LIDC Oxford Question A: Fines in Antitrust

Transcription

1 LIDC Oxfrd 2011 Questin A: Fines in Antitrust What are the mst imprtant factrs that shuld determine the level f fines impsed fr infringements f cmpetitin rules? Shuld there be a binding framewrk determining the level f fines? Wh shuld decide? Internatinal Rapprteur: Astrid Ablasser-Neuhuber, Gerhard Fussenegger HUNGARY Natinal Rapprteur: Zltán HEGYMEGI-BARAKONYI Members f the Wrking Grup (in alphabetical rder): Julianna BAKI - Bálint BASSOLA - Miklós BORONKAY - Gábr FEJES - Judit FIRNIKSZ - Mártn HIDVÉGI - Mártn HORÁNYI - András HORVÁTH - Zltán MAROSI - Péter MEZEI - Csngr István NAGY- Álms PAPP- Tihamér TÓTH - Dávid ZLATI References and abbreviatins: APA Cmpetitin Act CCP UCP Act HCA FSA CAO NTCA TFEU ECHR Rme Cnventin Antitrust Fine Ntice Hungarian Criminal Cde Act CXL f 2004 n the General Rules f Administrative Prcedures and Services Act LVII f 1996 n the Prhibitin f Unfair and Restrictive Market Practices Act III f 1952 n the Cde f Civil Prcedure Act XLVII f 2008 n the Prhibitin f Unfair Cmmercial Practices Hungarian Cmpetitin Authrity (Gazdasági Versenyhivatal) Financial Supervisry Authrity (Pénzügyi Szervezetk Állami Felügyelete) Central Agricultural Office (Mezőgazdasági Szakigazgatási Hivatal) Natinal Tax and Custms Authrity (Nemzeti Adó- és Vámhivatal) Treaty n the Functining f the Eurpean Unin Eurpean Curt f Human Rights Cnventin fr the Prtectin f Human Rights and Fundamental Freedms (Rme, 4 Nvember 1950) The applicatin f a leniency plicy t prmte the detectin f cartels Ntice n 3/2003 f the President f the Hungarian Cmpetitin Authrity and the Chair f the Cmpetitin Cuncil f the Hungarian Cmpetitin Authrity Act IV f 1978 n the Criminal Cde 1

2 1. INTRODUCTION Our reprt analyzes varius aspects f fines impsed in Hungary fr infringements f the prhibitin f restrictive agreements and the abuse f dminant psitin. The reprt des nt deal with fines impsed in merger cntrl cases, r fines which are therwise f a prcedural nature. 1 The HCA is entitled t act in cnsumer prtectin cases as well. Our reprt des nt analyze fines impsed in such cases, althugh where apprpriate, we refer t the methdlgy used by the HCA in that field. 2. LEGAL FRAMEWORK 2.1 Institutins Which bdies are respnsible fr deciding the amunt f the fine impsed fr an infringement f cmpetitin law ( infringements )? (Please describe hereunder als the degree f independence frm ther public enfrcement bdies and indicate als whether the same bdy investigates and decides ver the fine; please describe whether an appeal is pssible and t which bdy/institutin (administrative bdy, independent tribunal etc..). In Hungary, the enfrcement f the prvisins f the Cmpetitin Act 2 is the respnsibility f the HCA having natinwide jurisdictin. 3 Since the accessin f Hungary t the Eurpean Unin (1 May, 2004), the HCA als has jurisdictin fr the enfrcement f the cmpetitin rules f the Eurpean Unin. The HCA is an autnmus administrative bdy, which may nt be instructed by the Gvernment, and the President f which bears a reprting bligatin exclusively twards the parliament. Accrding t the Cmpetitin Act, the HCA is empwered t sanctin undertakings infringing Hungarian (Chapter III, IV and V f the HCA) and/r EU cmpetitin law (Article 101 and 102 TFEU) with a cmpetitin supervisin fine. 4 The facts are established by the case handler f the HCA, wh submits a prpsal in his/her s-called investigatin reprt n the cmpetitin law assessment and the sanctin t be applied t the Cmpetitin Cuncil, which is the independent decisin-making bdy within the HCA. The Cmpetitin Cuncil is nt bund by the 1 In Hungarian cmpetitin law, a fine may be impsed if the undertaking fails t cmply with the 30 days deadline fr submitting a merger cntrl filing after signing the binding agreement bringing abut the cncentratin. 2 The several times amended Act LVII f 1996 n the prhibitin f unfair market practices and restrictin f cmpetitin (hereinafter: Cmpetitin Act). 3 We have t nte that althugh the Cmpetitin Act (Chapter II f the Cmpetitin Act) als prhibits unfair cmpetitin, this prhibitin can nly be enfrced befre the curts and nt by the HCA [see Sectin 86 (1) f the Cmpetitin Act]. The curt is als empwered t impse fines, thus a typically administrative sanctin, in these prceedings upn the infringer. Nevertheless the curt shall prceed within the framewrk f the prvisins n cmpetitin supervisin fines in applying the fine as a sanctin, therefre, it must cnsider the aspects f impsing a fine, the upper limit f the fine, etc. (see Sectin 87 f the Cmpetitin Act, accrding t which [the] prceeding f the curt als extends t impsing a fine specified in Sectin 78 [f the Cmpetitin Act]. ). 4 See first sentence f Sectin 78 (1) f the Cmpetitin Act. The authrizatin fr sanctining the infringement f Article 101 and 102 TFEU with a cmpetitin supervisin fine is cntained in Article 5 f Regulatin 1/2003/EC. 2

3 investigatin reprt, it makes its wn cmpetitin law assessment n the merits f the case and decides n the fine independently. 5 The decisin f the HCA impsing a fine may be challenged befre the Metrplitan Curt within 30 days after the receipt f the decisin 6. After expiratin f this time perid, the decisin is enfrceable. 7 Challenging the decisin f the HCA des nt have a suspensive effect n the enfrcement theref. 8 The fined undertakings may request the curt t suspend the enfrcement f the decisin f the HCA within 30 days after receipt theref. Thus, enfrceability may mean n the ne hand that the deadline fr challenging the decisin f the HCA has expired, r n the ther hand that the curt rejected the applicatin fr the suspensin f the enfrcement f the decisin f the HCA. It is imprtant t nte, hwever, that enfrcement is barred als, if (i) the deadline f 30 days fr the applicatin fr suspensin has nt yet expired; (ii) the Metrplitan Curt is adjudicating the applicatin fr suspensin 9, r (iii) until the Metrplitan Curt f Appeal decides n the appeal against the negative decisin f the Metrplitan Curt cncerning the suspensin. An internal mnitring system exists within the HCA regarding the payment f the fines, in the framewrk f which the HCA first delivers a payment ntice t the undertaking bliged t pay the fine, then in case f an unsuccessful ntice, requests the assistance f the tax authrity. The actual payment is withut any difficulties in practice, because if the undertaking cncerned fails t fulfil its bligatin within the applicable deadline, the cmpetitin supervisin fine qualifies as a public debt t be levied similarly t taxes, which is cllected by the cmpetent tax authrity n the basis f the request f the HCA Nature f the Rules gverning the assessment f fines What prcedural rules are in place t gvern the determinatin f fines? (administrative prcedure, curt prcedure etc). The cmpetitin supervisin fine is impsed by the HCA in the curse f an administrative prceeding, t which the Cmpetitin Act and, as subsidiary law, the APA 11 are applicable. In case f challenging the HCA decisin, the curt prceeds n the basis f Chapter XX f the CCP 12 and it may verrule the fine. 5 Fr the sake f cmpleteness, we nte that in the curse f the cmpetitin supervisin prceedings, the HCA may impse a fine nt nly fr the infringement f the prvisins f substantive law, but als fr the act r cnduct aimed at r resulting in the prtractin f the administrative prceedings r the hinderance f discvering the actual facts [Sectin 61 (3) f the Cmpetitin Act], r fr disturbing the rder f the hearing [Sectin 62 (5) f the APA]. Furthermre, a fine may be impsed (Sectin 79 f the Cmpetitin Act) fr failure t submit an applicatin fr the authrizatin f a cncentratin (Chapter IV f the Cmpetitin Act), and als fr failure t cmply with the cnduct prescribed by the decisin f the HCA (Sectin 90 f the Cmpetitin Act enfrcement fine). 6 See Sectin 83 (1) f the Cmpetitin Act 7 See Sectin 89 f the Cmpetitin Act 8 See Sectin 89 (2) f the Cmpetitin Act 9 The Metrplitan Curt has 8 days t d s, hwever, experience shws that the curt usually exceeds this deadline. 10 See Sectin 90 (5) f the Cmpetitin Act 11 See Act CXL f 2004 n the general rules f administrative prceedings and services 12 See Act IV f 1952 n civil prcedure 3

4 T what extent is the level f fines determined by legislative rules (e.g. prescribing maximum levels f fines, the apprach t be adpted in assessing fines)? Accrding t the prvisins in frce, the amunt f the fine must be set by taking int accunt all circumstance f the case. 13 Nevertheless, the legislatr explicitly indicated certain aspects, which the HCA must in particlar take int cnsideratin in the curse f calculating the cmpetitin supervisin fine: - gravity f the infringement (the degree t which ecnmic cmpetitin is endangered, the scpe and extent f harm t cnsumers interests); - duratin f the infringement; - gain achieved by the infringement; - psitin f the participants f the infringement n the market; - culpability fr the cnduct; - cperatin facilitating the prceedings; - repeated vilatin f the law (recidivism). 14 Apart frm the bligatin f the HCA t take int cnsideratin the abve aspects 15, the HCA has wide discretinary pwers in setting the amunt f the fine. 16 Thus, it falls under the discretin f the HCA, fr example, whether t apply the sanctin f a cmpetitin supervisin fine at all r t impse ther sanctins 17 (as well). 18 Accrding t the amendment f the Cmpetitin Act, which entered int frce n Nvember 1, 2005, cntrary t previus rules, the maximum amunt f the fine is nt 10% f the net turnver f the undertaking achieved in the preceding business year, but the same rate f turnver f the grup f undertakings, t which the cncerned undertaking belngs t. 19 The same lgic applies t the fines impsed n the prfessinal assciatin f undertakings; 20 there the maximum amunt f 13 See first sentence f Sectin 78 (3) f the Cmpetitin Act 14 See Sectin 78 (3) f the Cmpetitin Act 15 Hwever, these aspects must be taken int cnsideratin by the HCA in any event. In a recent judgment, adpted in cnnectin with the review f the decisin f the HCA n the graphic cartel, the Metrplitan Curt f Appeal pinted ut that the HCA in its decisin failed t assess the infringement n the basis f these aspects [see the judgment N. 2.Kf /2007/12 f Metrplitan Curt f Appeal n the review f the HCA decisin adpted in the cmpetitin supervisin prceedings N. Vj-98/2004 (NB: althugh the Curt f Appeal upheld the perative part f the decisin f the HCA establishing the infringement, it has reduced the amunt f the fine significantly]. 16 In a recent judgment, the Metrplitan Curt f Appeal presented in detail thse aspects f impsing a fine, which it rendered as justified t be cnsidered by the HCA and the curts in accrdance with the authrizatin cntained in the exemplificative enumeratin in Sectin 78 (3) f the Cmpetitin Act (see judgement N. 2.Kf /2008/15 f the Metrplitan Curt f Appeal). 17 The Cmpetitin Act may establish that the cnduct is unlawful; may rder the eliminatin f the situatin vilating the Cmpetitin Act; may prhibit the cntinuatin f the cnduct vilating the HCA; where it finds an infringement, it may impse bligatins, including in particular the bligatin f a cntract t be cncluded where an unjustified refusal t create r maintain business relatins apprpriate fr the type f the transactin (Sectin 21 c) f the Cmpetitin Act) has been fund; may rder a crrective statement t be published in respect f misleading infrmatin (see Sectin 77 f the Cmpetitin Act). 18 The HCA decisin adpted in the cmpetitin supervisin prceedings N. Vj-60/2004 (Aréna, Ticketpr, Multimedia) serves as an example fr the case, where the HCA established the infringement, hwever, with respect t the fact that the unlawful situatin ceased t exist, the business relatinships f the undertakings have changed, etc., the HCA cnsidered impsing a fine as unjustified. 19 See Sectin 78 (1) f the Cmpetitin Act 20 See Sectin 78 (1) f the Cmpetitin Act 4

5 the fine is als 10% f the net turnver f the member undertakings achieved in the preceding business year. Are there ther (further?) guidelines as t the level f fines r as t the methdlgy t be used in assessing fines? Ntice N. 2/2003 issued by the president f the HCA and the chair f the Cmpetitin Cuncil f the HCA, as amended by ntice N. 2/2005, cntaining guidance n the amunt and the methdlgy f setting fines, was repealed by the president f the HCA and the chair f the Cmpetitin Cuncil f the HCA n 18 May, 2009, thus there is n guidance issued by the HCA n impsing cmpetitin supervisin fines in antitrust cases currently in frce. If s: Wh issues the guidelines? Are they binding fr the bdy wh determines the fine. Is there a requirement t cnsult the public n the guidelines and/r d they have t be apprved by the legislature r by gvernment ministers? Althugh currently there is n such guidance (s-called ntice) issued by the HCA in frce, the president f the HCA and the chair f the Cmpetitin Cuncil f the HCA may jintly issue a ntice. The ntices are nt legally binding. 21 There are n requirements set frth in the Cmpetitin Act pertaining t the cnsultatin preceding the issuing f the ntices, neither the apprval f the legislatr, nr that f the Gvernment (r any minister) is necessary. T what extent is the cmpetitin authrity r a judicial tribunal hearing an appeal, required t fllw the guidelines in determining the level f fines in any particular case? Althugh currently there is n such guidance (s-called ntice) issued by the HCA in frce, neither the HCA, nr the curts reviewing the decisin f the HCA are bund by the ntice. Nevertheless, the HCA shuld prvide a reasning fr deviating frm the ntice. T what extent d they reflect r relate t prcedures used in natinal law t determine penalties r fines payable fr ther types f ecnmic crimes/infringements (such as fraud/envirnmental law/cnsumer prtectin)? Althugh currently there is n such guidance (s-called ntice) issued by the HCA in frce, the Antitrust Fine Ntice previusly in frce was significantly different frm the prcedures applied in ther fields (criminal law, envirnmental law, cnsumer prtectin law) with respect t its details and methds. 21 See Sectin 36 (6) f the Cmpetitin Act 5

6 Is there a leniency prgram in place and what is the legal basis fr the determinatin f the criteria fr leniency (legislative rules, ther binding/nn-binding guidelines)? Yes, there is a leniency plicy in place in Hungary. Prir t the amendment f the Cmpetitin Act which entered int frce 1 June 2009, the HCA's leniency plicy existed in the frm f a ntice 22 issued by the HCA. Currently, Sectins 78/A-78/B f the Cmpetitin Act cntain the detailed rules f leniency. Are there any rules that permit r require fines als t individuals? Currently, n such prvisin exists fr the infringement f the cmpetitin rules. What are the verall bjectives f fining plicy (e.g. t deter further infringements by the undertaking cncerned, further infringements by ther undertakings, r, t mark the seriusness f the infringement) and are thse bjectives made transparent (e.g. legislative materials, recitals etc.)? Accrding t case-law, the cmpetitin supervisin fine must serve tw bjectives 23 : - n the ne hand, the sanctin must have sufficient deterrent effect n the given undertaking infringing the law nt t cmmit infringements in the future (special deterrent effect); - n the ther hand, it must play a rle in deterring ther undertakings frm pursuing practices cntrary t cmpetitin law requirements (general deterrent effect). 2.3 General Methdlgy used in determining the amunt f the fine Please briefly summarise the methdlgy used t determine the amunt f the fine (nly key factrs) As we indicated under pint 2.2, there are currently n guidelines n fining in antitrust cases issued by the HCA. An fficially published methdlgy n the determinatin f fines is thus currently nt available. Since the withdrawal f the Antitrust Fine Ntice, in practice, first, the HCA usually determines the basic amunt f the fine, which typically equals the turnver achieved n the relevant market by the undertaking(s) cncerned. Subsequently, the HCA cnsiders the legal criteria enumerated under pint 2.2 abve (gravity f the infringement, duratin f the infringement etc.) as well as ther aspects ptentially relevant fr the case, individually and in their entirety, typically qualifying them either as aggravating r mitigating circumstances. It is, hwever, imprtant t nte that since the withdrawal f the Antitrust Fine Ntice, in the vast majrity f cases, neither the exact basic amunt nr the exact weight allcated t the different circumstances increasing r decreasing the fine can be deducted frm the HCA s decisins See The applicatin f a leniency plicy facilitating the discvery f cartels. The ntice N. 3/2003 f the president f the HCA and the chair f the Cmpetitin Cuncil f the HCA (revked). 23 See HCA decisin adpted in the cmpetitin supervisin prceedings N. Vj-27/2003 and the final judgment N. Kfv.IV /2007/28 f the Supreme Curt uphlding the decisin. 24 See e.g. Case N Vj-174/2007 (railway cnstructin), Case N Vj-130/2006 (rad cnstructin) r Case N Vj-29/2008 (taxi) (althugh in the latter decisin the HCA revealed the basic amunt f the fine in the annex t the decisin) 6

7 Des the methdlgy vary depending n whether the infringement is unilateral (e.g. mnplisatin/abuse f dminant psitin, failing t ntify a merger) r multilateral (e.g. cartels)? Cnsidering that public guidelines r a methdlgy issued by the HCA are nt available, this questin cannt be answered. Is there a maximum fine that may be impsed? If s, hw is that maximum amunt determined? As we indicated under pint 2.2. abve, accrding t the main ( traditinal ) rule cntained in Sectin 78 (1) f the Cmpetitin Act, the maximum amunt f the fine is 10 % f the net turnver realised by the given undertaking in the preceding financial year. Furthermre, since 2005 it is pssible fr the HCA t align the maximum fine nt with the turnver f the given undertaking (typically a cmpany / business assciatin), but with the wider turnver f the grup f undertakings t which the given undertaking belngs. If the grup t which the undertaking cncerned belngs t is identified in the infringement decisin, the maximum amunt f the fine is 10 % f the grup s net turnver realised in the preceding financial year. It is bvius that fr the undertakings cncerned, it is extremely imprtant whether the HCA applies the abve maximum amunt in the traditinal r wider sense. Hwever, the Cmpetitin Act des nt determine in what situatins and under what cnditins the wider maximum fine cncerning grups f undertakings has t be applied and what is the extent f the HCA s bligatin t state reasning in that respect. The black-letter wrding f the law, using the term illetve in Hungarian (meaning here and/r ), appears t simply leave the chice between the tw pssibilities fr the HCA itself. In the cases decided fr the time being, the HCA applied the wider maximum in unfair cmmercial practices cases where all relevant members f the grup were brught int the investigatin as parties. 25 Hwever, there was als a recent antitrust case, where nly a given member f the grup was a party t the investigatin, but the HCA fund it necessary t increase the maximum in rder t ensure the deterrent effect f the (accrding t the HCA, the fine has t be such as t strngly influence all f the members f the grup f undertakings cncerned t abstain frm this kind f infringing practice in the future ) 26. The maximum amunt f fines impsed n assciatins f undertakings is similarly t grups f undertakings 10 % f the net turnver realised by the members f the assciatin in the preceding financial year. Finally, in the interest f legal certainty, it is prvided that if there is n audited/credible infrmatin available n the net turnver f the given undertaking r grup f undertakings realised in the financial year preceding the decisin establishing the infringement, the turnver f the last audited/clsed financial year is decisive when establishing the maximum amunt f the fine Case N Vj-165/2008 (Hild) 26 Case N Vj-174/2007 (railway cnstructin), par Sectin 78 (2) f the Cmpetitin Act 7

8 Insfar as the fine depends n the seriusness f the infringement, explain whether and (if s) hw the fllwing factrs are assessed and taken int accunt: the rle played by the undertaking in the infringement; The Metrplitan Curt f Appeal s judgment N 2.Kf /2008/15 stresses that the fact fr an undertaking t play an initiating, leading rle, mtivating thers t cmmit an infringement, is an aggravating circumstance (II/e). The HCA s decisin N Vj-69/2008 published in April 2011 established Pannnmill Zrt. s leading rle in a Hungarian mill industry cartel that went n fr years. The HCA impsed a fine f HUF 800,000,000 (EUR 3,000,000) n the undertaking. The cmpetitin authrity established in its decisin that Pannnmill Zrt. in certain cases exercised pressure n ther members in rder t achieve smth functining f the cartel. There are examples in the HCA s case law where the HCA qualified nt nly ne, but several undertakings at the same time as rganisers f the cartel and impsed higher fines. In relatin t the price-fixing agreements by taxi cmpanies in Budapest, the HCA, in its decisin N Vj-114/2002, cnsidered the active rle taken by Citytaxi, Budataxi and Főtaxi in the planning f the meetings between the cmpetitrs as an aggravating circumstance. In the abve decisins the HCA did nt explain what is the imprtance f a leading/planning rle as an aggravating circumstance. The rle played in the infringement may als be imprtant fr the evaluatin f leniency applicatins (see Leniency Ntice III/1/C). In Case N Vj-72/2002, the HCA refused t grant IHG-Inf Hlding Rt full immunity, referring t its leading rle, even thugh this undertaking prvided the written evidence that allwed the HCA t establish that in the sectr f car riginality inspectin services, price crdinatin between cmpetitrs had been ging n fr three years. the effects f the infringement; On the basis f the Metrplitan Curt f Appeal s judgement N 2.Kf /2008/15 and the HCA s case law, the absence f restrictive effects n cmpetitin has t be cnsidered as a mitigating circumstance fr the purpse f fixing the fine. (I/g) On the ther hand, the failure t prve the effect as such, is nt cnsidered t be a mitigating circumstance. (Case N VJ-69/2008) The HCA, in its decisin N Vj-112/2003, cnsidered that the decisins taken by the Slaughter Animals and Meat Assciatin in relatin t the sales prices f these prducts were infringing cmpetitin law, but as it became clear in the curse f the prceedings that market prices did actually nt rise due t the recmmended prices (which were accmpanied by severe sanctins in case f deviatin), the HCA explicitly tk this circumstance int accunt when fixing the symblic fine amunting t HUF 1,000,000 (EUR 3,800) (which the curt reduced t HUF 100,000). On the ther hand, in the prceedings initiated under N Vj-132/2003 against the Game Assciatin and in the prceedings N Vj-199/2005 against the Egg Assciatin, the HCA cnsidered that it was established that the assciatins recmmended prices and minimum prices had a restrictive effect n cmpetitin n all relevant markets. Cnsequently, it impsed fines f HUF 80,000,000 (EUR 300,000) and HUF 120,000,000 (EUR 450,000) respectively. (The 8

9 fine impsed n the Egg Assciatin was reduced by the Metrplitan Curt f Appeal by 50 %) While examining restrictive agreements f undertakings, the HCA prved in several cases that the given restrictive practice actually had a detrimental effect. In prceedings N Vj- 145/2001 it established that several undertakings agreed n the prices f their catering services in the summer hliday regin f Lake Balatn, as a result f which prices did indeed increase. In the same manner, the HCA increased the fine impsed n taxi cmpanies in Budapest fr price fixing agreements, in light f the evidence f the restrictive effect n cmpetitin. (Case N Vj-114/2002, taxi cartel) duratin f the infringement; Sectin 78 (3) f the Cmpetitin Act and judgement N 2.Kf /2008/15 f the Metrplitan Curt f Appeal state explicitly (II/j) that when determining the amunt f the fine, the cmpetitin authrity takes int accunt the duratin f the infringement. As far as case law is cncerned, the HCA reduced the fine because f the shrt duratin f the infringement in a case where it examined the ethical cde f the Natinal Ambulance Assciatin which had been in frce fr 9 weeks (Case N Vj-92/2003). In the same manner, the HCA cnsidered that the restrictive decisin f the Slaughter Animals and Meat Assciatin which had been in frce fr three and a half mnths was f shrt duratin and therefre reduced the fine. (Case N Vj-132/2003) On the ther hand, fr infringements that last fr years, the HCA always explicitly takes int accunt the duratin f the infringement. The earlier practice f the HCA was t multiply the basic amunt f the fine with the number f years affected by the infringement. Hwever, since the withdrawal f the Antitrust Fine Ntice, there is n frmal calculatin methd, and the HCA takes int accunt the duratin f the infringement as ne f the factrs relevant fr setting the fine. In its decisin in Case N Vj-130/2006, the HCA impsed a ttal fine f HUF billin (EUR 11 millin) n fur cnstructin undertakings fr a six-year lng cllusin in relatin t tenders called in tw Hungarian regins, while in prceedings N. Vj-174/2007 relating t railway cnstructin tenders, the HCA impsed a ttal fine f HUF billin (EUR 27 millin) fr cllusin that had lasted fr three years (an appeal against this decisin is pending). It shuld be nted that in bth cases, ther aggravating circumstances justified the extremely high fines. the persns affected by the infringement (e.g. cnsumers r vulnerable grups); The Metrplitan Curt f Appeal s judgement N 2.Kf /2008/15 stresses that if the infringement affects vulnerable cnsumer circles, this has t be cnsidered as an aggravating factr, taking int accunt als the knwledge level f the affected cnsumers. (II/n) Hungarian case law applies the cncept f harm t vulnerable cnsumers as an aggravating circumstance mainly in cases f unfair cmmercial practices. The fllwing cnsumer grups are cnsidered as particularly vulnerable: thse wh use the given prducts r services because f their physical injuries, illness, pains (Case N Vj-115/2009 Berlin Chemie) r with a healing/therapeutical purpse (Case N Vj-7/2009 Üstöki Kft.), r because f their addictin (Magyar Telekm Nyrt.) as well as thse wh are vulnerable because f their age (Case N Vj-47/2008 FHB Zrt.). In the same way, Hungarian cmpetitin law cnsiders as an infringement affecting a special circle f victims the infringement cmmitted t the detriment f public funds. This circumstance was allcated significant imprtance by the HCA in numerus cases, in 9

10 particular in relatin t restrictive practices cncerning calls fr tenders. In Case N Vj- 27/2003 the undertakings cncerned cmmitted an infringement t the detriment f public funds by cncerting their behaviur with regard t the tenders called in relatin t the cnstructin f the M7 mtrway. In that case the HCA impsed a ttal fine f HUF 7 billin (EUR 26.5 millin). the size f the affected market/relevant ecnmic market; The Metrplitan Curt f Appeal s judgement N 2.Kf /2008/15 establishes that it has t be cnsidered as an aggravating circumstance if the infringement cncerns a market in its entirety r cncerns a market the size f which is substantially larger than average. (II/l) In the prceedings initiated with regard t the Hungarian multilateral interchange fee (MIF), the HCA cnsidered the fact fr the restrictive agreement t affect the whle market as a strngly aggravating factr. (Case N Vj-18/2008, Allianz & C) the existence f a genuine cmpliance plicy at the time f the infringement; Althugh in numerus cases the parties referred t their cmpliance prgrammes as a mitigating circumstance, the HCA did nt fllw their requests. (Case N Vj-25/2004, Betnút & C; Case N Vj-56/2004, Adeptus & C) the invlvement f senir management in the infringement; Neither the Metrplitan Curt f Appeal s judgement N 2.Kf /2008/15 nr the currently existing Hungarian case law cnsider the participatin f senir executives participates in the infringement as an aggravating circumstance. any intentin by the undertaking (r emplyees invlved) t harm cmpetitin, r recgnitin that cmpetitin wuld be r wuld be likely t be harmed; Sectin 78 (3) f the Cmpetitin Act and the Metrplitan Curt f Appeal s judgement N 2.Kf /2008/15 explicitly establish (II/g) that the degree f culpability f the undertaking fr the infringement has t be cnsidered when impsing the fine. Under Hungarian case law, an undertaking is cnsidered strngly culpable fr the infringement if there is evidence that the restrictin f cmpetitin was intentinal. In Case N Vj- 74/2004, the HCA established n the basis f an agreement cntained in a ntarial deed and cncluded between Cnstrum Kft. and Ryal Bau Kft. that the given undertakings, in relatin t a bid fr the cnstructin f 22 residential buildings, intentinally and in a cntemplated manner cncerted their behaviur. In ther cases the HCA qualified the restrictive intentin f the given undertakings as deliberately ffending, and increased the fine als with regard t this circumstance. (Case N Vj-27/2003, mtrway case; Case N Vj-130/2006, Heves-Nógrád case) whether the infringing cnduct culd reasnably have been regarded as lawful r was f a type nt previusly fund t be an infringement; Knwledge f the infringement r the absence f an intentin in that sense are cnsidered by the HCA when evaluating the culpability f the undertaking. Hwever, the fact that an undertaking is nt aware that it is cmmitting an infringement is nt cnsidered as a mitigating circumstance. (Case N Vj-101/2000) With regard t the decisins taken by 10

11 bdies belnging t the agricultural sectr, the HCA in its earlier case law tk int accunt that legal prvisins in the agricultural sectr allwed farmers assciatins in certain cases t determine recmmended prices. While in 2002, the HCA did nt impse a fine in the prceedings against the Apple Farmers Assciatin, (Case N Vj-13/2002), it did impse a symblic fine in 2003 against the Slaughter Animals and Meat Assciatin, accepting the naive cartel defence. (Case N Vj-132/2003) In 2005 hwever, the HCA did nt accept this line f defence any mre when it was brught frward by the Egg Assciatin, impsing a substantial, deterrent fine. (Case N Vj- 199/2005) the leading r subsidiary rle played by the undertaking in the infringement; Accrding t the Metrplitan Curt f Appeal s judgement N 2.Kf /2008/15, it has t be cnsidered as a mitigating circumstance (I/c) if the given undertaking cmmitted the infringement upn the instigatin r under the influence f anther market player. As regards the cnsequences f an undertaking s playing a leading rle in the infringement, we refer t the first bullet pint, abve. previus infringements f cmpetitin law and r ther serius ecnmic crimes r infringements? The Metrplitan Curt f Appeal s judgement N 2.Kf /2008/15 mentins the fact that an undertaking has already cmmitted an infringement as an aggravating circumstance. (II/a) In the HCA s case law, it is especially imprtant fr the determinatin f the fine if an undertaking is a recidivist. In Case N Vj-174/2006 (railway case), the HCA impsed a fine amunting t HUF 3.4 billin (EUR 13 millin) n a member f the Strabag grup, Szentesi Vasútépítő Kft., fr an infringement cncerning railway cnstructin tenders, cnsidering that the HCA in several prceedings already impsed fines n ther members f the Strabag grup fr cncerting their behaviur (the case is currently n appeal, amng thers because f the applicatin f the grup recidivism thery). c-peratin (ther than taking advantage f a leniency prgram) with, r bstructin f, the investigatin, r by a decisin nt t cntest the cmpetitin authrity's allegatins The Metrplitan Curt f Appeal s judgement N 2.Kf /2008/15, when giving its pinin n cperatin with the authrity as a pssible mitigating factr, stated that the sle fact fr an undertaking t fulfil the bligatin f prviding infrmatin in a cmplete and timely manner cannt be credited t the undertaking s advantage when it cmes t the fixing f the fine. On the ther hand, ther ways f supprting the investigatin (even if this supprt des nt meet the cnditins f a leniency applicatin) may entail a lwer fine. The HCA cnsiders admissin f the infringement and prpsal f cmmitments as a significant mitigating factr (even if the cmmitments are nt accepted by the HCA at a later stage). (Case N Vj-137/2007, Allianz Zrt.) The Cmpetitin Act gives the HCA efficient prcedural instruments in rder t directly sanctin undertakings bstructing the prceedings (administrative fine) r t enfrce the authrity s rders (penalty payment). Thus, the HCA is entitled t impse prcedural sanctins fr the bstructin f the prceedings; when the decisin n the merits is taken, hwever, ptentially bstructing behaviur is nt taken int accunt. (Case N Vj- 79/1997, Ryal Ambassadr Kft.) 11

12 measures taken by the undertaking since the infringement t prevent future infringements (e.g. t intrduce a mre effective cmpliance prgramme) r t cmpensate victims f the infringement? Accrding t the Metrplitan Curt f Appeal s judgement N 2.Kf /2008/15, it has t be regarded as a mitigating circumstance if the undertaking takes measures in rder t prevent damaging cnsequences f the infringement. (II/f) On the ther hand, the sle establishment f an antitrust cmpliance prgramme is nt taken int accunt by the HCA as a mitigating circumstance. (Case N Vj-25/2004, Betnút & C) Nevertheless, in the prceedings against Magyar Államvasutak Zrt., in light f all the circumstances f the case, the HCA cnsidered as a mitigating factr that the undertaking abandned its infringing behaviur during the prceedings and granted access t tracks which had earlier illegally been refused. (Case N Vj-22/2005) T ur knwledge, specific cmpensatin f the victims has s far ccurred in the Hungarian antitrust practice nly in the cntext f cmmitments (where such cmpensatin was ffered as part f a cmmitment package by the undertakings cncerned withut an infringement having been established). Insfar as the fine depends n the size r ecnmic pwer f the undertaking, explain whether and (if s) hw the fllwing factrs are assessed and taken int accunt: - the turnver f the undertaking in the affected markets; the verall size f the undertaking in the jurisdictin cncerned; the verall size f the undertaking wrldwide; ther measures f size r ecnmic pwer such as prfitability/assets; the turnver f parent cmpanies/subsidiary cmpanies? Sectin 78 (3) f the Cmpetitin Act des nt explicitly mentin the size/ecnmic strength f the given undertaking as a relevant factr fr the setting f the fine. Hwever, this factr is de fact nt at all irrelevant in the related Hungarian practice. First, the Cmpetitin Act itself states that the market psitin f the undertakings cmmitting the infringement has t be taken int accunt, which factr is in a certain sense similar t the size/ecnmic strength f the undertaking. Secnd, the size f the undertaking is als imprtant fr the determinatin f the maximum fine, given that the fine may nt exceed 10 % f the net turnver realised by the given undertaking in the year preceding the decisin. Furthermre, as we indicated abve, the maximum fine may be determined in a wider sense with regard t the whle grup f undertakings (e.g. in Case N Vj-174/2007 (railway cnstructin) already mentined abve, the HCA cnsidered that the cmplete size f the grup f undertakings had t be taken int accunt in rder t make sure that the fine had an apprpriately deterrent effect). Is the size/ecnmic pwer f the undertaking assessed at the time f the infringement r at the time f the fining decisin? What happens if the undertaking has grwn r shrunk in size since the date f the infringement, r (by reasn f acquisitins r divestments) frms part f a larger r smaller grup f cmpanies than it did at the time f the infringement? Pursuant t Sectin 78 (1) f the Cmpetitin Act, fr the purpse f determining the maximum fine the turnver realised in the financial year preceding the decisin is relevant. Hwever, 12

13 Sectin 78 (2) Cmpetitin Act prvides that if there is n audited/credible infrmatin available n the net turnver f the given undertaking r grup f undertakings realised in the financial year preceding the decisin establishing the infringement, the turnver f the last audited/clsed financial year shuld be taken int accunt fr the purpse f determining the maximum amunt f the fine. Hwever, as discussed under the previus pint, the size (turnver) f the undertaking is als taken int accunt as a factr fr setting the amunt f the fine (within the 10% statutry threshld). In this regard there is n statutry guidance as t which year's turnver shuld be taken int accunt (i.e. that achieved at the time f the infringement r at the time f the fining decisin). The HCA prceeds therefre, n a case-by-case apprach, carefully cnsidering n the basis f the circumstances f the case which year's turnver data shuld be taken int accunt fr the evaluatin f the market psitin f the given undertaking. Fr example, in Case N Vj- 114/2002 cncerning the price agreements between taxi cmpanies in Budapest, the HCA cnsidered the net turnver f 2009 as the starting pint fr calculating the amunt f the fine, as this was the last audited financial year befre the decisin, even thugh the infringement tk place in On the ther hand, in cases cncerning bid-rigging in relatin t public prcurement prceedings (e.g. Case N Vj-174/1007, railway cnstructin), the HCA cnsidered the ttal amunt f the prcurement tenders cncerned by the infringement in as relevant turnver, as this amunt reflected the duratin f the infringement and its gegraphical extensin. Please describe any adjustment made fr "failing firms" (i.e. cases where the undertaking cncerned cannt pay the fine r cannt d s withut causing damage t inncent third parties such as creditrs r emplyees)? Hw des the bdy respnsible fr determining the amunt f the fine deal with cases where a "failing firm" argument is made? Are there any cases where a cmpetitin fine has led t the inslvency f an undertaking? Fr the failing firm defence questin, please see in mre detail pint 2.5 belw. T ur knwledge, fines impsed by the HCA have never led t the inslvency f the undertakings cncerned. It shuld be nted in this respect that, as we mentined abve under pint 2.1, even thugh the initiatin f judicial review against the HCA s decisin des nt suspend the bligatin t pay the fine, a request fr suspensin f the enfrcement may be submitted. In that cntext, ne f the mst imprtant questins that the curt cnsiders is whether the payment f the fine wuld entail irreversible damages fr the given undertaking, i.e. whether it may lead t the inability t pay r inslvency f the given undertaking. If that is the case, accrding t case law, the suspensin f the enfrcement is justified: cnsequently, under Hungarian law, by submitting a request fr suspensin f the enfrcement, the payment f a fine that wuld push an undertaking int inslvency can be avided 28. Is there any evidence that the level f fines has increased ver recent years? If s, t what extent has that been the result f changes in legislative rules r published guidance, r has it resulted frm a change in decisin-making practice by the cmpetitin authrity? Regarding the general level f fines we refer t the explanatins and statistics presented under pint 3 belw. 28 The payment f the fine impsed n the Hungarian Natinal Railways in case Vj-22/2005 was suspended by the Metrplitan Curt with the reasning that in the absence f a suspensin, the largest emplyer f the cuntry culd nt pay the salaries in due time, and even the peratin f rail services wuld be at risk. 13

14 Are cmpetitin fines, and the prcedures by which they are determined, cnsistent with internatinal human rights standards (insfar as they apply t crprate bdies)? In Hungary, specific prvisins gverning the cmpetitin supervisin prcedures carried ut by the HCA and the applicable sanctins are set dwn in the Cmpetitin Act, althugh sme general rules established by the APA are applicable as well. Amng the different types f cmpetitin supervisin prcedures, the abve questin is prbably mst relevant t antitrust cases, since these cases invke a wider range f pwers and mre severe sanctins, than in ther types f cmpetitin prceedings (e.g. in merger cntrl cases). In the current Hungarian regulatin system and the related legal practice, antitrust cases are essentially cnsidered t be administrative prceedings. Hwever shuld the vilatin be perpetrated in public prcurement r cncessin prcedures, a cartel may entail criminal prsecutin as well. Further, a vilatin f the antitrust rules may als give rise t private enfrcement prcedures (e.g. actin fr damages, etc.). Nevertheless, based n the criteria set dwn by the ECHR in the Bendenun 29 case, rules applicable t antitrust prcedures (in particular the rules n data cllectin and sanctins) may be cnsidered criminal in nature, althugh this has nt yet been cnfirmed specifically in case f the Cmpetitin Act. 30 Article 6 f the Rme Cnventin declares the right t a fair trial. 31 Accrding t the ECHR s interpretatin f the Rme Cnventin, this right implies the bligatin t enfrce criminal law principles and prcedural guarantees in prcedures f a criminal nature, - the enfrcement f which is a requirement f human rights standards. With reference t the abve, it is a crucial questin in what way and t what extent these principles and guarantees (in particular the principle f ex ffici examinatin 32, the principle f cntradictrium [divisin f prcedural functins] 33, the presumptin f inncence, the principle f in dubi pr re 34, and the right against self-incriminatin) are duly respected in cmpetitin law, and s whether cmpetitin regulatin is cnsistent with human rights standards. The principle f ex ffici examinatin is cmplied with in Hungarian antitrust prcedures. The principle f cntradictrium des nt fully apply, as bth the investigative/prsecutrial and the adjudicative/decisin-making functin belngs within the cmpetency f the HCA Bendenun v France, 24 February EHRR An administrative prcedure is cnsidered t have a criminal nature if the fllwing cnditins are met: (i) the vilatins f the law which entail the prcedure relates t a general rule; (ii) legal rules related t the vilatins are nt addressed exclusively t a specific grup f the sciety, but are f generally binding character; (iii) any vilatin f the rules, r failure t cmply with thse may be punished; (iv) the purpse f the sanctins impsed in the prcedure is primarily the enfrcement f deterrence thrugh punishments impsed n the perpetratr (punitive/deterrent), and nt prviding cmpensatin fr the damage caused by the actual cnduct (reparative) (v) the sanctins that can be impsed in the prcedure are severe. 31 Rme Cnventin Article 6 Pint 1: In the determinatin f his civil rights and bligatins r f any criminal charge against him, everyne is entitled t a fair and public hearing within a reasnable time by an independent and impartial tribunal established by law. Judgement shall be prnunced publicly but the press and public may be excluded frm all r part f the trial in the interest f mrals, public rder r natinal security in a demcratic sciety, where the interests f juveniles r the prtectin f the private life f the parties s require, r the extent strictly necessary in the pinin f the curt in special circumstances where publicity wuld prejudice the interests f justice. 32 Ex ffici prcedures. 33 Criminal law requirement as regards prcedures f a criminal nature, accrding t which the investigating/prsecutrial functin must be clearly divided frm the adjudicative/decisin-making functin. 34 The requirement that the facts that are nt prven cnclusively must nt be assessed against the perpetratr. 35 Fr mre details see Pint

15 As regards the presumptin f inncence, the Hungarian Cnstitutinal Curt pinted ut 36 that this criminal law principle is applicable in any prcedure where the testimny f the subject may lead t self-incriminatin (e.g. bid-rigging r cncessin cartels). Cmpliance with the presumptin f inncence is supprted in practice by the allcatin f the burden f prf, i.e. that it is the authrity s bligatin t prve the ccurrence and circumstances f the vilatin. Hwever, in relatin t evidence, it is anther questin whether the right against selfincriminatin and the principle f in dubi pr re is duly enfrced. In antitrust prcedures, the right against self-incriminatin is nt entirely bserved, since the HCA is entitled, with the exceptin f directly self-incriminating testimny (cnfessin) and evidence, t blige the parties t the prcedure t hand ver any infrmatin (whether incriminating r exnerating) and t impse prcedural fines in the case f failure t perfrm this bligatin. This practice is, hwever, cnsidered cmpatible with the practice f the ECHR in mst cases, since - accrding t the curt s interpretatin - the right against self-incriminatin is nt vilated if the evidence cllected by the authrity existed and was available t the authrity regardless f the will f the accused. It is ntewrthy that the principle f in dubi pr re des nt prevail entirely in antitrust prcedures either. This is because the requisite legal standard f prf in these cases is lwer than in criminal prcedures: it is usually enugh t establish (and prve) a finding if the facts n which such finding was based, were prbable. 37 Cnsequently, Hungarian antitrust enfrcement prcedures and the impsitin f fines can be cnsidered t be bradly cmpatible with the internatinal human rights standards, even if certain cncerns may arise. We nte that the cncerns referred t abve are largely similar t thse arising under EU cmpetitin law enfrcement. 2.4 Cmparisn f Methdlgy used in cmpetitin matters versus ther serius ecnmic crimes r infringements Are their any cmmn rules t be applied t infringements f cmpetitin law and ther serius ecnmic crimes r infringements? In Hungary, the penal pwers f the State and its pwer t impse sanctins is allcated int three areas. Gvernment entities may sanctin ecnmic infringements under criminal law, as misdemeanurs, r under administrative law. There is n generally prevailing rule fr calculating the amunt f the fine in neither areas f law. The APA des nt cntain any prvisins in this regard and there is n ther general administrative law rule either. The applicable sanctins in each area f law are regulated by sectral laws (particularly by tax law, agricultural law, energy law, pstal regulatins, cnsumer prtectin, regulatin f banking and financial services, transprt law, media law, cmpetitin law). These sectral rules are similar, in certain aspects, t the rules f the Cmpetitin Act, which prbably served as a mdel fr the legislatr, even thugh there are certain differences. The differences relate t the persns t be fined (natural persn r legal entity), the minimum and maximum f the fine (e.g. quantified amunt r a certain percentage f the net amunt f previus year's incme), and/r the factrs t be cnsidered when setting the amunt f the fine /1991 ABH 37 In cartel prcedures the requisite legal standard f prf is assessed in line with the s-called balance f prbabilities test. Hwever the evidence presented by the cmpetitin authrities shall still be firm, precise, cnsistent and cnvincing. 15

16 In criminal law a financial penalty is unlikely t be impsed in case f crimes f cmmercial nature. The reasn fr this is that the pssibility t impse a financial penalty instead f imprisnment nly arises in cnnectin with crimes punishable by imprisnment fr a maximum f three years. In cases f mre severely punishable ffences, a financial penalty is nly impsable alng with imprisnment. Accrding t the Hungarian Criminal Cde, the subjective and the bjective sides f the ffence must be taken int accunt equally, the minimum amunt is HUF 75,000 and the maximum is HUF 108,000 per crime. Detailed guidelines, ntice f penalty, methdlgy d nt exist. A cmprehensive analysis n the criminal practice culd nly be made after a significant research, but as far as ur knwledge, ntable penalty amunts are nt typical, e.g. nt similar t cmpetitin infringement penalties. Fr example, in a fatal medical malpractice case in 2010, the City Curt f Kapsvár, sentenced the physicians - nt yet finally - t pay a HUF 600,000 fine, respectively. In ne f the mst significant Hungarian criminal fraud cases the curt impsed a HUF 230 millin financial penalty in additin t imprisnment. As fr the administrative law, detailed methdlgy fr the calculatin f fines exists nly in a few fields. The HCA published a ntice n the impsitin f fines in UCP matters and the Financial Supervisry Authrity 38 alng with the NTCA 39 prvided a detailed explanatin as well. It shuld be nted that frm the precisin f the amunts f penalties impsed by the HCA, it can be cncluded that they have impsed fines n the basis f a detailed (nn-published) methdlgy. Is there any evidence that the level f fines impsed fr cmpetitin infringements is ut f prprtin t the level f fines impsed fr such serius ecnmic crimes r infringements? In Hungary the highest fines can be fund in the field f cmpetitin law, namely the antitrust fines, it is nt usual t impse fines f billins f HUF in ther areas f law. Certainly the cnducts leading t a fine differ, s thus it is difficult t judge bjectively the disprprtinality f the cmpetitin penalties'. It shuld be nted that thugh the penalties are nminally the highest in case f antitrust cases, when measuring the amunts in relatin t the 10% statutry maximum, it can be cncluded that the mst significant penalties (reaching the level f the maximum amunt defined in the law) are impsed n cmpanies falsely attributing health claims t fd prducts which are capable f misleading cnsumers. Hwever, since these are typically the lw revenue cmpanies, the nminal amunt f the fine is nt significant. It must als be seen that in the last few years the Cmpetitin Authrity rarely assessed abuse f dminant psitin cases and even if did s, did nt impse any significant fine. A few examples frm ther sectrs: The FSA bliged the Srs Fund Management LLC t pay a HUF 489 millin fine fr influencing the market f shares f OTP Bank. The FSA impsed a HUF 250 millin fine against an individual fr insider trade in cnnectin with the shares f BrsdChem (interestingly, the whle amunt f incme frm fines in 2007 was HUF millin) The HCA impsed a fine f a little ver than HUF 47 millin n Auchan fr the sale f tw prducts under the purchase price (higher fines were impsed in 2010) The Cnsumer Prtectin Agency impsed a fine f HUF 100 millin n Media Markt fr endangering the develpment f minrs with its advertisement campaign. (It shuld be 38 Available at 39 Available at 16