Record amount of fines
2021: year of cartels
Accelerated sector inquiry
Abuse of dominance
Beer Act enters into force
Benefits of cooperating with HCA
What to expect in 2022 and beyond
The Hungarian Competition Authority (HCA) has published a summary report of its 2021 activities. The HCA opened 51 competition proceedings against 124 undertakings, almost 25% more than in the previous year, and 42 cases were closed in 2021.
In 2021 the HCA established a competition law infringement in 28 proceedings against 71 undertakings. The HCA imposed a fine in 25 cases amounting to fines of around 18.2 billion Hungarian forints (approximately $54 million) on 62 undertakings in total. This is a record amount compared to previous years:
- In 2020 fines totalled 8.4 billion Hungarian forints (approximately $24 million).
- In 2019 fines totalled 8.8 billion Hungarian forints (approximately $25 million), although a very significant proportion of this relates to the high-profile fertiliser cartel, in which the HCA imposed fines totalling 14 billion Hungarian forints (approximately $40 million).
However, this decision, together with many others, is not necessarily final, as the fined companies can turn to the court to challenge the HCA's decision, as was the case in the fertiliser cartel. Excluding the fertiliser case, the total amount of fines imposed in 2021 has decreased compared to previous years.
It is not an exaggeration to state that 2021 was the year of cartels, given that more than 90% of the 18.2 billion Hungarian forints fines (ie, 16.2 billion Hungarian forints (approximately $41 million)) were imposed for agreements restricting competition (mostly cartels). In 2021, eight such cases were closed:
- an infringement was established for four public procurement cartels;
- two non-public procurement cartels; and
- two other anticompetitive agreements.
The HCA carried out dawn raids on the suspicion of cartels or other market distortions at 56 market players last year, during which it processed around 14 terabytes of data. This is not at all an indication that the covid-19 pandemic has deterred or limited the HCA's enforcement or dawn raid activities.
Consumer protection cases accounted for more than 50% of the closed cases. Fines were imposed in half of the consumer protection cases, totalling 2 billion Hungarian forints ($6 million). Here the HCA prioritised the detection of covid-19 related infringements and imposed fines of around 449 million Hungarian forints (approximately $1 million) – a quarter of the total fines imposed in consumer protection cases were imposed for covid-19 related infringements.
The most exciting consumer protection case of 2021 was not related to the pandemic, but to one of the most popular social media platforms. The HCA had previously found that Facebook had committed an infringement when it advertised its service as free because users did not have to pay a fee for using the service, but their user activities and data resulted in commercial benefits for Facebook, thus it meant in fact paying for the service. The HCA imposed the largest consumer protection fine in its history on Facebook: 1.2 billion Hungarian forints (approximately $3.2 million) (there have been higher fines since then). However, the courts have recently ruled in Facebook's favour and annulled the fine in its entirety.
Last summer, the Hungarian government introduced a new legal instrument to extend the powers of the HCA, allowing it to order an accelerated sector inquiry if competition is distorted or restricted in a specific market and an urgent intervention is required to identify and address these market disturbances. The HCA initiated the first accelerated sector inquiry in the construction sector on the Hungarian market of ceramic masonry elements (ie, bricks), then another one on the Hungarian market of construction wood materials. Most recently it has conducted an accelerated sectoral inquiry on the market for covid-19 antigen tests due to the extraordinarily high prices by regional comparison.
In 2021, the number of suspected abuse of dominance investigations increased compared to previous years, with a total of eight cases but, with the exception of the Budapest Airport case, these are still ongoing.
The HCA received a record number of notifications of concentration in 2021 and cleared 64 transactions last year. As no competition concerns were identified in any of the cases, the HCA issued a clearance certificate in 92% of the cleared transactions in a very short time (average clearance time of four days). The HCA is one of the most effective authorities at handling notifications of concentration that do not raise competition concerns in Europe, which is also important from a competitiveness perspective. The excellent statistics are also helped by the possibility of a pre-notification procedure, also favoured by the HCA, where the notifying party can discuss all relevant matters with the HCA before formally submitting the notification, making the actual proceeding more efficient and faster.
In 2020, the Hungarian Parliament amended certain provisions of the Trade Act and from 2021 further extended the powers of HCA. In the hotels, restaurants and catering sector, catering businesses may not conclude any exclusive agreements on the procurement of beverages with beverage companies with significant market power. Furthermore, catering businesses have to offer the products of at least two beverage companies for all categories of beverages sold (not only beer). These trade rules are enforced by the HCA. The competition authority recently announced that it had launched the first competition proceedings under the new trade rules against two fast food chains (KFC and Burger King) and three beer producers (Dreher, Borsodi and Heineken).
Benefits of cooperating with HCA
The HCA provides a wide range of opportunities for market players to cooperate with them. By cooperating with the HCA, the legal consequences of competition law infringements can be significantly reduced, fines can be avoided or significantly reduced, and in cases resulting in commitments, the HCA does not even establish an infringement. Last year, 24 companies obtained a reduction or waiver of fines totalling more than 7.6 billion Hungarian forints (approximately $22 million), which represented 29% of the total amount of competition fines imposed last year.
What to expect in 2022 and beyond
The importance of consumer protection cases has steadily increased in recent years, and the fines imposed in such cases have approached or even reached the level of fines imposed in cartel proceedings. While in 2021 the covid-19 infringement-related cases played a significant role, going forward the emphasis will be on sustainability, environmental aspects and green marketing in the upcoming years. This is also supported by the fact that the HCA published its guidance on green marketing for businesses at the end of 2020.
The pandemic has been part of everyday life for two years now and it has resulted in permanent or temporary disturbances in several markets, which required the prompt investigation and intervention by the HCA. However, as the published data show, these tasks (eg, conducting accelerated sector inquiries) have not impeded the authority in carrying out its traditional enforcement tasks.
In the last two years, the HCA closed roughly the same number of proceedings for cartels, consumer protection infringements or merger control as it did in 2019, before the pandemic. The number of proceedings opened (including sector inquiries) has increased, not only compared to the previous year, but also compared to the year before the pandemic. Thus, the pandemic has not reduced, but has intensified, the HCA's activity in the protection of competition and consumers. The same is expected in 2022.
For further information on this topic please contact Anna Turi or Bálint Szabó at Schoenherr Attorneys at Law by telephone (+36 1 8700 700) or email ([email protected] or [email protected]). The Schoenherr Attorneys at Law website can be accessed at www.schoenherr.eu.