The Hungarian Competition Authority (HCA) recently ruled on whether the exchange of past business  information, in the framework of a quarterly circulated  market research paper, is anticompetitive or not. Finding  that such an information exchange system, in certain  circumstances, should be regarded as a restriction  of competition, the HCA imposed a fine on all of the  parties involved except for the immunity applicant.  The case concerned Hungarian contact lens distributors  who exchanged their past individual sales volumes and  values through a market research system. The exchanged  information was entirely from the previous quarter – and  it was not publicly disclosed, but only circulated by the  market research company to the enterprises involved in  the HCA’s proceedings.

The decision is unique: this is the first time a European  competition authority has ruled on an infringement  of competition rules that consisted exclusively of the  exchange of purely past information.

The main message of the decision, which is under judicial  review, is that even an exchange of past information  in itself can be restrictive of competition. As a result,  companies need to reassess the market research they are  involved in on a case-by-case basis, even if the research  involves only exchanging information from the past. 

Although a case-by-case assessment is necessary, the  decision detailed below gives a quite complete list of  the aspects that need to be reviewed when assessing a  market research system. It is also a good insight into the  methodology of a national competition authority dealing  with market researches.

During the investigation, the HCA sought to determine  if the enterprises’ conduct was capable of restricting or  distorting competition, considering the specifics of the  market for contact lenses and accessories in Hungary and  the specific characteristics of the information exchange.  The HCA found that the enterprises, by exchanging  their detailed company- and product segment-specific  information (which could not be obtained from public  sources) regarding their recent income and sales volumes,  were operating an information system that was capable of  restricting competition.

According to one of the HCA’s position statements,  information exchange systems, the purpose or effect of  which is to lower the risks stemming from the behaviour  of competitors, are anti-competitive. Such reasoning  follows the European Court of Justice’s decision in  T-Mobile Netherlands: “An exchange of information  between competitors is tainted with an anti-competitive  object if the exchange is capable of removing uncertainties concerning the intended conduct of the participating  undertakings.” The underlying question: is the exchange  of past information capable of removing uncertainties  concerning intended conduct?

In the given case, the HCA carried out a step-by-step  analysis of the main aspects and principles laid down  by the European Commission  in its 2011 Horizontal  Guidelines and by the ECJ in its decision in Asnaf Equifax  i.e., (i) purpose of the information exchange;  (ii) access to the market research; (iii) terms and  conditions of joining to the system; (iv) type of  information exchanged (public or confidential, aggregate  or individual, future or past information and their  significance in determining prices, sales volumes or other  commercial terms). The result of such analysis, which is  also a list of the aspects to be reviewed by every company  involved in market research, are as follows: 

Market coverage

The parties covered 80 percent of the relevant market,  the market was heavily concentrated and no new market  entry could be expected. Only one market player was  not involved in the exchange system. Furthermore, the  relevant markets can be divided into certain segments in  which only one to three market players were active, which  made the exchange even more sensitive.

Lack of public information

As no similar public information was accessible to other  market players and customers, the exchange system  offered by this research significantly increased the  transparency of the market to the companies concerned.  Moreover, there no other source afforded other market  players similar information. Retail prices could be  collected from retailers, but wholesale prices could not  be estimated based on retail prices because distributors  offered varying discounts to retailers.

Age of information and frequency of the exchange

Market players made business decisions on an annual  basis, i.e., they determined prices once a year for the  entire coming year. Therefore, a quarterly data exchange  should be regarded as a frequent, non-historic information  exchange.

Strategic, detailed information

The market research consisted of sales volumes and  values, market shares and average wholesale prices  split by product categories. Such information should be  regarded as strategic information, according to the HCA.  In an oligopolistic market, regularly exchanged sales data  allows the parties to observe any alteration in the business  strategy of their competitors, e.g., a new marketing  campaign or a price cut. This led to a situation in which  the parties were able to eliminate market uncertainties.

Publicity of information

The exchange significantly increased market transparency  only for participants of the exchange system, resulting in  an information asymmetry that harmed consumers and  downstream market players.

Use of information exchanged

It was shown that the market research was used and  assessed in strategic business decision making. According  to the HCA, benchmarking could be a pro-competitive  use of the market researches, but such pro-competitive  purposes could have been achieved by the exchange of  aggregated data as well.

Potential of influencing business decisions

The parties involved in the proceedings argued that  the market research was unable to influence business  decisions, therefore could not be anti-competitive, due to  the fact that business strategies were determined by the  headquarters and not by the local management who were  involved in the market research. The HCA did not accept  this reasoning as it was confirmed that local management  fine-tuned and localized overall business strategies  emanating from headquarters.

The result of the analysis was that even if there was no  evidence of any effect on the market due to this market  research and even if it consisted of only past information,  it was anti-competitive.