On 1 July 2014 significant amendments to the Hungarian Competition Act (“CA”) (the "Amendments") entered into force, some of which affect ongoing proceedings. The Amendments are the last of a series of recent changes aiming to increase the efficiency of Hungarian competition law enforcement. The Amendments leave the provisions regulating anti-competitive agreements and abuse of dominance essentially untouched, and relate mainly to procedural law. This article provides a short overview of some of the notable changes, including with regard to leniency applications, settlement and access to case files.
Leniency regime has been part of the CA since 2009. The declared purpose behind the Amendments (which are applicable to leniency applications submitted after 1 July 2014) was to bring Hungarian law in line with the ECN’s new model programme (“ECN Model Programme”), as well as to address the Hungarian Competition Authority’s (“HCA”) experience with leniency applications.
Under the Hungarian leniency regime full immunity from fines may be granted to an undertaking if it supplies information/proof that enables the HCA (a) to apply for a judicial order authorizing a dawn raid, or (b) to establish the violation of competition law (similar to Type 1A and 1B applications under the ECN Model Programme). Following the Amendments, Type 1A applications can also be accepted in the case at hand if the HCA has already carried out a dawn raid, provided that no other Type 1A application has been made. Before the Amendments, Type 1A applications were not possible if a dawn raid had already been conducted.
A reduction of the fine may be applied if an undertaking supplies evidence with significant added value compared to the evidence already available to the HCA but where full immunity cannot be granted (similar to Type 2 applications). The new rules have extended the deadline for submitting applications for the reduction of the fine: such application can be made (a) even after the Competition Council has issued its statement of objections or has sent the investigator’s report to the investigated undertakings (which is also a new feature introduced by the Amendments), or (b) access to the case file has been granted (whichever is earlier). However, such application will only be successful if the applicant provides decisive and clear new evidence that materially influences the legal assessment of the case.
The amended rules also make it clear that summary application markers can only be granted to Type 1A applicants. Furthermore, only Type 1A applications (including the supplied evidence) can be withdrawn (a) until the Competition Council’s decision on the acceptance or the refusal of the leniency application, or (b) following such decision, provided that the Competition Council refuses to grant leniency to the applicant.
In view of the practical difficulties that have arisen in the past, the Amendments make it possible for undertakings belonging to the same group of undertakings to apply for leniency jointly.
The Amendments introduce a settlement procedure into Hungarian law. Settlement, which can be initiated by the HCA only, can lead to a 10% reduction in the fine imposed against an undertaking which admits to the HCA’s allegations (i.e. confesses its breach of competition law) and, inter alia, waives its right to seek any legal remedy against the HCA’s decision. The undertaking can revoke its declaration admitting to a breach of law during the settlement process only until the expiry of the deadline open to seek a legal remedy against the HCA’s decision, and only if the HCA’s preliminary position and decision is materially different from the content of the undertaking’s declaration, including the level of the proposed fine. If the undertaking’s declaration is revoked, it cannot be used as evidence.
The settlement declaration, as well as the settlement procedure, will not be accessible by the investigated undertakings before they are permitted by the HCA to access the case file (and until then, the undertaking participating in the settlement procedure must keep it confidential, as well as the settlement declaration). The settlement declaration will only be accessible to other undertakings under investigation if the lack of access to these documents would hinder the undertakings’ right of defence.
It remains to be seen whether the HCA will offer the possibility for settlement in ongoing procedures, or only in procedures launched after 1 July 2014.
Access to the case file by third parties
The Amendments significantly widen access to the case file by the general public with respect to any proceedings that are ongoing or launched on or after 1 July 2014.
As a general rule, any third party will be able look into non-confidential versions of documents in such case files after the HCA’s proceedings (and any subsequent judicial review) have been completed. Third parties who prove a legal interest (such as interest in enforcing a damages claim) may gain access to the case file prior to the above date.
However, the following types of information remain inaccessible for both the investigated entities and third parties: data revealing the identity of protected witnesses, complainants or informers; personal data (with some exceptions); classified data; business secrets or other secrets (with limited exceptions); internal documents of the HCA and copies of electronic data seized during dawn raids. The HCA must ensure that such data remains duly protected also in documents produced during the procedure, including the published HCA decision.
The new rules ensure that special rules will apply to access to the content of leniency applications and related declarations. First, the fact that an application has been made, the related evidence as well as the leniency application and related declarations will not be accessible before the investigated undertakings are permitted by the HCA to access the case file (and until then, the leniency applicant is also obliged to secrecy). Second, during the investigation, the leniency application and related declarations will be accessible only to other undertakings under investigation, and only if lack of access to these documents would hinder the undertakings’ right of defence. However, following the completion of the judicial review of the case, third parties will not be automatically prohibited from accessing leniency applications. The HCA has a discretionary right to restrict access if it deems that it would put the efficiency of the leniency regime at risk. One can only hope that the HCA’s approach will favour leniency applicants in this regard.
Legal professional privilege
Before the Amendments, documents “prepared for the purpose of attorney-client communication” (but never actually sent) enjoyed legal professional privilege. However, this provision, which is deemed by the Hungarian legislator to be inconsistent with ECJ case law, has been deleted. Therefore, it appears that currently only communications between the client and its external legal counsel prepared for the purpose of the client’s defence are subject to legal professional privilege. This interpretation is supported by the legislator’s reasoning behind the Amendments, according to which legal professional privilege is not applicable to communications with in-house lawyers – in contrast to other European jurisdictions, notably Belgium.
The classification of a document as subject to legal professional privilege remains subject to the undertakings’ express request. As before, the HCA remains entitled to seize even legally privileged documents if those are available on electronic data carriers of which the HCA prepares a mirror copy. However, the Amendments have introduced very detailed technical rules on how to handle such mirror copies to effectively ensure the protection of legally privileged documents. In this respect, the Amendments definitely help to guarantee the effective protection of procedural rights (provided always that the investigated undertaking actually manages to convince the HCA that the seized documents do qualify as subject to legal professional privilege).