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Lawyer Bálint Bassola reveals the changes of the Competition Act.
On September 1, 2008 the modifications to the Hungarian Competition Act should have entered into force. President Sólyom, however, applied to the Constitutional Court for constitutional control, and therefore, has put all amendments on ice. Still, it might be worth browsing through the proposal, as it contains some truly revolutionary legislative ideas.
One of the most important changes of those proposed is that the manager of a company would now be personally sanctioned if his company was involved in a hard-core cartel (i.e. price fixing, market sharing, limitation of production or sales). The executive officer would be prohibited from holding such a position in any corporate entity for two years. The decree, issued by the Competition Council, the decision-making body of the Hungarian Competition Authority (GVH), could be appealed before the court, and the proposal also contains certain exceptions.
President Sólyom, however, held that the proposed sanction of the company’s executive officers raises constitutional issues. First, the non-public proceeding, that is prescribed by the proposal, is based solely on written documents and does not involve an oral hearing. Thus the right to a fair procedure and public trial is violated. Second, the fact that the Hungarian Competition Authority’s decree on the manager’s sanction is founded simply on the records of the court of registration and is then automatically imposed rather means a presumption of culpability and not a presumption of innocence.
New leniency rules
Leniency in antitrust means that the company which “confesses” to the competition authority that it was involved in a cartel and provides evidence for that receives immunity from fines.
According to the proposal, a leniency applicant may be given such immunity from fines if it provides evidence on the basis of which the GVH receives judicial authorisation for a dawn-raid or evidence with which the unlawfulness of the conduct can be proven. A company may receive partial immunity from fines if the evidence submitted to the GVH is of added value to compare with that which is already in the possession of the GVH.
The immunity or reduction of fines is, of course, subject to the immediate termination of the infringement and the full cooperation with the GVH throughout the entire competition supervision proceeding. Also, the immunity or reduction of the fine may not be accorded to a company which has played the role of a ringleader in a cartel.
The proposal introduces a substantial ease for submitting actions for damages before the civil court as well. According to the new provisions, it is legally presumed that the hard-core cartel caused a price increase of 10 percent. Thus, if the GVH or an administrative court, on appeal of the GVH’s decision, establishes the unlawfulness of the practice, the civil court, before which the damages claim is filed, is bound by that part of the decision. Of course, as for damages, the civil court retains its capacity to appreciate whether or not such claims are appropriate.
Furthermore, in order to increase the attractiveness of the leniency policy, the legislative modification stipulates that the firm submitting a leniency application would be obliged only to pay damages if the plaintiffs could not seek compensation from the other cartelists.The damages procedure against the leniency applicant would be suspended until the final judgement is pronounced in the case.
After many years of applying the “dominance-test,” the amendment of the Competition Act now introduces the “substantial lessening of competition (SLC) test.” On the one hand, this will allow the authorisation of concentrations which lead to the creation or to the strengthening of dominance, but which show substantial efficiency gains and, on the other hand, it will make it possible to prohibit concentrations which do not create or strengthen dominance but would substantially lessen competition.
The author is lawyer at the Hungarian Competition Authority (GVH). The views expressed are purely those of the author and may not in any circumstances be regarded as stating an official position of the office.
Bálint Bassola
28.11.2008
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