The Hungarian Competition Office has recently received significant criticism concerning its fining practice in its competition investigation against mobile telephone operators. As a response, the Competition Office has now published (a) a notice on calculation of fines in antitrust cases ("Notice on Fines"), and (b) a notice introducing a formal leniency scheme for hardcore cartels, the first such in Hungarian competition law ("Leniency Scheme Notice").
The purpose of the two notices is to enable undertakings to make an estimate of the competition fines they may face and - taking the advantage of a preliminary application on a no-name basis - take a decision whether or not they wish to participate in a leniency scheme.
Through the Notice on Fines the Competition Office intends to provide more detailed reasoning in its decisions on the fines it imposes by referring to the Notice. Presumably the intention of the Competition Office when issuing this Notice was to reduce the number of judicial review cases where an appeal court has had to reduce the amount of the fine imposed by the Competition Office.
The Competition Act only provides for the maximum amount of the fines (which may be levied for breaches of competition law) and lists some circumstances to be taken into account when assessing the amount of the fine. The maximum fine set out in the Competition Act is 10% of the net turnover of the year preceding the fining decision. The Notice on Fines provides more details by classifying the factors listed in the Competition Act into four groups and imposing a scoring system to each such group. The estimated amount of the fine can be calculated by multiplying the scores (calculated under the scoring system) and the so-called relevant turnover.
The four groups within the scoring system are the following: (a) the type of breach of competition law (30% relevance score), (b) its actual or potential effect on competition (30% relevance score), (c) the undertaking's behavior with regard to the breach and the competition investigation (30% relevance score), and (d) the group of other circumstances, which are not specifically listed in the Notice (10% relevance score).
As regards the first group (the type of breach), hardcore cartels (i.e. cartels not having positive effects on competition at all, such as, for example, price fixing, market sharing etc.) have the most scores, whilst non-hardcore cartels and "abuse of a dominant position" have less. As regards the second group (the effects of the breach on competition), within this group the Competition Office considers the market share as the more important factor, whilst other factors include entry barriers, side effects on other markets, and the nature of the goods and consumers affected. A crucial factor is also whether the effect on the market was actual or potential. Within the third group (behaviour of the undertaking concerned) the following are the detailed factors: role in breach (e. g. organizer or only a predominated participant of the cartel etc.), remediation of the harm caused, co-operation with the Competition Office, etc.
As seen from the above scoring system, the discretion of the Competition Office has been limited by the Notice on Fines to a certain degree, however, it is still quite wide, as within the above groups the scoring is still in the Competition Office's entire discretion (the Notice gives only trivial examples on what may mean higher scores, but does not give concrete examples).
As explained above, the above score is multiplied by the so-called "relevant turnover". This is 10% of the net turnover of the undertaking made on the relevant market in the year of the breach. The relevant turnover is increased by 10% if the breach continues for longer than one year or is a repeated breach.
Regardless of the above scoring system, if an actual gain made as a result of breach of competition law can be established, then the amount of the fine is three times such gain unless the fine calculated according to the Notice on the Fines would be higher, and, of course, subject to the maximum threshold. Further, where special circumstances exist, the Competition Office reserves the right to defer from the Notice subject to an obligation to provide reasons.
The last factor in assessing the level of fines is the application of the newly introduced Leniency Scheme, which applies only to hardcore cartels. The participants in the Leniency Scheme may not be the organizers of or predominant parties to the cartel. In order to be eligible to receive a full release of fines, the participant to the Leniency Scheme must first inform the Competition Office of a cartel or provide evidence with regard to an ongoing investigation, where the Competition Office itself does not have sufficient evidence. The reduction of the fine is available to further participants in the Leniency Scheme in an ongoing investigation, where they provide new evidence which is substantially important for the proving of the cartel. The first such participant may obtain a reduction of 35-50% of the fine, the second a reduction of 20-30% of the fine, whilst further participants may receive a reduction up to 20% of the fine. Further, all participants to a Leniency Scheme are required immediately to stop participation in the respective cartel and fully co-operate with the Competition Office. This includes an obligation to submit all relevant information they have with respect to the cartel.
The Leniency Notice sets out the procedural rules for participation in a leniency scheme. Participants must receive confirmation of their participation and a formal promise of full release or reduction of the fine.
There is an interesting provision according to which an application for participation may be made on a no name basis, submitting only a list of types of evidence in the participant's possession. This provides the opportunity of making only a "trial application" on a "small-risk basis" first. On the basis of this information the Competition Office decides whether there is a foreseeable chance of a release of or reduction in the fine, upon which the applicant may decide whether it wishes to participate, or not (of course, such a promise is conditional upon that the list of evidence being correct).
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.