Parliament adopted amendments to the Competition Act on June 9 2015 to reflect the practical lessons learned from the application of the rules which came into force in July 2014. The amendments introduce noteworthy exceptions to the cartel prohibitions. Some of these rules signal a more lenient approach towards certain competition law infringements, while others support more rigorous enforcement (eg, in bid-rigging cases).
SMEs not to be fined for first-instance infringements
The amendments allow the Competition Authority to grant a second chance to small and medium-sized enterprises (SMEs).(1) As the decision-making body of the Competition Authority, the Competition Council may issue a warning instead of imposing a fine for a competition law infringement committed by an SME for the first time. This is a new tool that was previously unavailable to the Competition Authority. If the Competition Authority issues a warning, it must simultaneously oblige the SME to amend its practices and bring them into line with the Competition Act. This possibility does not apply to:
- infringements of EU law;
- bid rigging in a public procurement procedure; or
- infringements against a person who is especially vulnerable (ie, due to age, credulity or mental or physical disability).
The agricultural exception to the cartel prohibition, which was originally introduced in 2012 to a sectoral act on agricultural products, has now been added to the Competition Act. It was on this basis that the so-called 'watermelon cartel' case was terminated by the Competition Authority in 2013. The provisions not only were debated in the literature, but also served as the basis of an infringement proceeding initiated by the European Commission against Hungary.
The agricultural exception, which is now incorporated in the Competition Act, is the same as its previous sectoral counterpart, in the sense that it still allows for both not establishing infringement and not imposing a fine on cartels that involve agricultural products.
The Competition Authority must suspend a proceeding issued on the basis of an alleged cartel affecting agricultural products and request the minister responsible for agricultural policy to decide whether the following criteria for the exceptions are met:
- The restriction does not exceed the achievement of reasonable and justifiable income; and
- The market participant is not barred from achieving that income.
If the minister establishes that the exceptions apply, the Competition Authority must follow the minister's position (ie, infringement may not be established). Moreover, the Competition Authority must refrain from imposing a fine for infringement (if committed in connection with agricultural products) and oblige the parties to bring their practices into line with the competition law provisions.
The novelty of the newly implemented rules concerning agricultural products is that it has now been clarified that these exceptions concerning agricultural products do not apply where Article 101 of the Treaty on the Functioning of the European Union may need to be applied in the proceeding. This amendment therefore seems to address the European Commission's concerns with regard to infringement proceedings.
Enhancing enforcement of bid-rigging cartels
The publisher of a public procurement procedure is already obliged under the existing regime to notify the Competition Authority if it notices (or has good reason to believe) that the cartel provisions of the Competition Act or Article 101 of the Treaty on the Functioning of the European Union has been infringed.
Parliament has also inserted a new instrument in the Public Procurement Act. The amendment provides that the minister responsible for public procurement or the minister for the utilisation of EU funds may notify the Competition Authority – and supply all necessary data to the authority – if it notices (or has reason to believe) during the supervision of public procurement procedures that the cartel provisions of the Competition Act or Article 101 of the Treaty on the Functioning of the European Union has been infringed. A legislative proposal to include this as an obligation of the minister was not adopted by Parliament; therefore, it will remain a right (but not an obligation) of the minister to supply the necessary data to the authority.
The amendments illustrate the Competition Council's priorities for the upcoming period – to focus on hardcore cartels and especially bid rigging; whereas with regard to SMEs, the emphasis is on education rather than repression.
Further amendments protecting leniency and settlement statements signal the Competition Authority's attempt to encourage undertakings to cooperate with the authority by admitting to the circumstances of infringements, while other amendments clarify the process of exceptions from the suspension clause in merger control proceedings.
For further information on this topic please contact Anna Turi at Schoenherr Rechtsanwälte by telephone (+36 1 345 87 78) or email ([email protected]). The Schoenherr Rechtsanwälte website can be accessed at www.schoenherr.eu.
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