December 2011 – A recent second instance judg ment by the Metropolitan Court of Appeal (“Court of Appeal”) provides some interesting insight into the court’s approach in cartel matters. The case before the Court of Appeal concerned the second instance review of a first instance judg ment that annulled certain parts of the decision of the Hungarian Competition Office (the “HCO”).
Definition of the relevant market
Until now, in response to applicants’ criticism of the HCO’s casual approach to market definitions, the HCO often argued that the definition of the relevant market in matters concerning hard-core (i.e. price fixing or market sharing) cartels is of secondary importance. The HCO took the view that pursuant to the Competition Act, based on the low market share of the cartel participants the exemption of anti-competitive agreements from the general prohibition does not apply to hard core cartels.
The Court of Appeal has now revealed that the conduct of the investigated companies cannot be lawfully assessed from a competition law perspective in the absence of a market definition. The HCO must consider all relevant circumstances in the given case (including the product, the geographical area, the time factor and the market players) to determine whether there is competition. Only if this is established can the HCO assess whether a conduct had any impact on competition, which is a precondition of establishing an infringement. In this particular case, the HCO’s failure to investigate the facts relating to the establishment of the relevant market led to incorrect conclusions and was sufficient per se for the annulment of the HCO decision.
Single and continuous infringement
The Hungarian Competition Act does not define the concept of single and continuous infringement and does not provide the conditions for establishing such infringement. Based on EU judicial practice, if a set of individual agreements are interlinked in terms of pursuing the same objects or as part of a common plan, those can be characterised as constituting a single and continuous infringement. A party participating in an agreement that is deemed to be part of a single and continuous infringement can be held liable for agreements of others in pursuit to the same end that forms part of the same single and continuous infringement.
The Court of Appeal ruled that in the absence of a statutory prohibition, the HCO is authorised to introduce the concept of a single and continuous infringement into its proceedings, and define those conditions pursuant to which such infringement can be established. Thus, the Court of Appeal did not challenge the criteria set by the HCO to establish a single and continuous infringement, i.e. the proof of (a) a single objective; (b) an overall plan; and (c) a continuous conduct.
In addition, the Court of Appeal did not overturn the first instance judg ment’s ruling that in the event the HCO seeks to establish a single and continuous infringement, it is necessary (i) to precisely set the market on which such infringement took place, and (ii) to provide sufficient evidence on the basis of which it can be established without a doubt and without logical errors that the anti-competitive agreement covered the entire relevant market. Only if these conditions are met can the HCO prove that certain agreements regarding which there is no direct evidence of the participation of an investigated party belonged to the same set of agreements that formed the single and continuous infringement. Only in this case can such party be held liable for an agreement in respect of which there is no direct proof of its participation.
Limited scope of representatives
The Hungarian Competition Act provides a list of persons who are entitled to represent an undertaking before the HCO, including making statements on behalf of that undertaking. In the particular case, the HCO used as evidence statements from a person who did not qualify as a representative based on such list. However, the HCO did not define in what capacity this person was heard, and it was clear that this person was not heard as a witness (in which case certain procedural guarantees should have been applied).
The Court of Appeal ruled that such omission of the HCO made these statements unfit to be assessed as evidence until in the repeated proceedings the HCO finds proper legal grounds to include them into the proceedings as evidence.
Procedural requirements to qualify as evidence
On a more general note, the Court of Appeal ruled that a piece of information cannot be used as evidence by the HCO to prove the facts of the case if the HCO fails to establish what type of evidence (document, witness statement, statement of the undertaking, expert opinion etc.) such information represents. Otherwise, it cannot be determined whether procedural rules and guarantees relating to such evidence were observed by the HCO. The Court of Appeal ruled that the HCO’s failure to establish that the information used qualified as evidence constituted an infringement of procedural law affecting the merits of the decision, which was sufficient to annul the HCO decision.
Broad discretion of the HCO to set fines
The first instance court’s rulings (left unchanged by the Court of Appeal) confirmed that the HCO has a very broad discretion when imposing fines. For example, the HCO can deviate from its previous fining practice as long as the imposition of the fine is lawful based on the circumstances of the specific case. Furthermore, although the Hungarian Competition Act obliges the HCO to establish the maximum amount of the fine imposed on the basis of turnover information that “can be regarded as authentic”, the HCO was allowed to lawfully deem that only an audited annual report is authentic for such purpose. In addition, the HCO has no obligation to delay the adoption of its decision until the audited annual report of the undertaking for the preceding business year preceding the imposition of fines is available. It follows that the HCO may use previous audited annual reports for establishing the maximum amount of fines (even if the relevant turnover figure had significantly decreased in the meantime). Finally, it has been ruled that the HCO is entitled to adjust the maximum level of the fine to the turnover of the group of undertakings to which the offender belongs.
Limited court’s authority to provide guidelines to the HCO for repeated proceedings
The Court of Appeal confirmed that during the judicial review of HCO decisions, the court is authorised to amend or annul the HCO decisions and if necessary, provide compulsory guidelines for the repeated HCO proceedings. However, such authority may not result in the court taking over the role of the HCO to collect evidence, establish new facts of the case and establish a different type of infringement as compared to the reviewed HCO decision. Therefore, in its guidelines, the court must leave sufficient room for the HCO to exercise its discretionary power as an authority.
No right to dispute leniency decisions concerning other undertakings
The first instance court ruled (and the Court of Appeal did not overturn such ruling) that the parties to the proceedings had no right to dispute the lawfulness of the HCO decision to grant leniency to another undertaking, as they are not considered to be “interested parties” in the relationship between the HCO and the leniency applicant.
For further information please contact Ákos Nagy, Counsel, at .