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The Competition Act

The latest amendments to the Hungarian Act LVII of 1996 on the prohibition of unfair trading practice and unfair competition (the Competition Act), which enter into force as of June 1 2009, aim at implementing recent international developments in antitrust regulation and enforcement to Hungarian law in three key areas.

First and most importantly, the amendment formally implements the leniency policy into the Hungarian Competition Act that has been operated by the Hungarian Competition Authority under a notice since 2003. The leniency policy rewards companies that denounce hardcore cartels in which they have participated by granting them total or partial immunity from fines.

A company participating in a cartel that it wishes to denounce may apply for total immunity from fines if: (i) it is the first to provide evidence of that cartel to the Authority on the basis of which a preliminary court permission for initiating the investigation can be obtained; or (ii) if the Authority is already aware of the cartel and the company is the first to provide the Authority with substantive evidence enabling the Authority to establish the existence of the cartel concerned. However, a company forcing other companies to participate in a cartel cannot benefit from immunity.

A company that cannot qualify for total immunity may nevertheless request a 20-50% reduction in the fine if it supplies evidence of value in addition to evidence that the Authority already has. Immunity from, or a reduction of fines remains fully conditional on the genuine and continuous cooperation of the company with the Authority throughout the entire investigatory procedure. The applicant is required to supply accurate, complete and not misleading information. Unless the Authority elects to apply flexible investigatory tactics to the other participants in the cartel, the applicant must also immediately and completely withdraw from the cartel.

Also, the Amendment introduces a presumption that the effect of a hardcore cartel on relevant market prices is 10%. In private antitrust enforcement lawsuits therefore it will be for the infringing defendant to rebut such a legal presumption and prove the contrary by using evidence in its own possession. The underlying intention of the Hungarian legislator is to incentivise private antitrust enforcement claims by relieving innocent third parties from the burden of proof of the damages they suffered. Successful applicants to the leniency programme will also be able to push the liability to pay civil law damages onto other participants in the cartel.

Finally, in approximating to the prevailing regulatory trend, the Amendment relinquishes the old dominance test and introduces the more recent substantive criterion for merger assessment and analysis – the test of substantial lessening of competition. Compared with the dominance test, this test allows the prohibition of concentrations that do not create or strengthen single dominance but would substantially lessen competition by creating or strengthening collective dominance, and equally allows the authorisation of concentrations that lead to the creation or strengthening of dominance, but also show important efficiency gains as a result of the merger. Even though some may argue that the old and the new merger tests have so far produced similar results, uncertainty will be removed on the former potential gap in the coverage of the old dominance test regarding some oligopolies.

János Tóth

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