Swift, simple and less burdensome proceedings with a 10% reduction in fines – these are the benefits that the Hungarian Competition Authority (GVH) chose to emphasise in its recent notice on the settlement procedure (3/2015). In particular, the procedure allows the GVH to settle a cartel or abuse of dominance case with the companies involved in a regulated proceeding in exchange for a 10% fine reduction.
The settlement procedure has been available since July 2014, but no proceedings were initiated before the GVH released its November 2015 notice, which provides detailed rules governing the procedure. The procedure generally mirrors EU rules and practice. However, in previous cases the GVH has demonstrated that it will not shy away from taking a different approach than that provided under EU law.
Decision to conduct settlement talks
The settlement option becomes available after conclusion of the investigation phase and is initiated by the Competition Council, the decision-making organ of the GVH. The GVH invites the parties to conduct settlement discussions at its own discretion (ie, the settlement procedure is not an inherent right of the parties). In deciding whether to conduct settlement talks, the GVH considers (among other things) the likelihood of reaching common ground within a reasonable timeframe, any foreseeable conflicting positions and the number of parties involved. However, the GVH generally takes a flexible approach and may consider overtures from the parties that they would like to participate in a settlement proceeding.
'Hybrid' procedures – in which not all parties to the GVH proceedings take part in the settlement talks – are also available.
During settlement talks, the parties may access the case file only to the extent allowed by the GVH, considering the objectives of the settlement. The settlement discussions are in principle conducted verbally and with short deadlines. The presumption of innocence applies during this initial phase; thus, the undertakings' willingness to engage in settlement talks does not per se indicate admission of the alleged infringement.
Formal settlement submission
Undertakings must conclude the settlement agreement by way of a settlement submission, which includes (among other things):
- admission of the infringement;
- a statement of the relevant facts; and
- disclosure of the highest fine deemed appropriate by the undertaking.
It must also include a waiver of important procedural rights, such as the right of appeal, and a statement that the undertaking will refrain from further accessing the file or requesting a hearing. Unilateral revocation of the settlement submission is possible only if the content of the GVH's statement of objections or the final decision "materially deviates" from the content of the settlement submission.
Although the new Hungarian notice generally aligns with the relevant notice issued by the European Commission, it contains noteworthy deviations which may fundamentally affect its application.
Wider scope of applicability
The new notice extends the scope of applicability for the settlement procedure: it can now be used in antitrust cases (ie, abuse of dominance and cartel cases – the proceedings equivalent to Article 101 and 102 cases). In contrast, under EU rules settlement is limited to cartel cases.
Access to file
During the settlement procedure, the parties have limited access to the file, which is granted only to the extent that the GVH finds reasonable (although access is granted earlier than in a 'normal' competition proceeding). The reasonability of the access request is assessed on the basis of the general objective – to conclude the settlement discussions without hindering the swift and effective conclusion of the entire procedure. The GVH provides the parties with a document list on request, and with non-confidential documents that it deems reasonable in light of the objectives of the settlement. The parties must explicitly undertake to refrain from making any further request to access the file.
The provisions on file access are similar to those under the EU rules, with an important distinction being that the GVH may also allow access to certain confidential data on request. Access to confidential data is limited and a delayed request to access such data may result in termination of the settlement process altogether.
Waiver of right of appeal
The new notice (in line with the statutory rule included in the Competition Act) foresees that the parties must waive their right to appeal the GVH's final decision. This is the most striking deviation from EU practice, as the European Commission's notice explicitly provides that the final decision is subject to judicial review.
Is the 10% fine reduction worth it? Many companies may think that a settlement procedure is a good opportunity to engage in tentative negotiations with the GVH. However, the scope of negotiations on the side of the company is very limited. Moreover, successful discussions presuppose a high level of exposure for the undertaking. The main concern is the obligatory waiver of the procedural rights of detailed access to files and of appeal.
Nonetheless, the Hungarian rules allow the company to revoke its settlement submission without penalty if the final decision materially deviates from the content of the settlement submission. If the GVH decides that the revocation was not justified, it may amend the final decision to include the company's revocation of the settlement as an aggravating circumstance, thus presumably increasing the fine. It may also impose a procedural fine on the company and use the settlement submission as evidence against it. The penalties for companies' unjustified revocation of their settlement submission are thus severe.
The inherent risks of the 'striking' waiver of appeal rights will ultimately become apparent through future GVH practice in connection with the revocation of settlement submissions. The possibility to end settlement talks prematurely will also be refined in practice.
The GVH's narrow interpretations and fines may discourage parties from engaging in settlement talks. However, in taking a flexible approach, settlement and a 10% reduction in the fine (especially if it could be increased by a joint application of partial immunity based on leniency and a successful settlement) may make this option worth consideration. The settlement procedure is a familiar tool in EU practice and a favourable development in Hungarian competition law.
For further information on this topic please contact Anna Turi or András Nagy at Schoenherr by telephone (+36 1 8700 700) or email ([email protected] or [email protected]). The Schoenherr website can be accessed at www.schoenherr.eu.
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