Hungary: Hungarian Competition Authority - Draft Fining Guidelines Published For Consultation

Last Updated: 26 January 2018
Article by Zoltan Marosi

The Hungarian Competition Authority (GVH) has published drafts of its new fining guidelines both for antitrust and unfair commercial practices cases. What are the main proposed changes?

The GVH's new drafts (as available on the GVH's website in Hungarian) contain a rather complex fine calculation method, which is somewhat more sophisticated than the earlier model. The five main steps of the fine calculation would be as follows:

  1. setting a starting amount: based on the relevant turnover and a "case-based ratio" (a system of points from 0 to 60 depending on the type of infringement committed and the market effects of the infringement);
  2. setting the basic amount: checking various aggravating and mitigating circumstances, which may reduce or increase the amount;
  3. correction of the basic amount: a) possible recidivism, b) any undue advantages achieved by the infringement, c) deterrence and d) the overall 10% maximum of the fine;
  4. possible cooperation by the party: a) leniency, b) settlement, c) active steps to remedy the infringement, d) compliance programs, e) other cooperation;
  5. possible reductions / payment in instalments due to financial difficulties.

The planned changes within this five step procedure can be summarised along the following key points:

  • As stated, the starting amount of the fine will be based on two factors: the relevant turnover and a "case-based ratio". Importantly, the GVH plans to start the fine calculation (the establishment of the "basic amount) by taking 30% of the relevant turnover (ie typically the turnover of the given company achieved from the relevant market): this was previously only 10%;
  • to ensure the overall goal of deterrence, there will also be certain minimum levels for the "case-based ratio" in specific cases: for example, it cannot go below 20 points in public procurement cartel cases or 15 points for serious vertical restraints (such as resale price maintenance);
  • the starting amount could then be increased or decreased by minor, intermediate and important aggrevating and mitigating factors. A minor factor could entail a change between 0-5%, an intermediate factor between 5-15% an important factor between 15-25%. The factors include the extent of the company's role in the infringement, state inducement, culpability, etc.;
  • a very strong emphasis is put on recidivism: under the new rules, a repeated infringement would be taken into account (i) in relation to the entire company group in question, (ii) in case of infringements of EU law, any other EU competition authority's decision would be relevant and (iii) the relevant period for previous infringements would be increased to 15 years. A repeated infringement could even entail a 100% increase of the basic fine amount;
  • a further important novelty is the description of the factors to be taken into account when evaluating the extent of the reduction in the unique Hungarian settlement procedure, whereby a settlement could entail a reduction of up to 30 % (as opposed to, e.g. the 10% fixed reduction rate before the European Commission). For example, SME's can expect a higher reduction here;
  • a further important novely of the draft guidelines is the recognition of compliance programs as a relevant issue from the perspective of setting the amount of the fine. A compliance program implemented before the initiation of the GVH proceedings in itself does not entail a reduction; however, if the given party can prove that the compliance program contributed to the provision of relevant evidence within the framework of a leniency application, then this could entail a maximum 10% reduction. In case of compliance programs to be implemented after the intitiation of the GVH proceedings, the rate of reduction is smaller (up to 5%) and such reduction is only provided if (i) the program is undertaken to be implemented in conjuction with a leniency application, a participation in a settlement procedure or active measures to rectify the harm caused by the infringement and (ii) if they comply with the relevant international standards;

The new guidelines would generally be applicable in case of GVH proceedings initiated after their adoption. However, the they would already apply in GVH proceedings where the statement of objections has not been issued by the GVH: in such cases, however, certain more stringent provisions would not be taken into account (such as the increase of the "basic amount" from 10% to 30% and the minimum levels for the "case-based ratio".

The deadline for submitting comments to the draft guidelines is 29 September, which comments may result in various changes to the current text. It is expected that the new guidelines would enter into force some time in October 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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