartel

On 3 July 2014 the Gazdasági Versenyhivatal (GVH – Hungarian Competition Authority) launched a competition supervision procedure against DUNA HOUSE FRANCHISE Kft. (Real Estate Agency) and Otthon Centrum Franchising Tanácsadó Kft. (Real Estate Agency). The investigation was initiated with an unannounced inspection held by the GVH at the seats of the undertakings under investigation.

According to the available data, the GVH presumes that the real estate agency undertakings possessing nationwide territorial networks entered into an anti-competitive agreement in 2013, under which certain assignments became available and transferable for the network sellers of both real estate agencies and the concerned real estates were displayed on the homepages of both real estate agencies.

The GVH presumes that the terms of service, in particular the fees, applied in the concerned assignments as a consequence of the agreement between the two real estate agencies, may have been unified and that this may have resulted in the fees being raised. The cooperation between the undertakings may considerably increase their market shares in the long term on the seller side of the real estate market and exclude their competitors from this side of the market.

The GVH suspects that the undertakings under investigation have presumably violated, by the above-mentioned conducts, the provisions of the Hungarian Competition Act with regard to the prohibition of restrictive agreements.

The unannounced inspection of the GVH is ensured in the Hungarian Competition Act. According to the provisions of the Hungarian Competition Act the inspection requires prior judicial consent.

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-57/2014.

Budapest, 4 July 2014

Hungarian Competition Authority

Further information:
Katalin GONDOLOVICS
spokeswomen
Hungarian Competition Authority
Mail: 1054 Budapest, V. ker. Alkotmány u.5.
Postal address: 1245 Budapest, 5. POB 1036
Tel: (+36-1) 472-8902
Email:
http://www.gvh.hu

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Changes to the Hungarian competition rules – proceedings become more predictable

The amendments made to Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices Act (the Hungarian Competition – Tpvt.) which will enter into force on the 1st of July will constitute several substantive and procedural modifications. The changes, which are the result of the experiences gained over the last couple of years in the law enforcement, will result in the GVH’s proceedings (Gazdasági Versenyhivatal - Hungarian Competition Authority) becoming more clear and predictable.

The more up-to-date legal background that the modifications will result in will enable the GVH to fulfil its role more effectively. The clearer legislative conditions that will exist will also allow better adaptation to the economic changes that have taken place since the last modifications were made to the Act and to current European legal practices and standards.

Merger procedures are significantly affected by the amendments. Due to the procedural changes made to merger control, the administration deadline for simpler (first phase) merger cases has been reduced from 45 to 30 days. Furthermore, another significant change is that a merger cannot be realised until the approval of the GVH has been attained. In the GVH’s opinion, these alterations will result in a reduction in the administrative burdens faced by market players without substantially increasing the risk that restrictive mergers would be approved, and they will also provide the GVH with effective tools against undertakings that disobey merger legislation.

Rules regarding access to files and data management have also undergone significant changes in order to enable the GVH to conduct its investigations even more effectively, while continuing to comply with data management and data protection standards.

The changes concerning cartel and abuse of dominance cases involve corrections to the rules of the so-called leniency policy. This policy allows the Authority to reduce or waive fines for those undertakings that voluntarily cooperate in discovering cartels or providing evidence of them.

To strengthen transparency in the area of consumer protection the provisions of the Act on Business Advertising Activity regarding the prohibition of misleading and unlawfully comparative advertising have been incorporated into the Competition Act.

The modifications also aim to highlight the fact that the development of competition advocacy and competition culture is a key task. These two areas are of high priority in the GVH’s work as by shaping the legal environment to be competition-friendly, increasing the recognition and compliance of competition law through improved consumer awareness, the GVH can effectively contribute to improving the intensity of competition and thus to economic growth, employment and living standards, and overall, to social welfare.

Budapest, 30 June 2014

Hungarian Competition Authority

Further information:
Katalin GONDOLOVICS
Spokeswoman
Mail: 1054 Budapest, V. ker. Alkotmány u. 5.
Postaddress: 1245 Budapest, 5. POB 1036
Tel: (+36-1) 472-8902
Email:

http://www.gvh.hu

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Restrictive agreements on the market of contact lenses

The Hungarian Competition Authority (Gazdasági Versenyhivatal - GVH) decided that CooperVision Optikai Cikkeket Forgalmazó Kft., FOTEX-OFOTÉRT Optikai és Fotócikk Kereskedelmi Kft., Johnson Johnson Egészségügyi és Babaápolási Termékeket Gyártó és Forgalmazó Kft. and Novartis Hungária Egészségügyi Kft., had committed an infringement when – using the framework of market research – they exchanged information about their individual sales volumes and income that was not disclosed beyond the parties to the case. The GVH imposed a total fine of 100 million HUF (approx. 300 thousand EUR) on the involved undertakings.

In its proceeding, the GVH investigated whether the market leader undertakings of the distribution of contact lenses and accessories were operating a restrictive, information exchange system via market research services when they shared business information between each other including data about their recent income and quantities of their products sold in Hungary.

During the investigation the GVH’s purpose was to determine if the undertakings’ conduct was capable of restricting or distorting competition, considering the specifics of the market of contact lenses and accessories in Hungary and the specific characteristics of the information exchange. The GVH found that the undertakings, by exchanging detailed, company- and product segment-specific information – which could not be obtained from public sources – regarding their recent income and quantities sold, were operating an information system that was capable of restricting competition.

For this infringement the GVH fined CooperVision Optikai Cikkeket Forgalmazó Kft. 15 400 000 HUF (approx. 51 thousand EUR), FOTEX-OFOTÉRT Optikai és Fotócikk Kereskedelmi Kft. 48 900 000 HUF (approx. 166 thousand EUR) and Novartis Hungária Egészségügyi Kft. 34 500 000 HUF (approx. 115 thousand EUR).

Applying the leniency policy the GVH waived the fine for Johnson Johnson Egészségügyi és Babaápolási Termékeket Gyártó és Forgalmazó Kft.

The GVH terminated its proceeding against “Kleffmann Partner” Piackutató, Szolgáltató Kft. (market researcher company), because it could not be determined that the undertaking had committed a competition law infringement.

Case number: Vj-96/2010.

Budapest, 23 June 2014

Hungarian Competition Authority

Further information:
Katalin GONDOLOVICS
Spokeswoman
Mail: 1054 Budapest, V. ker. Alkotmány u. 5.
Postaddress: 1245 Budapest, 5. POB 1036
Tel: (+36-1) 472-8902
Email:
http://www.gvh.hu

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GVH has accepted commitments offered by the MOL

The Gazdasági Versenyhivatal (GVH, the Hungarian Competition Authority) has accepted commitments offered by MOL Magyar Olaj-és Gázipari Nyrt (MOL – the Hungarian Oil Company). According to the commitments, in the next 5 years the changes made to the gas oil wholesale listed prices of MOL, which are counted on an annual average basis, will be tighter (within a range of +/-1%) and will reflect the changes made to the Platts’s references prices. The commitments have been accepted by the GVH in the hope that they will result in the creation of a calculable pricing policy, and that they will facilitate the entry of potential competitors into the market of crude oil. Following the stock prices more accurately by MOL, as a result of the commitments, is one of the preconditions of fostering import competition which may result in more favourable MOL prices for consumers.

During its investigation initiated against MOL, the Hungarian Competition Authority scrutinised the market behaviour of MOL under EU and Hungarian legal provisions on the prohibition of abuse of dominant position

During its proceeding, the GVH established that the vast majority of storage facilities available for commercial use and the only refinery are controlled by MOL. Taking into account that MOL is a market player with a market share of 80%, the GVH is of the opinion that it has a dominant position in the wholesale market.

MOL determines its wholesale list prices based on the import parity scheme. The reference prices are the prices published by Platts and additional cost elements are added to them which would arise if an undertaking was to import the fuel to Hungary. The calculated list price is the result of this calculation method applied by the MOL. The weekly announced wholesale list prices could have been higher or lower than the calculated list prices during the five years period of investigation.

Entry into the Hungarian import fuel market is highly dependent on predictability. According to the statements of the GVH, it is essential for potential importers that MOL announced list prices, which were unilaterally established and followed by competitors, in a predictable way. This requires that the relation between the list prices announced by MOL and the international reference list prices should be predictable. This is due to that fact that competing wholesalers / importers also have to adapt to the needs of their customers, who have to follow the announced list prices of MOL as reference prices in their yearly contracts. It is important to emphasise that MOL’s market share is extremely high on the Hungarian fuel wholesale market.

The profitability of the domestic sale of fuel purchased on alternative import fuel base prices therefore depends on how the calculated and announced list prices of MOL develop compared to the Platts prices throughout the duration of the contract. In order to find out whether MOL follows the changes made to the Platts prices, the GVH examined the calculated and weekly communicated list prices of MOL. It can be concluded in that regard that the impacts of significant changes arising from market conditions of fuel prices (i.e. sudden changes in Platts prices and/or currency exchange rates) are built in the price gradually by MOL, thereby trying to mitigate the effects of the changes in the market conditions. The GVH also looked at whether in terms of potential importers the impact of the price mitigating mechanism will be equalised by the commitment in such a way in the foreseeable future that it will show close correlations with the Platts prices.

On the basis of the expert opinion given during the investigation, the GVH found that there were years in which the weekly published list prices of diesel fuel persistently exceeded or stayed below the calculated list prices based on the Platts reference prices which were serving as international reference prices. According to the GVH, it may be the pricing scheme of MOL that is contributing to the uncertainty when calculating the pay back prospects of the imports. The unpredictable deviations from internally accepted and used reference prices like Platts could be one of those factors which makes imports to Hungary more difficult.

Diverting the weekly announced list prices from the calculated list prices based on previous weeks’ Platts prices does not in itself raise any concerns. The lack of justification arises from the price methodology scheme applied by MOL during a specific time period. Namely, it originates from the fact that the deviations in the case of gas oil could not be justified on the basis of criteria providing an objective basis for the deviations. The proceeding Competition Council, consequently, concluded that it was not necessary that the announced and calculated list prices are entirely equal.

It is sufficient if the degree of the deviations remains relatively small, thus enabling other participants of the market to eliminate the uncertainty originating from deviations from the Platts prices. This way it will make no difference for importers if they set their prices according to Platts prices or MOL announced list prices. Thus the risk of using imported gas oil and investing in import could decrease and, consequently, gas oil coming from the (non MOL-related) oil refineries of neighbouring countries might strengthen competition for MOL. The proceeding Competition Council found MOL’s +/-1% range list price deviation commitment to be sufficient to realise the above mentioned positive effects of competition, considering that the deviations in fuel prices remained between these limits as well.

The proceeding Competition Council also considered it significant that the commitments were developed through negotiations as this will likely result in better coherence between the public policy goals (following more accurately the Platts prices, and dimming the price fluctuations) than if the Council had excluded MOL from the negotiations. The process was protracted for many reasons. On the one hand, in addition to the behaviours that the GVH originally planned to investigate, other market conducts were also scrutinised and this resulted in a large number of time consuming requests for information. Besides this, MOL only made its list pricing practices clear to the GVH after one and a half years and this took the proceeding in an entirely new direction – the acceptance of the commitments – of the investigation The GVH imposed a procedural fine of 150 million HUF (500 thousand EUR) on the undertaking.

In addition to the above mentioned reasons, the obligatory consultation between the GVH and the Commission took longer than usual, taking into account the complexity of the case. Now that the competition supervision proceeding has been concluded, the Authority is in control of ensuring that the undertaking complies with the prescribed commitments. This will be achieved through a post-investigation.

Case number: Vj-50/2010.

Budapest, 11 June 2014

 

Hungarian Competition Authority

Further information:
Katalin GONDOLOVICS
Spokeswoman
Mail: 1054 Budapest, V. ker. Alkotmány u. 5.
Postal address: 1245 Budapest, 5. POB 1036
Tel: (+36-1) 472-8902
Email:
www.gvh.hu

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