Government Decree 205/2011on block exemptions for vertical agreements and concerted practices, which supersedes the former vertical block exemption in Hungary,(1) came into force on October 22 2011. The new exemption mainly follows the principles of its predecessor, but introduces one significant change.
The new element is consistent with the concept behind the new EU Vertical Block Exemption Regulation (330/2011). It provides that it is no longer sufficient for the supplier's market share to be below 30% in the relevant market. In addition, the buyer's market share in the relevant market in which it purchases the contract goods must be lower than 30% in order to qualify for the exemption. This dual requirement, whereby both parties' respective market share must be below 30% in their relevant markets, represents a tighter application of the vertical exemption for buyers with significant market power.
The principles of the regulation clarify the method of calculating market shares. The supplier's market share must be calculated on the basis of market sales value data, while the buyer's market share is to be calculated on the basis of market purchase value data. All calculation data must be based on the preceding calendar year. If no such data is available for the given market, reliable estimates are allowed for calculation purposes.
The new decree also clarifies the application of the exemption if a market share, although initially not more than 30%, subsequently rises above this threshold. If the increased market share remains below 35%, the exemption will continue to apply for two consecutive calendar years after the year in which the 30% threshold was first exceeded. However, if the market share exceeds 35%, the exemption continues to apply for one year after the year in which the 35% threshold was first exceeded. These rules on the continuation of the exemption may not be combined so as to exceed a period of two calendar years. These rules are consistent with those under the regulation.
Hardcore vertical restrictions, which are ineligible for an exemption, remained substantially unaffected. Accordingly, any of the following automatically excludes the application of the vertical block exemption:
- any direct or indirect restriction on the buyer's freedom to set its sale prices, without prejudice to the supplier's right to impose a maximum sale prices or recommend a sale price; or
- any direct or indirect restriction on the territory in which, or the customers to which, the buyer is allowed to sell the goods or services under the contract, except:
- a restriction on active sales within a territory or to customers exclusively reserved for the supplier or allocated to another buyer;
- a restriction on sales to end users by wholesalers;
- a restriction on sales by members of a selective distribution scheme to unauthorised distributors - although the Hungarian vertical block exemption has been changed so that such a restriction is valid only if applied by the supplier within a territory that it designates for such a system;
- a restriction on sales, by the buyer, of components to customers that use them to manufacture goods that compete with those of the supplier;
- a restriction on active or passive sales to end users by members of a selective distribution system operating at retail level;
- a restriction on cross-supply between members of a selective distribution system, including between distributors that operate at different trade levels (ie, retail and wholesale); and
- a restriction agreed between a buyer that incorporates the contract components and the supplier of the component on the supplier's sales of components to end users or repairers.
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As under the EU regulation, 'a non-compete obligation' under the new Hungarian vertical block exemption is either:
- a requirement imposed on the buyer not to manufacture, buy, sell or resell goods or services in competition with the contract goods or services; or
- an obligation on the buyer to purchase at least 80% of the buyer's total purchases of the contract goods or services (or substitutable goods or services) from the supplier, or any other undertaking designated by the supplier, based on the preceding calendar year's sales value data.
The maximum permitted term for a non-compete obligation remains the same (ie, five years).
Restrictive vertical agreements that were entered into before the new Hungarian vertical block exemption came into effect, but in compliance with the previous block exemption, and which fail to satisfy the conditions of the new exemption are excluded from the general cartel prohibition for one year from October 22 2011.
For further information on this topic please contact Álmos Papp at Bán S Szabó & Partners by telephone (+36 1 266 3522), fax (+36 1 266 3523) or email ([email protected]).
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