The GVH intervened in the structure of the Hungarian beer market

The Hungarian Competition Authority (Gazdasági Versenyhivatal – GVH) accepted the commitments offered by Heineken Hungária Sörgyárak Zrt. (Heineken), Dreher Sörgyárak Zrt. (Dreher) and Borsodi Sörgyár Kft. (Borsodi), as a result of which the three largest Hungarian beer companies will decrease their respective beer sales tied by exclusive contracts. Having regard to this, the GVH did not establish that an infringement would have been committed and did not impose any fines in the case.

The GVH found that through exclusive contracts Heineken, Borsodi, Dreher and Pécsi Sörfőzde Zrt. (Pécsi Sörfőzde) taken together took up 43.5-44.3% of the sales of beer consumed on premises in Hungary. Moreover, (along with Carlsberg) the five largest market players accounted for 82-95% of the total sales made in the so called HoReCa (Hotels, Restaurants and Catering/Cafes) market in the period investigated. As a consequence of the exclusivity clauses, neither imports nor small breweries were able to gain market shares vis-á-vis the large beer companies.

On the basis of the commitments offered by the undertakings the GVH has imposed an obligation on Heineken, Borsodi and Dreher to decrease the amount of beer sold to single outlets under exclusivity terms (i.e. hindering the products of other breweries) in two steps by almost 20% in total by the end of 2017.

As a result of the decreases pursuant to the commitments, the market shares foreclosed from competition will decrease by about 4% in the case of Heineken and about 5% each in the case of Borsodi and Dreher by the end of 2017. This means that the market share foreclosed through the simultaneous ties will fall from 43-44% to about 30% in total, thereby increasing the chances that alternative beer companies (including small breweries) will enter the Hungarian market. Due to its small market share Pécsi Sörfőzde did not contribute to an appreciable extent to the cumulative effects of parallel networks; therefore based on the provisions on minor importance the GVH terminated the proceeding against Pécsi Sörfőzde.

When assessing a commitment application the main goal of the GVH is to ensure the efficient protection of the public interest. Commitments enable a more efficient elimination of a behaviour that is contrary to the provisions of the Competition Act, and the decision made on a commitment application also serves as a guideline for other market operators. When making a decision about a commitment the GVH assesses all of the factors both for and against its acceptance, while taking into consideration the characteristics of the relevant market.

After analysing the contents of the commitment application, the GVH established that

  • by accepting the commitments the cumulative market foreclosure effect having triggered the competition concerns will cease and the smaller market players will have greater chances to put competitive pressure on the larger beer companies;

  • the risk of repetition of the perceived competition problem will likely decrease;

  • having regard to the mechanism for certification of their fulfilment the commitments meet the requirement of verifiability.

Case number: Vj/49/2011

Budapest, 30 July 2015

 

Hungarian Competition Authority

 

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

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GVH’s experiences regarding timeshare agreements

The definition and characteristics of timeshare agreements have become well known by consumers; however, the misleading information communicated by resale timeshare undertakings has resulted in a number of problems. Both the Hungarian Competition Authority (GVH) and its legally mandated cooperating Competition Counsel Offices, which operate out of Debrecen, Eger, Szeged, Pécs and Győr, became aware of these aforementioned problems through market notices.

In a number of competition supervision proceedings the GVH investigated the misleading information communicated by several resale timeshare undertakings aimed at popularising the resale of timeshares. The GVH established infringements in all of the cases and imposed fines on the involved undertakings.

In the investigated cases, the firms often sold timeshares in product presentations for consumers who already possessed timeshare agreements. In these cases the offers related to the resale of timeshares were aimed at consumers who were not able to take advantage of the services of the timeshares due to their age or health, and resulted in a bigger burden being placed on the consumers as a result of the increased annual maintenance fee that they were required to pay.

According to the GVH’s decisions in the cases, the phone calls made to consumers inviting them to attend programmes and the information communicated at events were misrepresentative on a number of points. The representatives of undertakings

  • regularly placed consumers in situations where they had to make immediate decisions because favourable offers were only made available in the programmes;
  • falsely promised to resell the timeshares already possessed by consumers in order to induce them to buy new timeshares and also provided them with false information about the prices and the offsetting of the previous timeshare in the new contract as a reduction in price.

The old timeshares were rarely sold. It was generally the case that consumers ended up bearing the cost of two timeshares.

The GVH currently has several ongoing proceedings in similar cases. The GVH would like to highlight the importance of consumer awareness in order to avoid consumers falling victim to such misrepresentations. With this in mind, it suggests that consumers

  • calmly consider the real intentions of undertakings advertising programmes promising favourable offers (e.g. wellness-weekend with a reduced price, sale of an already possessed timeshare);

  • consider the long term consequences of entering into an obligation, the costs associated with taking out a loan or other service for a second timeshare of 20-30 years, and the accommodation offers related to the purchase of a timeshare;

  • meticulously read the contract that needs to be signed and the relevant documentation before signing the contract, and that the reading is undertaken in calm circumstances, such as at home in order to enable the details to be talked through;

  • note that they are not obliged to accept an offer if they do not wish to do so and are free to leave the product presentation event without suffering any consequences

  • exercise their right to withdraw from the contract within 14 days if they change their mind.

Given the above, the GVH would like to draw consumers’ attention to the risks associated with the sale of timeshares. Further details about these risks are available on the website of the GVH.

Budapest, 23 July 2015

Hungarian Competition Authority

 

Further information:
Dr. 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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Tettye Zrt. abused its dominant position

According to the decision of the Hungarian Competition Authority (GVH), Tettye Forrásház Zrt. (Tettye Zrt.) abused its dominant position by setting, from May 2011, excessive prices for its consumers for the proficiency test of subsidiary water-meters (also including the provision of safety lock) and the call-out. The GVH imposed a fine of HUF 1.3 million for the infringement and prohibited the continuation of the unlawful conduct.

The GVH established as a fact that Tettye Zrt. has a monopolistic position in its service territory (with almost 170000 potential consumers in Pécs and in the surrounding area) having regard to the public utility nature of water-supply, the service and the regulation of the proficiency test of  the  related subsidiary water-meters.

On the basis of economic analysis methods the GVH considered that Tettye Zrt.’s

  • fee for the provision of the service is significantly higher than the reasonable costs incurred and the level of fair profit;

  • certain costs included in its computation of its costs are excessively high compared to the costs of other examined undertakings, moreover its fee also involves costs which are charged related to other services and which undertakings providing similar services do not charge. In this respect, Tettye Zrt. did not prove that these costs were needed for the provision of the service;

  • fee is much higher than the base of comparison defined by the benchmark method and the fees of other examined undertakings.

As a result the GVH found that Tettye Zrt. had set discriminative, unfair and excessive prices on its consumers.

When imposing the fine, the GVH took as a starting point the turnover of Tettye Zrt. during the period May 2011 to March 2015, and when determining the amount of the fine it took into consideration, inter alia, that:

  • the behaviour of Tettye Zrt. had a direct impact on the local market due to its 100% market share;

  • during the competition supervision proceeding Tettye Zrt. had further increased the expenses being imposed on consumers despite being aware of the preliminary position  of the Competition Council and the former decisions of the GVH in similar cases.

In 2013, the year of the commencement of this case the GVH gave priority to the fostering of the functioning of local markets and it therefore initiated more competition supervision proceedings in cases where regulation leaves a large amount of scope for the conduction of competition law actions.

Case number: Vj/42/2013

Budapest, 13 July 2015

Hungarian Competition Authority

Further information:
Dr. 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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A quarter of a century supporting fair competition in the interest of consumers – the GVH is 25 years old

This year the Gazdasági Versenyhivatal (GVH – the Hungarian Competition Authority) celebrates the 25th anniversary of its establishment and the passing of the first Competition Act. The GVH will mark this momentous occasion with several publications, a renewed homepage, a jubilee image and a number of competition events.

The Competition Act passed in 1990 established the GVH as an independent state administrative authority and the GVH started its operation on 1 January 1991, with the entry into force of the act. The mission of the GVH has remained unchanged for the last 25 years; its operation is based on three pillars: on competition supervision, on competition advocacy and on the development of competition culture and consumer culture in Hungary, thereby promoting an increase in consumer welfare.

Since the establishment of the GVH, competition supervision proceedings have constituted the most defining part of its work. In the last 25 years the GVH has brought more than 3500 decisions closing cases, on average in around 40% of which infringements have been found, and it has imposed fines of about 70 billion HUF (cca 221.5 million EUR).

For years the GVH has had as its main priority the fight against cartels, considering that cartels have a harmful effect on the development of the whole economy, cause severe and direct harm to consumers and also result in a general decline in efficiency. The amendments that have been made to the Competition Act – following changes in the international regulatory environment and in the European Union – have resulted in new tools for more efficient detection, such as the leniency policy, unannounced inspections and the informant reward, thereby facilitating the discovery of cartels. By 2014, the GVH had brought a final decision in the case of almost 300 restrictive agreements, in about half of which it had also established an infringement and imposed sanctions in the form of fines amounting to more than 54 billion HUF (170.1 million EUR).

Maintaining competition is an important public interest together with ensuring that also the consumers themselves perceive the welfare effects of competition. Therefore, the GVH pays particular attention to consumer protection, since this activity and the regular tasks of a competition authority amplify each other’s effects. Since 2008, in line with the directives of the European Union, new provisions have been enacted which protect consumers from those undertakings employing unfair commercial practices. The protection of vulnerable consumers who, due to their health, age or financial difficulties, are more easily influenced by advertisements and offers is a top priority of the GVH.

In 2013 the merger procedures were also modernised and became clearer. In the last few years the Global Merger Control Index of the renowned international institution, the Center for European Law and Economics Global Merger Control, has placed Hungary among the leaders of the member states of the Union regarding the effectiveness of merger procedures.

The GVH quantified the social benefits of its activities for the first time in 2013. Calculated on the basis of the economic methodology used by the leading competition authorities, consumers saved at least 58 billion HUF (cca 183.5 million EUR) through the competition supervision proceedings of the GVH relating to restrictive agreements, abuses of dominant position and mergers in the period between 2008 and 2012, and concerning the period between 2009 and 2014 the GVH estimates its social benefits – based on a methodology that was improved in 2014 – to be of about 97 billion HUF (cca 307 million EUR). The calculation is based on the price constraining effect of competition: the intervention of the GVH in thwarting anticompetitive conducts and mergers saves consumers the additional expenditure that they would otherwise face in the absence of such intervention. 

The GVH is responsible for the development of competition culture and is therefore charged with ensuring the dissemination of competition knowledge and appropriate information in order to facilitate compliance with the law. The GVH established the Regional Centre for Competition in Budapest (RCC) in association with the OECD, the aim of which is to support competition culture in the countries of Central, Eastern, and South East Europe and Central Asia. The GVH has achieved significant international recognition due to its educational activity through the operation of the RCC.

The GVH remains committed to supporting the law abiding behaviour of market operators and to this end it works non-stop to ensure that the administration and application of the law is carried out in a citizen friendly, transparent and predictable manner. With its explanatory notes, guidelines and notices, the GVH provides guidance to market operators and helps them to increase their competition law related case law knowledge. The GVH, as it places great emphasis on the issue of leniency, has recently launched a leniency programme, and with its thematic websites (e.g. http://megfeleles.hu/; http://www.nedoljonbe.hu/; http://versenyugyi-tanacsadoiroda.hu/) and several ads it is also attempting to raise the awareness of consumers and undertakings in relation to a number of significant competition law problems through the provision of detailed, specific information.

The openness of the GVH can be seen by the fact that a number of the notices on its activities have been discussed in a public consultations with concerned market operators, professional associations and trade unions..

In 2014, The GVH elaborated its institutional strategy and vision for the future for the following four years, focusing on the baselines of its operation, such as timeliness, predictability, customer-orientation – giving increasingly the image of a cooperative office which reacts in a timely and professionally manner to market processes.

The competition advocacy activities of the GVH played a key role in modernising and developing the Hungarian competition rules. The development and maintenance of effective competition require pro-competitive regulations, thus the GVH by all means available seeks to influence state decisions in the interest of competition.

While over the past 25 years the GVH has undergone significant changes and development, its main role as the guardian of fairness and freedom of competition has remained unchanged, as maintaining and promoting competition is an important public interest which brings social benefits and contributes to the improvement of consumer welfare.

On the occasion of the anniversary the image of the GVH’s homepage (http://www.gvh.hu/) has been renewed and will regularly be updated with news regarding the jubilee events.

Budapest, 9 July 2015

 

 

Gazdasági Versenyhivatal – the 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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A procedural fine of 5 million HUF imposed on Crédit Agricole Corporate and Investment Bank SA

The Competition Council of the Gazdasági Versenyhivatal (GVH – the Hungarian Competition Authority) imposed a procedural fine of 5 million HUF (approx. 16,500 EUR) on Crédit Agricole Corporate and Investment Bank SA, because the undertaking refused to provide the data that was necessary for the GVH to be able to determine the amount of the fine that it wished to impose due to a suspected infringement.

On 11 April 2012 the GVH initiated a proceeding in which it investigated the interbank database which was created and is maintained on the basis of an agreement between Magyar Bankszövetség (Hungarian Banking Association) and Nemzetközi Bankárképző Központ Zrt. (Institute for Training and Consulting in Banking Ltd.), and which is built on relevant and sensitive data provided by 38 participating banks.

The Competition Council of the GVH obliged Crédit Agricole Corporate and Investment Bank SA to provide data in order to enable it to establish the facts and to arrive at a legally justified maximum fine to be imposed as a result of the suspected infringement. However, the undertaking did not fully comply with this obligation. The GVH deemed that the behaviour of Crédit Agricole Corporate and Investment Bank SA did not only endanger the establishment of the facts but also aimed at prolonging the competition supervision proceeding and was ultimately successful in doing so.

The Competition Council of the GVH regarded the unlawful behaviour as severe, as the data that Crédit Agricole Corporate and Investment Bank SA failed to supply was indispensable for establishing the facts of the case, and consequently, for determining the sanction to be imposed for the suspected infringement, and this deficiency could not be remedied from any alternative source.

When imposing the fine the Competition Council of the GVH took into account the fact that Crédit Agricole Corporate and Investment Bank SA had asked the GVH for information on the interpretation of the order requesting data before it provided its data and that it did not, however, alter its false interpretation even after receiving the explicit and detailed written information of the GVH and that it did not attempt to properly fulfil its data submission obligation.

Crédit Agricole Corporate and Investment Bank SA has turned to the court to appeal the order imposing the procedural fine.

Case number: Vj/8/2012

Budapest, 25 June 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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