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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The GVH used an improved methodology to quantify the benefits of its activities

Consumers saved at least 97 billion HUF (cca 307 million Euro) in the last 6 years, thanks to the competition supervision proceedings of the GVH (Gazdasági Versenyhivatal - the Hungarian Competition Authority).

In the period between 2009-2014 the detection of agreements restricting competition, abuse of dominance and merger control resulted in consumer welfare increase that were four times higher than the total budget of the GVH (for the same period and calculated using the same method).

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 above sum is the result of a conservative estimation which assumes that without the proceedings of the GVH, the goods and services would have been “only” 5-10 per cent more expensive than otherwise and “only” for two years, as a consequence of cartels and other anticompetitive conducts and mergers leading to a significant lessening of competition.

The quantification is in line with the best practices of leading competition authorities, and relies on the OECD guide on ex-ante impact assessment and on the recommendations of the independent experts who evaluated the methodology of the previous assessment.

Due to methodological restraints the approximation does not take into account the full range of the GVH’s activities – such as the gains achieved from consumer protection proceedings, the deterrence effect of proceedings – consequently, the actual amount saved exceeds the figure shown here, and may even be several times higher. All in all, the results suggest that the taxpayers’ money devoted to the operating expenses of the GVH has paid off.

The use of this analysis for comparison may, however, be misleading due to methodological reasons. The present calculation uses – partially on the advice of independent experts – an improved methodology; therefore, its result cannot be directly compared to that of the previous analysis. Nevertheless, according to the results of both assessments the consumer benefits through the activity of the GVH are considerable, and they substantially exceed the social expense of the GVH.

The full analysis of the GVH and further information can be found on the following link (in Hungarian): http://www.gvh.hu/gvh/elemzesek/tarsadalmi_haszon (the English version is under preparation).

Budapest, 17 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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The Parliament passed an amendment of the Competition Act

The aim of the amendment of Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices (Competition Act) is to facilitate the effective and efficient enforcement of competition law through the fine-tuning of the regulations that concern the proceedings of the Gazdasági Versenyhivatal (GVH – the Hungarian Competition Authority), and to also impel small and medium sized enterprises towards law abiding behaviour.

Pursuant to the Competition Act, when a small or medium sized enterprise commits an infringement for the first time – with the exception of some certain more severe infringements – it is possible to only give a warning instead of imposing a fine. The amendment explicitly lists those serious infringements that cannot be terminated by a warning.

The amendments also aim to make actions against competition law infringements in public procurement procedures more efficient. If the minister responsible for public procurement and for the use of European Union funds notices or has reasonable grounds to suspect an infringement of the provisions regarding the prohibition of restrictive agreements contained in the Competition Act or the Treaty on the Functioning of the European Union when verifying the validity of public procurements, then he may make this known to the GVH. The minister responsible for public procurement will be entitled to forward to the GVH the data in his possession due to the verification of the concerned public procurement, contract or amendments thereto.

The aim of the amendments relating to merger control is to make the control of concentrations more efficient, transparent and predictable. The most important innovation is the regulation on the timing of an application for the authorisation of a concentration, and how the applicant has to support this application.

Certain provisions introduced by Act CXXVIII of 2012 on agricultural associations and on the regulation of certain issues concerning the agricultural markets (Act on inter-branch organisations) which related to competition proceedings have become more unequivocal and have been incorporated from the Act on inter-branch organisations into the Competition Act. It has been made clear that special rules taking into consideration the specificities of agriculture will only be applicable if the primacy of the competition rules of the European Union do not prevail.

The amendments concerning the rules on access to the file intend to foster the efficient and timely closure of the GVH’s proceedings by assuring that the rights of the parties are not violated. The Competition Act guarantees in several ways that access to secured information does not lead to the violation of the rights of the person who supplied the secured information. This way it is not necessary to obtain the consent of the person who supplied the protected information or to guarantee the right for this person to ask for a court review against a decision of the GVH allowing access to the file / secured information by other parties – all of which would lead to the postponement of the proceeding. The amendment favours those undertakings which cooperate with the GVH by allowing leniency documents, declarations and documents of the settlement to be exclusively accessed by the clients and notes but not copies to be made about these documents. Access to files may be exercised against payment of costs – as regulated by the relevant Government Decree.

Budapest, 09 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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The case of MasterCard and OTP is closed by the acceptance of commitments

The Hungarian Competition Authority (Gazdasági Versenyhivatal – GVH) accepted the commitments offered by MasterCard Europe Sprl (MasterCard) and OTP Bank Nyrt. (OTP), through the implementation of which the undertakings shall bring the stipulations of their agreement in line with the rules of the applicable competition law.

On the basis of the commitments, the GVH imposed an obligation on the parties to terminate in their agreement on incentives and support made for a five-year period, OTP’s undertaking of a card-ratio and MasterCard’s undertaking to provide subsidies which was aimed at facilitating the achievement of the card-ratio contained in the agreement. This termination is to have a retroactive effect to 1 January 2014.

The market of card payment services affected by the agreement under investigation by the GVH is connected to the card payment system which can be described as a two-sided market. In card payment systems competition occurs on several levels; on the level of the payment organisation on the one hand, and on the level of the card issuers and the acquirers on the other hand. The main goal of a payment organisation is to have as many credit cards as possible on the market bearing its logo and to have these cards accepted at as many places as possible. It is in the interests of the issuing banks that they are able to provide their customers with better products and services in the most profitable manner.

The contract of OTP and MasterCard was signed in 2012 in accordance with these goals and principles. OTP then undertook t

  • reach the turnover level determined by MasterCard each year (turnover level clause)
  • reach the card proportion within OTP’s debit card portfolio determined by MasterCard (card proportion clause).

MasterCard undertook to provide OTP with different kinds of subsidies to achieve these goals.

The GVH initiated a competition supervision proceeding in 2013 in order to investigate the above mentioned behaviour, as it found it likely that the contract between OTP and MasterCard would restrict the choice between sale options and would also impede the market entry of competitors.

In the course of the proceeding the GVH investigated both the turnover level clause and the card proportion clause, but it was only in the case of the latter that it came to the conclusion that it could be regarded as single branding, since it exceeded the 80 % foreclosure level applied in the European Commission’s practice. However, through the abolishment of the card proportion clause exceeding 80% and the subsidies, the infringement of the rules on restrictive agreements of the Competition Act and the Treaty on the Functioning of the European Union could be brought to an end.

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 the protection of the public interest could be efficiently ensured by accepting the commitments offered by MasterCard and OTP.

The GVH, among other things, regarded the following considerations as working in favour of the acceptance of the commitments:

  • the commitments immediately – and through the accounting between the parties, with a retroactive effect to 1 January 2014 – terminated the behaviour restricting competition on the market of debit cards,
  • the debit card portfolio of OTP will once again be contestable by competitors, since the termination of the card-ratio clause and the related support may initiate competition which may result in a broadening of supply and in decreasing prices for consumers,
  • the agreement contributed to the proliferation of PayPass technology,
  • the commitments meet the requirement of verifiability.

 

Case number: Vj/78/2013

 

Budapest, 8 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: ,

 

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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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