Introduction
In December 2016 Parliament adopted a major amendment to the Competition Act (57/1996), which took effect on January 15 2017. An important part of this amendment was the timely implementation of the EU Antitrust Damages Directive (2014/104/EU) into Hungarian law.
It was possible to claim damages for a competition law infringement under Hungarian law before the directive's implementation under the general civil law rules on damages and a few special supplementary provisions. However, the directive's implementation introduced detailed rules for damages claims arising out of competition law infringement and the enforcement thereof. The Hungarian legislature chose to include the new rules in a new chapter of the Competition Act, instead of incorporating them into a new, separate legislative instrument.
The directive's implementation also introduced several new solutions to Hungarian law. It will be interesting to see what effects the new rules will have on the private enforcement of competition law in Hungary, which – to date – has rarely been pursued.
Damages may be claimed for:
- cartels and other horizontal or vertical restraints (Chapter IV of the Competition Act and Article 101 of the Treaty on the Functioning of the European Union); and
- the abuse of a dominant position (Chapter V of the act and Article 102 of the treaty).
In such cases, the Civil Code and the Code of Civil Proceedings apply, with the exception of cases in which the special rules included in the new chapter of the Competition Act apply.
Full compensation Aggrieved parties are entitled to full compensation for their losses. Full compensation is the general principle of both the EU Antitrust Damages Directive and Hungarian civil law and, as such, the directive made no significant changes in this regard. The difference between the directive and Hungarian civil law is that the Civil Code (5/2013) allows the courts, in exceptional circumstances, to award damages of an amount lower than the actual loss. This rule is not applicable under the Competition Act and will therefore not apply in cases of liability based on competition law infringements. Further, liability for such damages may not be excluded or limited by a contractual provision.
Joint and several liability Multiple infringers are jointly and severally liable for the resulting damages. The principle of joint and several liability was already an important principle of Hungarian civil law before the directive's implementation. However, the Competition Act adopts the general civil law principle in the context of competition law, which results in exceptions from joint and several liability for small and medium-sized enterprises and leniency applicants to whom immunity has been granted. These parties are jointly and severally liable only for the losses of their direct or indirect buyers and suppliers and are liable for the losses of further parties only if the losses cannot be enforced against the other infringers.
Amount of loss The burden of proof regarding the amount of damage caused by the infringement lies with the plaintiff. However, the Competition Act now contains two important rebuttable presumptions in this regard:
- if a cartel's existence is proven, it is assumed that it caused damage (this has been implemented by the new amendments); and
- it is assumed that cartels increase the prices applied by infringers by 10%.
This latter presumption already existed under the Competition Act before the directive's implementation and is unique to Hungarian competition law. However, even this presumption was not enough to encourage possible claimants to initiate private enforcement proceedings against cartelists.
Passing-on defence The question of whether the passing-on defence was valid under Hungarian law had not been settled at the statutory level before the directive's implementation. There were examples of the Hungarian courts accepting the passing-on defence by invoking the Civil Code provision which states that plaintiffs are not entitled to compensation for costs which have been recovered from elsewhere. The Competition Act now clearly provides that infringers may rely on the passing-on defence. The burden of proof lies with the party that relies on this defence.
Disclosure of evidence The Competition Act now contains detailed rules on discovery (formerly alien to Hungarian law) with regard to how the courts may order participants or other third parties – including national competition authorities and the European Commission – to disclose evidence.
Disclosure may be ordered only at the request of a party and not by a court ex officio. There are multiple requirements and limitations for a court to order the disclosure of evidence, which are in line with the directive:
- It must seem likely that the evidence requested to be disclosed is capable of proving the requesting party's claim.
- The scope of the disclosure must be limited to evidence which is absolutely necessary and the advantages expected from the disclosure cannot exceed the related disadvantages (ie, with regard to cost and workload).
- If the plaintiff has requested the disclosure, it can be ordered only if it seems likely that the plaintiff's claim is justified. Certain documents – including leniency applications and other confidential documents – are in any case exempt from disclosure.
Failure to comply with an order to disclose evidence can be penalised by a fine of up to Ft50 million (approximately €160,000). This fine can be imposed repeatedly.
While it must be ensured that requests for disclosure are used as a tool for fishing for information, the Hungarian disclosure requirements may be too strict. It will be up to the courts to apply these rules in a way that does not impose unreasonable obligations on the party requesting the disclosure. In any case, the defending parties will have several provisions to rely on if they want to avoid disclosing evidence.
Competition authority participation If the Hungarian Competition Authority or the European Commission has already rendered a decision in the same case, the court is bound by these decisions with regard to the fact of the infringement. Decisions of other EU member state competition authorities are also accepted by the Hungarian courts with regard to the fact of the infringement, but they are rebuttable. Other parts of the decision (eg, the infringement effects) are not binding on the courts.
The court may also request a non-binding opinion on the case from the HCA; however, the HCA has the right to refuse this request.
The usual five-year limitation period provided for under civil law also applies to competition law infringement claims. However, the start of the limitation period is different for competition law claims: it starts from the date on which the infringement ceases and the aggrieved party learns, or should have learned, of the infringement, the harm and the party that caused it.
If a competition authority in the European Union starts to investigate the infringement, the limitation period is suspended from the start of the investigation until one year after the authority's final decision. If the parties enter into alternative dispute resolution, the limitation period is suspended during that procedure.
Possible effects of changes on private enforcement
As indicated above, private enforcement of competition law was almost non-existent in Hungary, possibly due to:
- awareness of competition law;
- the slow and ineffective nature of court proceedings; and
- the costs of litigation.
While the directive's implementation will probably make it easier to succeed in private antitrust litigations, it will certainly not remedy all of the shortcomings of civil proceedings in Hungary and businesses' lack of willingness to engage in antitrust litigation.
As a result, the new private enforcement rules will most likely not cause a surge in antitrust litigation, but rather contribute to a legal environment which could gradually enhance private enforcement of competition law in Hungary.
For further information on this topic please contact Anna Turi or Attila Jákói 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.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
