BACKGROUND

On 6 December 2016 the Hungarian Parliament adopted a number of significant changes to the Competition Act ("CA"), which were announced on 15 December 2016. The amendments address two main areas: the implementation of the EU Damages Directive (2014/104/EU) ("Directive") and the Hungarian merger control regime (please find our related article here). This update will focus on the implementation of the rules on actions for damages and some of the other notable changes:

IMPLEMENTATION OF THE EU DAMAGES DIRECTIVE

Right to full compensation. The adopted changes are aimed at ensuring that anyone who has suffered harm caused by an infringement of competition law is able to claim full compensation regardless of its actual position in the supply chain. The definition of a competition law infringement includes all violations against national or EU competition law. The concept of full compensation also requires overcompensation to be avoided. Accordingly, the rules state that damages cannot be claimed to the extent of the overcharge that has been passed on.

Decisions of competition authorities. The rules ensure that in actions for damages caused by competition infringements, the courts are bound by final decisions of the HCA, the European Commission, and the competition authorities of another EU Member State regarding the question of whether an infringement occurred or not. (In case of a decision from another Member State defendants still have the possibility to prove the contrary). As regards other parts of such decisions – e.g. the effects of the infringements – courts are not bound by the findings. Plaintiffs, however, may also initiate actions without a respective competition decision. In this case, courts may ask the opinion of the HCA, but they are not bound by it, and the HCA is also allowed to refuse to give such opinion.

Disclosure of evidence. In accordance with the Directive, the adopted rules are intended to remedy information asymmetry in competition law litigation. Accordingly they introduce the possibility for claimants to obtain – upon their justified request - the disclosure of evidence relevant to their claim. However, the rules also state that disclosure of evidence may only be ordered to the extent necessary, and the interests of the concerned parties must be balanced. In addition, certain types of evidence are excluded from the possibility of disclosure, including leniency applications and documents under legal privilege.

Joint and several liability of infringers. The implementing rules state that where competition infringements occur through acting in concert of undertakings, they shall be jointly and severally liable for the harm caused to every affected third party. However, with a view to provide incentives for leniency applicants, and support small or medium sized enterprises, their joint liability is limited with certain conditions.

Alternative dispute resolution. The rules also follow the Directive's aims to promote alternative dispute resolution ("ADR") avenues. Accordingly, under the new regime participation in ADR proceedings shall be taken into account by the HCA as a mitigating factor in determining the fine imposed on an undertaking. The joint liability of undertakings that entered into an agreement as a result of ADR is also limited in the sense that they are only obliged to pay damages to third parties if those payments cannot be enforced on other infringers.

OTHER IMPORTANT CHANGES

Higher reward for settlements. The new regime raises the possible amount by which fines imposed for competition infringements may be reduced in settlements with the HCA. Accordingly, under the new rules, fines will have to be reduced by at least 10 % but no more than 30 % in case the infringer concludes a settlement with the HCA.

Leniency in case of vertical agreements. The HCA previously published a notice on leniency policy[1], in which it clarified that the CA had to be interpreted such that a leniency application could only be submitted in case of agreements between competitors. The new rules clarify this situation by stating that the rules on leniency also cover vertical agreements that do not contain any horizontal elements.

EFFECTIVE DATE Most of the new rules will be effective on the 31st day following the announcement of the amending act, ie on 15 January 2017. As an exception, the rules on the possible higher reward for settlements already became effective on the day following the announcement.

COMMENTS

So far, damage claims and settlements have been very rare in Hungary. It remains to be seen whether the amendments to the CA will help remedy this. The changes certainly provide incentive to this end.