Rising focus on HCA settlement proceedings – case law round-up l Hungary

This article first appeared on International Law Office.

Since 1 July 2014, companies have been able to initiate settlement proceedings with the Hungarian Competition Authority (HCA). Recent case law suggests that the HCA has aimed to foster cooperation between itself and market participants and is striving for cooperation even when market participants allegedly commit grave infringements of competition law (for further details please see "HCA's recent practice: cooperation and commitments").

HCA settlement proceedings

In the course of HCA settlement proceedings, as a trade-off for waiving certain procedural rights (including the right to appeal against the decision), the imposed fine will be reduced by 10% to 30%. HCA settlements differ from undertaking commitments. Settlements are allowed only in cartel (for both horizontal and vertical agreements) and abuse of dominance cases, and, as opposed to commitments, a settlement decision establishes an infringement and requires an admission of guilt from the parties. Nevertheless, the promise of a certain and substantial reduction of the fine and fast conclusion of the proceeding seems tempting, which is underpinned by a rising number of successful settlement procedures in recent case law.

Recent case law

December 2019:

Fines of more than 860 million HUF (ca. EUR 2500) for collusion in public procurement procedures (VJ/77/2016) -25% reduction for settlement

The HCA imposed the maximum possible fines allowed by law on the companies involved. However, it has reduced the fine of three companies for cooperating in a settlement proceeding, acknowledging the infringement and waiving their right to appeal. It has granted a further 5% reduction in exchange for introducing a compliance programme. Fines in total over 500 million HUF (EUR 1.5 M) on a number of companies for restricting the distribution of alarm equipment (VJ/97/2016)– 30% reduction for settlement

One of the undertakings was granted a fine reduction of 30%, as it admitted its participation in the infringement. Its fine was further reduced for voluntarily introducing a compliance programme aimed at increasing the awareness of its employees in the field of competition law so that similar infringements could be avoided in the future. The other companies were also offered to participate in a settlement proceeding, but they have declined participation and did not receive any reduction.

May 2019: vertical price fixing agreement (Vj/103/2014) – 25% reduction for settlement

The case pertained to resale price maintenance. According to the HCA, in collaboration with a number of its distributors, a producer of outdoor power products for gardening unlawfully set the (online) retail prices of certain branded products. To reduce the imposed fine, the producer participated in a settlement proceeding with the HCA (25% reduction), submitted a leniency application with valuable additional evidence (an additional 45% reduction) and also undertook to improve its compliance programme in order to prevent any such infringements of competition law in the future (an additional 5% reduction).

April 2019: solar battery cartel (Vj/41/2016) – 30% reduction for settlement

In this case, the cartel participants committed market sharing in relation to 26 EU funded projects regarding the production of solar power systems. A dawn raid revealed all necessary evidence to the HCA, which intended to impose a fine close to the 10% maximum. Under these circumstances one of the participants decided that settling with the HCA would result in a more favourable outcome. The HCA rewarded the participant with a 30% fine reduction on condition that the company acknowledged the infringement, waived its rights to make further statements, participate in hearings or seek remedy against the HCA's decision.

April 2019: cartel among battery producers (Vj/43/2015) – 25% and 23% reductions for settlements

Battery producers had agreed to pass waste management fees on to their customers. Two companies applied for settlement with the HCA and received 25% and 23% fine reductions, respectively. The difference between the reductions was based on the different filing times of the applications. The first company had agreed the terms on the first hearing, while the second requested a five-working-day deadline to file its final statement after the hearing. This decision underpins that settlement proceedings support and reward efficiency and concluding cases in a timely fashion. The fine reductions were further increased by successful leniency applications (a 75% reduction for one of the participants).

September 2018: bid rigging (Vj/19/2017) – 30% reduction for settlement

The participants agreed on the winner of a public procurement tender. The infringement was revealed to the HCA through a leniency application and no fine was imposed on the successful applicant. As all of the necessary evidence had been revealed to the HCA, the other participant decided to settle with the HCA and received a 30% fine reduction. When deciding the maximum reduction amount, the HCA considered that the company had settled swiftly and fell into the category of small and medium-sized enterprises.

Takeaways

Although the right to initiate settlement proceedings lies with the HCA, the above cases suggest that the HCA frequently offers this possibility to participants in the most severe cases of competition law infringements. Further, the HCA benefits from a quicker, more efficient proceedings that consume less resources, while companies can benefit from significant fine reductions.

However, in determining whether a settlement is an attractive option, companies must consider that settlement proceedings involve acknowledging that an infringement has taken place and waiving their right of appeal, thereby increasing their exposure to potential follow-up damages claims.