(Restrictive agreements)


OTP Bank (National Savings Bank), MOL (Hungarian Oil Co) and Matáv (Hungarian Telephone Co) asked the GVH for a negative clearance relating to the issuance of a so-called "Multipoint Card" by the parties. The Competition Council did not give a negative clearance to the agreement, because it found that Multipoint Card programme would have a rather deleterious effect on competition in the long run. However, on condition that the number of issued Multipoint Cards should not exceed 250.000, an individual exemption was granted till 31 December 2004. Furthermore the Council obliged the parties to report on the turnover of the Multipoint Cards and the bankcards in every six months.

The Multipoint programme

The three undertakings entered into an agreement to operate a customer fidelity system. The basis of the fidelity system is the operation of the Multipoint card system. The Multipoint card has two functions: on the one hand, it is a "traditional" bankcard, since it holds financial functions (like other deposit or credit cards). On the other hand, it is also a co-branded bankcard with fidelity customer functions. Those consumers, who would like to be holder of the Multipoint card and participate in the fidelity system, must become costumers of the OTP, since the point-collection is generated through payment by the Multipoint card from an OTP bank account. Multipoint cardholders can pay by their cards at domestic point-collecting places that were not excluded by the members of the agreement. According to the framework agreement, the distribution channels of the competitors of the members are excluded from functioning as point-collecting places.

Consequently, the Competition Council found that the Multipoint Card was not merely a combined system of fidelity cards of the parties` customers but also a co-branded bankcard with fidelity customer functions for the customers of the OTP.

Relevant markets

According to Article 14 of the Hungarian Competition Act, the relevant market shall be defined by taking into account the goods, which are subject to the agreement. The Competition Council pointed out that the relevant product has had appreciable effects on competition in the following markets:

  • a)

    The "loyalty market". It particularly contains those kinds of cards and bankcards that have fidelity costumer or VIP functions or provide costumers with any other kinds of benefits.

  • b)

    The market of bankcard. It must be examined, since the Multipoint card also has traditional financial functions. Bankcards can be either deposit or credit cards. In the present case, only the market of deposit cards is important because retail account management is connected to them.

  • c)

    The markets of the members of Multipoint programme that are not mentioned in points a) and b):

    • a)

      the retail sales market of public telephone services (domestic, domestic long distance, international) and end-appliances (telephones, accessories),

    • b)

      fuel retail and other retail connected to filling-stations that sale to natural persons as consumers.

The investigations of these background markets are relevant, because the homogeneous products of these markets are differentiated by means of the Multipoint programme. The price-discount offered in exchange for fidelity points differentiates between the products that are affected and those, which are not affected by the Multipoint system.

The definition of loyalty markets was one of the most important parts of the decision because it was the first time that this question was analysed by the Competition Council. It had to be decided on, whether the loyalty market could be considered as an independent market or the market definition covered only the traditional markets of the members of the agreement, which were influenced by the costumer fidelity system.

The Competition Council pointed out that Multipoint could not be defined as a product of the traditional background markets but it developed from them, bound them together and reacted upon them. Multipoint is a new and separate product originated from the connection of traditional markets, so it can be specified as a product of loyalty market.

Characteristics of the relevant markets and competition effects

Loyalty market

The market of multi-partner fidelity cards has been deploying nowadays in Hungary. The construction of Multipoint is a new product on this market and it might intensify the weak competition in this field. The programme, however, has several factors that may have as their effect the prevention, restriction or distortion of competition in the foreseeable future. The following factors have been evaluated by the Competition Council:

The advertising campaign of Multipoint programme might be stronger than the earlier campaigns concerning other customer fidelity systems. In addition, the level of benefits offered to the consumers can be easily changed at any time in order to make Multipoint cards more competitive in consideration of future consumer loyalty programmes.

One of the biggest advantages of the programme is that it links the costumer databases of the participating undertakings together and therefore helps the participants to retain existing consumers and attract in new consumers from the clienteles of partner undertakings.

Multipoint is the sole existing construction that makes point-collecting possible, independently from the fact, whether costumers use the card for the payment by a partner or by another undertaking. Consequently, Multipoint card is more attractive to consumers than other competing bankcard-based fidelity cards.

The construction has considerable network effects that may exclude competition in the market of co-branded cards. This statement can be explained by two facts. On the one hand, the three members of the programme are market leaders on their own relevant markets. On the other hand, no new fidelity programme that has the same level of network effects can be created by the competitors of the participating companies. The latter might be a serious constraint on the future competition.

One of the main aims of loyalty schemes is the creation of a customer database, which makes the undertakings possible to evolve direct marketing strategies by using the information gained on costumers` behaviour. The advantage of the scheme that collects a data field on consumers and adapts this to their buying transactions is that the undertakings start to build up a profile on consumer buying habits. Consequently, the database connected to Multipoint system can be used for marketing and competition purposes and therefore must be an important factor by assessing competition effects.

The maturity of the relevant market must also be taken into account. Since the Hungarian loyalty market is relatively immature, the concept of "first mover advantage" has to be applied as well.

The relevant markets of OTP Bank., MOL. and Matáv.

The Competition Council found that the Multipoint programme also raises doubts concerning the traditional markets of participating undertakings.

The Multipoint card is a substitute for the traditional bankcards but the latter are not substitutes for Multipoint. The Hungarian deposit bankcard market comprises five million bankcards on the market of which OTP Bank has a market share of 60 %. Multipoint - as a special product - enables OTP to strengthen further its position concerning deposit cards and retail account management.

Regarding the relevant markets of MOL and Matáv the Competition Council found that the Multipoint system restraints competition fundamentally by creating a common consumer database that enables the undertakings to retain its existing consumers and attract new ones.

The decision

The Competition Council did not give a negative clearance to the agreement, because it found that Multipoint Card programme would have as its object or effect the prevention, restriction or distortion of competition in the long run.

Nevertheless, the Competition Council exempted the agreement subject to conditions, because the Hungarian loyalty market was relatively immature and the Multipoint construction could encourage the competitors to react and so intensify competition.

An individual exemption was granted till 31 December 2004, on condition that the number of issued Multipoint Cards should not exceed 250.000 and the parties were also obliged to report on the turnover of the Multipoint Cards and the bankcards in every six months. The short period given enables the Council to evaluate the characteristics and dynamics of the loyalty market, as well as the effects of Multipoint scheme during this period. The rationale of the limitation of the numbers of cards was not to impede market entry and innovation on the relevant markets but to deter from both the creation of dominant position on the loyalty market and the strengthening of the position of OTP concerning retail deposit cards.