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Current issues of competition law – joint conference of the GVH and the Hungarian Competition Law Association

Over the last 25 years competition law has evolved and become a complex field of law in Hungary. From time to time, the application of, and compliance with, competition law raise a number of questions. In the First Hungarian Competition Law Forum, the most prominent experts in this field shared their views on the recent issues arising in the area of competition law.

At the first of what was intended to mark the beginning of a new tradition of such conferences, Miklós Juhász, the President of the Hungarian Competition Authority (Gazdasági Versenyhivatal – GVH) highlighted in his opening speech that the GVH is as interested as the market participants themselves in creating an environment where law-abiding behaviour ensures fair competition; furthermore he emphasised that this endeavour would be supported by the competition authority in accordance with the law. He stated that in order to achieve the above-mentioned goals and to create a more client-friendly operation at the GVH, the latter has initiated competition law amendments, continuously supervised its notices and guidance and facilitated a wider dissemination and greater understanding of competition law rules among both the business community and the general public.

In his speech, Zoltán Hegymegi-Barakonyi, the President of the Hungarian Competition Law Association emphasised the importance of the development of a culture of competition: he considers the further improvement of the compliance of small and medium-sized enterprises as the most difficult challenge. Through the introduction of international practice, he presented that compliance programmes which are more simple but similar to the ones of bigger competitors are needed for assuring the compliance of small-sized undertakings with few resources.

The introductory presentation of the conference by Pál Csiszár, director of the Directorate-General of the European Commission dealt with the current practice relating to merger control on oligopolistic markets.

Further topics of the conference concerned the significant recent developments. The guest of honour of the Competition Law Forum was the Emeritus Professor Richard Whish, an esteemed legal academic at King’s College London. Along with a member of the Competition Council and other prominent lawyers, he took part in the panel tasked with discussing exchange of information cases. The same panel discussed the liability questions arising in regards to the undertakings participating in a cartel. Through the use of practical examples, the panel members presented the types of information and data, which although prohibited by competition law, tend to be exchanged in merger takeovers and in horizontal and vertical agreements. They also touched upon liability issues in relation to cartel members acting as contributors or helpers in cases involving fundamental rights, taking into account the decisions of the Hungarian (concrete cartel, pharma cartel) and other EU Member States’ competition law authorities.

With the participation of András György Kovács, the President of the chamber of the Curia and András Tóth, the head of the Competition Council the following panel discussed the recent developments relating to the judicial review of administrative decisions. Krisztina Rozsnyai, the Ministerial Commissioner of the Ministry of Justice offered an insight into the background of the amendments of the Act on Administrative Procedures (Ket).

The afternoon panel discussed recent developments in the area of private enforcement from the perspectives of the legislative, the administrative and the judicial branches, the perspective of legal representatives, and the transposition of the Directive on Antitrust Damages Actions into Hungarian law. The conference concluded with the corporate community, the Hungarian Competition Authority and the Hungarian Competition Law Association sharing their perspectives.

During the conference’s breaks participants were able to view the exhibition of the legal history research that was commissioned by the GVH on Act XX of 1931, which contained the early competition law rules and institutional design.

The presentations of the First Hungarian Competition law Forum are available on the website of the GVH.

Budapest, 14 June 2016

Hungarian Competition Authority

Further information:
Andrea BASA
Spokesperson
Alkotmány u. 5., H-1054 Budapest,
Tel: +36 1 4728902
Mobile: +36 30 6186618
Email: basa.andrea@gvh.hu , press@gvh.hu
http://www.gvh.hu

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The GVH continues to monitor the hotel booking market after closing its sectoral inquiry

The Hungarian Competition Authority (Gazdasági Versenyhivatal, GVH) prepared its report on its sectoral inquiry on the online accommodation booking market. Due to the positive changes that took place on the market during the sectoral inquiry, the GVH does not foresee intervention this year. However, as a member of the Monitoring Working Group in the framework of the European Competition Network it continues to monitor market developments.

In the summer of 2013 the GVH launched a sectoral inquiry into the hotel online booking market due to the identification of phenomena in the contracting practices of the online intermediaries which indicated that the competition between online travel agencies (OTAs)/online booking portals offering the same hotel rooms was restricted.

The sectoral inquiry focused on the so-called ‘price parity clause’ which could be found in the agreements of both international and large domestic OTAs. Pursuant to such a clause a hotel binds itself not to offer its rooms for prices that are lower than those given to the website of the OTA on other distribution channels.

According to the online intermediaries the use of parity clauses served the protection of their investments. Considering that a significant part of the services provided in the course of the hotel intermediary activity (search, comparison, views of pictures and ratings) is free of charge and available also prior to the booking, the investments of the intermediaries in the supporting IT systems might easily be abused (free-riding).

Pursuant to the conclusions of the sectoral inquiry, the benefit of the price parity was seen in the form of a reduction of the searching costs (searching time) of consumers. In contrast, price parity had a negative effect on hotels, as they would only be able to make larger profits if they could apply favourable prices on their own distribution channels and on platforms applying lower commission rates.

In order to better understand the consumer side of the market the GVH also commissioned market research. The aim of the research was to gain insight into the preferences of consumers in Hungary in relation to travelling, specifically concerning the gravity and role of intermediary portals and consumers’ behaviour when using hotel booking portals.

The GVH found that through the appearance of OTAs, the market had become more transparent as several accommodation offers could be compared even on the website of just a single OTA. This transparency led to an increase in price competition among hotels and in capacity utilisation of the hotels; however, there was no substantive price competition among the OTAs on the market and the prices of accommodations were roughly the same in all sales channels in the first half of the period affected by the sectoral inquiry.

The position of the GVH is in line with the conclusions of international procedures on the topic, according to which the wide parity clauses (i.e. comprising all sales channels) may restrict competition by standardising market prices and increasing barriers to entry. It may give raise to particular competition concerns with regard to the market concentration in Hungary. The application of wide parity clauses does not result in efficiency benefits to such a nature and to the extent and does not enhance consumer welfare to a degree that could justify the total restriction of competition among the single sales channels.

In 2015 the larger international OTAs (Booking.com, Expedia) narrowed the applicability of the price parity clause on the Hungarian market, too. As a consequence, OTAs will only stipulate in the future that the hotels shall not offer less favourable conditions to intermediaries than what they publish on their own websites. Furthermore, the parity clause will not apply to other intermediaries and to other booking channels (telephone, fax, e-mail, etc.), which means that hotels will be able to provide discounts.

In the opinion of the GVH, also taking into consideration the danger of the free-rider phenomenon, the use of a narrow parity clause may be the correct solution to the current market issues. A narrow parity clause may pave the way for accommodation providers (hotels) to be able to freely apply different price policies via certain sales channels. On the other hand, OTAs may announce special promotional periods at the expense of their commission rates and may also compete on prices.

After the draft report of the sectoral inquiry was released, the largest Hungarian-owned market player of the Hungarian online booking market, Szallas.hu, indicated to the GVH that it plans to switch to the application of a narrow parity clause, thus following the international market players. Consequently, in practice all larger market players will apply narrow parity clauses, which will hopefully also influence the conduct of players with smaller market shares. In light of these changes, the GVH does not foresee intervention in the market processes this year; however, it does not rule out intervening if market developments do not show a strengthening of competition.

The GVH – as a member of the Monitoring Working Group established in the framework of the European Competition Network (ECN) aimed at observing the changes on the online intermediaries market and the effect of the introduction of narrow parity clauses –will also monitor any further market developments in this respect subsequent to the termination of the sectoral inquiry.

The full report on the sectoral inquiry and further information are available on the website of the GVH.

Budapest, 8 June 2016

 

Hungarian Competition Authority

Further information:
Andrea BASA
Spokesperson
Alkotmány u. 5., H-1054 Budapest,
Tel: +36 1 4728902
Mobile: +36 30 6186618
Email: basa.andrea@gvh.hu , press@gvh.hu
http://www.gvh.hu

 

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Fine imposed by the GVH concerning public procurements

According to the decision of the GVH, Finella Investment Kft. (the successor of HTD Szaknévsor Kiadó Kft.), JRM Produkció Kft., LIGA TV Kft. (LIGA TV), “PUPU Produkció” Filmgyártó Kft., and Nosztalgia-Design Kft. concerted their practices with the object of restricting competition in two public procurements launched by Médiaszolgáltatás-támogató és Vagyonkezelő Alap (Media Service Support and Asset Management Fund – MTVA). The GVH imposed a total fine of HUF 81,970,500 (approx. EUR 262,000) on the undertakings for the infringement.

On 2 November 2013, MTVA issued a call for tenders and subsequently conducted two open public procurement procedures under EU procedural rules, one concerning a ‘Framework Agreement on the rental of a HD television mobile broadcasting unit for the Media Service Support and Asset Management Fund for a period of 24 months with the occasional provision of human resources’ and one relating to a ‘Framework Agreement on the rental of a SD television mobile broadcasting unit for the Media Service Support and Asset Management Fund for a period of 24 months with the occasional provision of human resources’. The subject matter of the tenders concerned the rental of mobile broadcasting vehicles applying SD and HD technology. These broadcasting vehicles are used for local broadcasting in sport, cultural (concerts, theatre plays) and other events.

As regards to MTVA’s 2013 framework agreements, it was established by the GVH that LIGA TV had initiated the coordination that took place in relation to the bids submitted by the above-mentioned undertakings with respect to their form and content. The undertakings concerted their practices (i.e., decided to take part in the tender, drafted, submitted their bids and later completed any missing elements of the bid) in favour of LIGA TV, which would have been a subcontractor of all the other participants of the tenders of MTVA. The undertakings aimed to exclude competitors from the second round of the tenders, in which only the first four placed undertakings from the first round of each of the tenders would be able to participate. They intended to win the first four places in the first round. As a result, LIGA TV could have won contracts to execute the tasks defined by the framework agreements.

During the unannounced inspections at the premises of the undertakings, the GVH seized many pieces of evidence supporting the finding of an infringement, which included, among other things, the notes of the executive director of LIGA TV as a primary piece of evidence of the restrictive practice.

When establishing the basic amount of the fine, the GVH took into account three times the value of the tenders as the amount of the relevant turnover, and then it assessed the aggravating and mitigating circumstances.

When defining the amount of the fine, the GVH took into account – among other things, – the following factors:

  • coordination on the prices of bids in public procurement procedures amounts to one of the most severe competition law infringements with respect to not only the interests of the contracting authority but also society’s interests which are supposed to be realised by the public procurement;

  • the framework agreements were not implemented in the end and consequently did not have an actual effect on the market.

The GVH considered that LIGA TV played an active role as an instigator and organiser when conducting and coordinating infringing behaviours.

According to the decision of the GVH, it amounts to a severe restriction of competition, if in the first (qualification) round of a two-round public procurement procedure, a market participant undertakes to operate as a subcontractor to an extent of no more than 25% for tenderer undertakings which were previously not part of the market, but which could be personally linked by their directors to the subcontractor, and by this behaviour the subcontractor aims to exclude other market participants from the second (reopened tendering) round.

The GVH terminated the competition supervision proceeding against TVP Televíziós és videó műsorokat gyártó Kft.

Case number: Vj/11/2014.

Budapest, 9 May 2016

Hungarian Competition Authority

Further information:
Andrea BASA
Spokesperson
Alkotmány u. 5., H-1054 Budapest,
Tel: +36 1 4728902
Mobile: +36 30 6186618
Email: basa.andrea@gvh.hu , press@gvh.hu
http://www.gvh.hu

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The GVH has initiated a proceeding for a suspected cartel

On 11 April 2016 the Hungarian Competition Authority (Gazdasági Versenyhivatal – GVH)  initiated a competition supervision proceeding against several undertakings (Siemens Healthcare Kft., GE Hungary Ipari és Kereskedelmi Kft., PHILIPS Magyarország Kft., Variotrade Kft., HOGE Orvosi Műszer Kft., Premier G. Med Kft., Med&Trade Co. Bt., INNOMED MEDICAL Orvostechnikai Fejlesztő és Gyártó Zrt., Getronics Magyarország Informatikai és Kommunikációs Megoldások és Szolgáltatások Kft., PASCAL TEAM Kereskedelmi és Mérnöki Szolgáltató Kft., Silver Wood - IT Kereskedelmi és Szolgáltató Kft., MEDIMAT Kereskedelmi és Szolgáltató Kft., MEDI-CONT Kereskedelmi és Szolgáltató Kft., VMD Kórház Technológiai Zrt., Novelmedix Zrt., Artmed Kft., Euromedic Technology Kft., EUROMEDIC DENT Kft., Medirex Zrt., Mediszer Kórháztechnika és Kereskedelmi Kft. and Chemium Kereskedelmi, Szolgáltató és Gyártó Kft.). At the same time the GVH held unannounced raids at the premises of the undertakings.

The GVH noticed that since 2015, the undertakings under investigation have been presumably negotiating and sharing information with each other about the tender of identification number KEOP-5.6.0/E/15-2015 for “Supporting the procurement of health equipment aimed at saving energy” which was issued for the public procurement of diagnostic imaging equipment. The communications that took place between the undertakings were aimed at co-ordinating the undertakings’ conduct as tenderers in the public procurement, in particular in relation to deciding on the winning undertakings and the submitted prices on the tender.

By their conduct the undertakings 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 on the premises of undertakings. 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 an 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/19/2016.

Budapest, 12 April 2016

Hungarian Competition Authority

Further information:
Dr. Andrea BASA
Spokesperson
Mail: H-1054 Budapest, Alkotmány u. 5.
Tel: (+36-1) 472-8902
Email: basa.andrea@gvh.hu, press@gvh.hu
http://www.gvh.hu

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Hungarian success in the ICN-WBG Competition Advocacy contest

On 9 March 2016, the International Competition Network and the World Bank Group announced the winners and honorable mentions of their 2015-2016 Competition Advocacy Contest.  The Hungarian Competition Authority (GVH) was awarded an ‘Honorable Mention’ for its anonymous contact system, the Cartel Chat, which it introduced last year.

The contest, which aims to increase the role of competition authorities in the development of competition culture, was also organized last year by the World Bank Group and ICN. There were 43 entries in the contest spread over four themes.

The GVH won the honorable award in the category of “Catalyzing competition reforms through citizen and civil society engagement”.

The GVH attaches great importance to the fight against cartels as cartels have an extremely harmful impact on the development of the whole economy. What is deemed to be successful action as regards to the detection of cartels is “breaking the silence”, and detecting and obtaining decisive evidence. Competition authorities can obtain information on the most effective way of achieving the above from stakeholders themselves – one of the potential tools employed by the GVH for this goal is the leniency policy.

At the end of last year, the GVH launched a communication campaign to popularise the leniency policy with the following slogan “It cannot be kept secret”. As part of this campaign, the GVH introduced the new contact system for replying to questions about cartels.

Cartel Chat is a closed and protected system that assures persons (individuals and undertakings) who have information about secret cartels by a simple, anonymous registration that

1. they can share their special knowledge with the employees of the Cartel Detection Section of the GVH, in full anonymity and without fear of negative consequences or retaliation;

2. they can share information they have become aware of with the GVH even if the so called compliance programme in operation at the undertaking does not work or does not work properly;

3. they can ask any questions they want about cartels, the leniency policy and the procedure of the policy and about the informant reward;

4. in every case, they will receive answers from the same employee of the GVH who they have previously dealt with in the event that they have further questions.

More information about the contact system is available here (only in Hungarian).

The aims of the integrated communication campaign were to raise awareness, to incite activity and to forward basic information. In order to achieve the latter, the GVH has created its own microsite on http://kartell.gvh.hu/ (only in Hungarian).

Besides the activities of competition supervision and competition advocacy, the GVH is also responsible for the development of competition culture, in the framework of which it is responsible for disseminating general information on competition policy and promoting undertakings’ compliance with competition law. To fulfil this role, the GVH initiates communication campaigns aimed at inciting compliance with competition law and increasing the awareness of consumers.

Further information regarding the Advocacy Contest of the World Bank Group and ICN and its winners is available here.

Budapest, 10 March 2016

 Hungarian Competition Authority

Further information:
Dr. Andrea BASA
Spokesperson
Mail: H-1054 Budapest, Alkotmány u. 5.
Tel: (+36-1) 472-8902
Email: basa.andrea@gvh.hu , press@gvh.hu
http://www.gvh.hu

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