Competition Newsletter – October 2021

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We focus this month on Hungary, where the Competition Authority encourages firms to compensate victims of anti-competitive practices to obtain a reduced fine.

Hungarian competition authority revises its approach on prevention, fines and remedies

In Hungary, the competition authority has gradually shifted its efforts from pure retaliation to a sophisticated system of tools intended to motivate undertakings to cooperate with the competition authority, thereby strengthening prevention and encouraging proactive remedies. In antitrust cases, partial leniency, settlement and compliance-related commitments together can achieve reductions in fines of up to 80 percent. This year, the authority introduced proactive remedies as an element directly reducing fine amounts in order to further mitigate the negative consequences of violating competition law.

The essence of a proactive remedy is that the violating company provides either partial or full compensation to those negatively affected by the violation. In the past, the competition authority has also considered compensation as a mitigating factor when it determined the fine. Now, compensation has become, in practice, a portion of the fine—in exchange for the compensation, the antitrust fine is reduced by the amount compensated. The compensation may thus result in full elimination of the fine.

Obviously, the payment of such compensation does not necessarily reduce the financial burden on the company, it only restructures how that financial burden is allocated. Nonetheless, proactive remedies can show the good faith of the infringing undertaking and can mitigate reputational damage caused by the competition authority’s fine decision.

Another consideration when opting for a proactive remedy in the form of direct financial compensation is how it impacts public procurement procedures. Under Hungarian law, undertakings fined for cartel infringement will be excluded from public procurement procedures by way of law. In order to avoid this serious consequence, undertakings can undergo a self-cleaning procedure. This procedure requires the infringer to compensate the persons harmed by the competition law infringement.

Furthermore, the competition authority also takes into consideration how the proposed compensation impacts job creation, market access, foreign trade and tax revenues. These considerations recently led to acceptance by the competition authority of a proactive remedy of HUF 1.7 billion (approx. €4.7 million) offered by the retailer SPAR Magyarország Kereskedelmi Kft. in a case involving the abuse of the retailer’s dominant position. The compensation was primarily aimed at the establishment of a regional supplier chain, thereby presumably contributing to the expansion of opportunities for local small producers affected by the improper conduct, and to an increase in jobs. 

From this year on, the competition authority may also consider the positive impact of proactive remedies on sustainability and environmental protection. Companies may also make commitments that are largely unrelated to the violation if such commitments serve sustainability and environmental objectives. Unfortunately, no infringers have yet proposed commitments related to sustainability, and it remains to be seen what forms those commitments may take and how much fine reduction they can achieve.

In addition to antitrust cases, the competition authority also accepts proactive compensation in unfair commercial practices cases. Recently, the competition authority fined Dante International and its Hungarian subsidiary, Extreme Digital-eMAG Kft., for unfairly communicating prices and promotions on their websites. The competition authority imposed a fine of HUF 200 million (approx. €555,000). However, the compensation offered by the companies—and then imposed as an obligation on them by the competition authority—reached almost HUF 4 billion (approx. €11 million), and included directly compensating consumers harmed by the deceptive practices and promoting the online commercial presence of Hungarian companies.

Digital intermediation platforms in transport sector boycotted: French Competition Authority imposes €500,000 in fines

By its decision of September 9, 2021, the French Competition Authority (the “Authority”) fined several traditional players in road transport—freight exchanges, haulers’ associations and trade unions—for calling for boycotts and conducting boycotts between the end of July 2016 and the end of February 2018 in an attempt to stymie the development of digital intermediation platforms (such as Chronotruck or Everoad) in their respective sectors and to limit development of traceability software (Shippeo).

More precisely, this “anti-platform lobbying” took place during management board meetings of H2P (parent company of the freight exchange B2Pweb) and in meetings with its chairman. Each of the groups participating in the concerted practice then passed on the agreed instructions to their respective members. The Authority also noted the existence of communications and publications posted on websites and intranet sites, encouraging members not to cooperate with these new players. One of the groups prohibited its members from working with certain specific platforms. 

The Authority considered these boycott practices to have seriously impeded competition and innovation in the road transport sector, noting in its press release that it concerns “a sector that is undergoing profound change, marked by the emergence of new computer and digital technologies, which make it possible to offer transport management optimization services to both shippers and carriers.” However, the Authority considered that the damage to the economy had to be put in perspective, notably in light of the strong growth of digital players in this sector during the time of the boycotting practices. In this respect, the Authority also noted the absence of retaliation measures against carriers working with the platform, the lack of importance on the market of the organizations in question and the loaders’ negotiating power. 

In the end, the Authority imposed fines totaling €500,000 on eight players in the sector. It should be noted in this respect that the Authority applied the method taken from the 2011 sanctions notice only on B2PWeb—the sole entity to have actually generated turnover in connection with the offense. For the other companies, the Authority set a lump-sum fine.

GRAIL acquisition by US-based Illumina before Commission clearance: Interim measures on the horizon

The European Commission sent a statement of objections to DNA sequencing giant Illumina and GRAIL, a cancer diagnostics firm in reaction to the companies’ announcement that Illumina had completed its acquisition of GRAIL without waiting for EC clearance. According to the Commission’s press release, dated September 20, 2021, the statement informed the companies of the interim measures it intended to adopt.

European Union merger-control rules prohibit companies from completing mergers before the Commission has authorized them. This transaction is special, as it was below the thresholds of national and European regulations, but because of the serious competition concerns raised, several EU member states, including France, had referred it to the Commission for review, under Article 22 of the EU Merger Control Regulation and the Commission’s Communication of March 26, 2021. Because the acquisition had been referred to the Commission, the parties were required to wait for the outcome of the investigation. 

The Commission pointed out in its press release that this was the first time it considered it necessary to adopt interim measures “to prevent the potentially irreparable detrimental impact of the transaction on competition.”

GRAIL and Illumina now have the opportunity to respond to the statement of objections in writing or orally. After hearing them, the Commission could make the interim measures binding, and the two entities would be legally obliged to comply with them. If they are found liable the companies would face a fine of up to 10 percent of their annual worldwide turnover.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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