(EFFECTS BASED?!) FUNDAMENTAL RIGHTS AND COMPETITION LAW - AN EFFECTS BASED FUNDAMENTAL RIGHTS PROTECTION

We had a great conference in Bratislava last week (Fifth Annual Conference on Competition Enforcement in the CEE Member States). I was the chair of the panel on due process and competition law and had great panel members.

There have been occasional blog posts (So What; Alrosa, negotiated procedures and the procedural economy/due process conundrum – one step forward, three steps back?Yes European Competition Law Enforcement is Open to Abuse, But at Least Firms in Europe Can Appeal; etc.)

Many papers already written on the subject.

Many of the papers, decisions, judgements are very relaxed (probably for good reason) on the issue. I can't keep thinking on how lawyers can state the followings:

Menarini judgement of the ECtHR: „[...] provided that the judicial body does in fact exercise this unlimited
jurisdiction." Italian administrative courts had in fact exercised full jurisdiction, notwithstanding general statements as to their jurisdiction being limited.

I know it is a theoretical question: How can a court do something to which it has no right to do?

One of the great academic-practitioner, who I think is a great mind writes: „What is decisive is whether the General Court in fact exercises full jurisdiction, not any general statements which the Courts may make as to its
powers." Wils, Wouter P. J., The Compatibility with Fundamental Rights of the EU Antitrust Enforcement System in Which the European Commission Acts Both as Investigator and as First-Instance Decision Maker.

I am preparing a book on Fundamental rights and competition law for two years now. I just gave a new titel to it: Effects based fundamental rights protection in EU competition law. (out in two month)

It seems all that matters in EU competition law recently is effects based, even if we talk about fundamental rights protection...

WHAT IS IN THE BASKET? POVERTY AND COMPETITION

Today we are celebrating Saint Nicholas, the bishop from Myra who helped poor people. It is therefore excellent timing that the Hungarian Competition Authority (hereinafter: GVH) has organised a half-day conference examining the connection between poverty and cartels within the framework of the World Competition Day initiated by Consumer Unity & Trust Society from India. At the conference an OECD study written by a Hungarian author dealing with the role of competition in poverty was presented to the participants (the documents of the round table can be downloaded here).

Mr. Miklós Juhász, the President of the GVH, found it very challenging during his opening speech to draw a parallel between the two topics. There are a lot of examples from abroad (especially in Africa) and also in Hungary where competition authorities are helping less wealthy people by breaking down the cartel prices concerning basic food products. I do agree with Mr. András Tóth, the vice-president of the GVH, who believes that the protection of competition and the fight against poverty are only engaged in a distant relationship with each other. Competition law commences roughly where poverty ends: those people who are not able to afford prices that are near to the marginal costs, and which are a result of effective competition, are not on the map of competition policy. Malfunctioning in competition is certainly harmful for poor people and competition within unregulated circumstances and can easily lead to poverty – as can be seen by the problems stemming from mortgage loans.

However, it is important to note that even if competition law is not the best weapon in the fight against poverty, this does not mean that there is no need for the existence of a strong competition authority devoted to the protection of competition and that there is no need to fight against poverty with every possible tool. The following questions are worth considering – what is actually poverty? Who are the poor people? Is poverty a sin, a virtue, a temporal or a lasting-inherited life situation? According to the statements of the New Testament, Jesus placed himself in the position of poor people on many occasions and though he regaled thousands of starving people, he did not help them by placing bags of money into their pockets. We tend to interpret the parable on the camel and the needle’s eye favourably upon ourselves; however, rich people generally struggle to gain eternal salvation. Still, poverty will never be a desirable way of life, because just as richness does not involve by all means hard-hearted attitude, poverty to a degree is soul destroying.

The protection of free and fair competition is primarily in the interest of those who actually have money to spend. Competition law is the game of wealthy people. However, poor people are also afflicted by the effects of an exploitative local monopoly; in fact, they are perhaps afflicted even more than wealthy people. In line with one of the examples heard, it is scandalous if the owner of the only local store prescribes the price of three breads in case if a customer bought one bread at the end of the month as a credit. Is it possible to assume that if the customer was in fact his competitor, he would be forced to be more human?

If we were to ask a poor person about the usefulness of competition, he/she would probably respond with an uncomprehending glance. The theory of competition is often difficult to understand, however, poverty can be very concrete and tangible. The situation would probably be different if we could see competition as a field of possibilities, the playing field of economic freedom which is required for human dignity. Concurrency is not good, but what is before and behind: the possibility of realising my dreams, of trying to create and sell it to others, sounds attractive. Optimism and hope are driving forces behind competition and without hope; poverty could also truly be destroying.

Well-functioning local markets, “human-faced competition” could help poor people in two ways. If state administration does not make it impossible, and if there is entrepreneurship and a connection network required for prosperity, then it is possible for small businesses to operate. Individuals who are unable to launch small businesses could still find employment with the help of the state through different measures. Additionally, if local cartels do not increase the price of basic food products then individuals will be able to spend less money from their salaries on basic food items such as bread, sugar and flour.

One of the central questions of competition policy is: how much is needed from free competition and how much from the state? Who should be the flag-bearer in the fight against poverty: the welfare state or the market? As far as the latter question is concerned, many may have doubts about the role of the market, as tense competition often results in unemployment due to the corresponding reduction in the number of underperforming market players. However, it is true that whatever competition takes with one hand, it gives back with the other hand: lasting, true and value-creating workplaces do not originate from the state, but from market players. However, beside the interaction of the market and the state, no one should forget the third factor. We could definitely do more for poor people on the level of civil society, churches, foundations, associations or family communities. The welfare state should support the latter societies or the individuals. The state should only intervene directly where smaller groups of society have failed. State intervention is only beneficial if it takes place on an occasional basis. Excessive help could result in a loss of personal responsibility and in the will to act, but only if these have not already been destroyed by poverty.

Tihamér Tóth

 

DO WE NEED FREE COMPETITION?

The importance of the freedom of competition is probably a self-evident assertion for competition lawyers, economists and civil servants dealing with this issue. However, a lot of businessmen, politicians or even average people see the world in a different way. Instead of the abstract world of impressive theories and competition they are much more interested in actual matters, like job security or the monthly rate of overheads (not to mention the values that are truly important from the perspective of Mankind).

In its 27 November issue the Frankfurter Allgemeine (FAZ) newspaper devoted a whole page to the results of the survey conducted by the Institut für Demoskopie Allensbach. The piece was given the not so promising title of “Stille Liebe zur Planwirtschaft”. The conclusion of the article is that residential support of free market economy is not that obvious even in the country regarded as the economic engine of Europe. People still expect the state to provide solutions for several problems. The FAZ recalls what an ambiguous choice it was of the Germans to vote for the free market after World War II: economists of France and the United Kingdom in those days were thinking in terms of centralized economies. The pro-market change of perspective led by Ludwig Erhardt could only be considered as an economic wonder afterwards. According to the results of the survey, it would be just as equally important for today’s politicians to campaign for market economy and competition.

According to 61% of the respondents, the level of social fairness has decreased recently in Germany and only 7% of them believe that it has increased. An encouraging fact though is that 66% of the respondents associate welfare with the market and only 26% with the state. 23% of the respondents link deficit to the market, while 40% of the respondents relate it to the state. The lack of efficiency is overwhelmingly attached to the state, and, not surprisingly, bureaucracy as well. The market is blamed for negative consequences related to craving, aggression and exploitation. A higher proportion of respondents put the blame on the market for high prices (49% compared to 35% who think it is the state to be held responsible). Respondents simply do not expect social justice from the market (only 12% do so, as opposed to the 43% who regard this as a competence of the state).

The responses given to the following conflict situations are also very informative. Let us assume that the country is undergoing a serious economic crisis. In order to remedy the negative consequences, the state decides to launch a serious economic intervention and therefore fixes the prices, subsidises distressed businesses and bans redundancies. However, the situation is still not getting any better. What should be the next step? Well, only 15% of the respondents felt that in such a situation ineffective state intervention should be withdrawn. 40% of the respondents were of the opinion that the state should not retreat, but uphold its previous position. However, 25% of the respondents (10% more than those who were pro-market) thought that the state should actually take on a more active role to resolve the problems.

The other question concerned the implementation of a price regulation scheme managed by the state. Respondents were asked if they would support the state fixing the prices of basic food products so that they would be available to everybody, or if they think this measure would result in a reduced range of products due to a loss of motivation among some companies to manufacture their products (as they would only be making a low - or even negative - profit). Most of the respondents voted in favour of the former, interventionist solution (46%), with only 37% of the respondents realising the drawbacks of the well-intentioned price regulation scheme.

Regarding the house-rental fee, which is a topic that affects a lot of people in Germany, the number of those in favour of the supply-demand mechanism was more overwhelming: almost two thirds of the respondents would prefer rental fees regulated by the State.

For many years, the Competition Culture Centre of the GVH (Hungarian Competition Authority) has been reinvesting some of the revenue collected from fines to promote the importance of competition both for academics and the general public. Not only the above-mentioned German survey, but also the surveys conducted by GVH and our research centre show that pro-competition advertising activity is constantly needed. Controlled free competition, even if it is not a value in itself, is a tool and mechanism vitally important for the success of a well performing economy and society. However, as this hypothesis is not evident for many, it needs to be proven from time to time.

Tihamér Tóth

IP RIGHTS AND COMPETITION LAW

I have just been involved in training of competition authorities organized by OECD-GVH Regional Centre for Competition in Budapest (RCC). The event was: Workshop on Intellectual Property Rights and Competition Law.

Here are my slides:

pptxIP rights and competition law

pptxThe AstraZeneca Case

The workshop way very interesting. One of the rules in the participating countries was that the authority can get a minister resigned if the minister cannot explain the reasons for an anticompetitive regulation and that individuals may be fined if the company did not know about the wrongdoing of the employee.

BIGGEST EVER FINE IN HUNGARIAN COMPETITION LAW

The Hungarian competition authority just imposed its biggest ever single case fine in history, 9.488.200.000 HUF (cca 31,6 million Euro) on 11 financial institutions. See the press release here: http://www.gvh.hu/gvh/alpha?do=2&st=2&pg=133&m5_doc=8456

Later tomorrow, after reading the decision.

The differences are striking. Will be intersting to see the reasoning:

 

HUF

Euro

Budapest Bank Zrt.

283.50.000

ca. 945.000

CIB Bank Zrt.

835.400.000

ca. 2.785.000

Citibank Europe plc., Hungarian branch office

800.000

ca. 2.700

Erste Bank Hungary Zrt.

1.725.700.000

ca. 5.752.300

Kereskedelmi és Hitelbank Zrt.

983.300.000

ca. 3.278.000

Magyar Takarékszövetkezeti Bank Zrt.

1.000.000

ca. 3.300

MKB Bank Zrt.

783.000.000

ca. 2.610.000

OTP Bank Nyrt.

3.922.400.000

ca. 13.074.700

Raiffeisen Bank Zrt.

583.600.000

ca. 1.945.300

UCB Ingatlanhitel Zrt.

63.200.000

ca. 210.700

UniCredit Bank Zrt.

306.300.000

ca. 1.021.000

INDUSTRIAL POLICY AT GLANCE

Yesterday the Hungarian Parliament adopted an amendment to the Hungarian competition act with great majority. Final bill available here. The details here.

The amendment goes as follows:

"Article 24/A. The Government may classify a concentration of undertakings on public policy reasons - in particular for protecting employment or securing supplies - as a concentration of national importance. For such concentration there is no need to ask for the allowance of the Gazdasági Versenyhivatal according to Article 24.

Article 97 The Government is hereby authorized to classify in a regulation a concentration of undertakings as a concentration of national importance."

This fits nicely into the recent developments in Hungarian competition policy.

PUBLIC INTEREST LITIGATION – GROUP LITIGATION – COMPARATIVE PERSPECTIVES

We will have a great conference at our Faculty. We fully recommend everyone to attend, registration if free, but limited (we received over 70 registrations within 4 days).

Some of our key speakers: actually all speakers have to be mentioned except for me, so please check the programme.

So here it is:

The Faculty of Law of the Pázmány Péter Catholic University would like to invite you to the conference on

Public Interest Litigation – Group Litigation – Comparative Perspectives

Budapest, 7-8 November 2013
Venue: Pázmány Péter Catholic University, Faculty of Law, Hall II. János Pál (2nd floor)
1088 Budapest, Szentkirályi utca 28-30.

Further information is available here: http://jak.ppke.hu/en/news/events-calendar/2013-11-07-public-interest-litigation-group-litigation-comparative-perspectives or https://jak.ppke.hu/kutatas/kutatointezetek-kutatokozpontok/tamop-kutatocsoportok/maganjogi-kutatocsoport/hirek

Registration is possible here: http://pazmanypeter.eu/PublicInterestLitigation

REPUTATIONAL DAMAGE

One of the concerns of undertakings according to survey is the reputational damage due to finding an infringement by the competition authorities. Here is a good example:

 

FUNDAMENTAL RIGHTS AND COMPETITION LAW

I have been lecturing at Raadboud University in Nijmegen under the framework of a great programme: Honours Academy Radboud University Nijmegen - Law Extra’ Summer School 2013.

The presentation was on fundamental rights and EU competition law. pptxSee the slides here.

Meanwhile the trend on reinterpreting the extent - standard of review in competition cases continues. The European Court of Justice delivered a judgement (actually several judgements) in  the fittings cartel case and annuled the European Commission's decision. In this judgement the language is indicating that the General Court is carrying out a full review. (European Commission v Aalberts Industries NV, Compas SA, Simplex Armaturen + Fittings GmbH & Co. KG (C-287/11 P) [2013] ECR 00000)

DRAFT EU DIRECTIVE TO STRENGTHEN PRIVATE ENFORCEMENT IN EUROPE

The EU Court of Justice confirmed in 2001 in its Courage v Crehan[1] judgment that victims of an antitrust infringement are able to claim compensation for the damage suffered relying on EU law. The design of procedural rules have been left so far to Member States subject two the principles of equivalence and effectiveness. The Commission believes that the differences in national liability regimes negatively effect both competition and the proper functioning of the common market. So it is high time to act.

On June 11, 2013 the EU Commission published a proposal for a directive on how damages claims under EU antitrust rules can be brought.[2] The suggested measures feature expanded access to evidence for claimants, rules on limitation periods, rules confirming the respondent’s ability to claim the passing-on defence and rules on the quantification of harm.

The directive covers both to individual and collective actions the latter being currently available in only about half of the EU Member States.

The proposal does not require Member States to introduce collective damages actions in the competition field. The Commission adopted a non-binding recommendation encouraging Member States to set up collective redress mechanisms for victims of violations of EU law in general, including the antitrust rules.

The third element of the package is another soft law instrument, this time a communication on the quantification of antitrust harm supplemented by a detailed practical guide.[3] Thereby an explanation is given about the strenghts and weaknesses of various methods and techniques available for judges to quantify harm.

Alexander Italianer, director general for competition, recalled that only 25% of the antitrust infringements found by the Commission have been followed by civil claims over the past eight years, most of them were brought in the UK, Germany and the Netherlands where procedures are perceived to be more favorable.[4] He emphasized that the aim is (i) to remove existing barriers to effective redress for victims of antitrust infringements and (ii) to regulate the interaction between public and private enforcement of EU antitrust rules, in particularly to protect the effectiveness of EU and national leniency programs.[5]

Following discussions in the EU Parliament and the Council, Member States will have two years to implement the final directive in their legal systems.

It is worth recalling that the draft directive has been proceeded by an eight year long debate.

 

  1. For the 2005 Green Paper see (link http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2005:0672:FIN:EN:PDF
  2. For the 2008 White Paper see: (link http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0165:FIN:EN:PDF)

Building blocks of the proposal

The principle of full compensation. Cartel members are liable to pay not only the actual damage caused, but also the profits lost and appropriate interest from the time the damage occurred. This is in line with the case-law of the ECJ and the tradition of most European states.

Presumption of harm. Quantifying harm is a very fact intensive and costly process. Once adopted and implemented, the EU rules will assume that a cartel caused damages in the form of a relative price increase. It will be for the cartel members to rebut this presumption. This rule applies only to naked secret cartels and not to the broader set of competition law infringements.

Consensual dispute resolution. The draft directive encourages parties to agree on compensating the harm through consensual dispute resolution mechanisms, like out-of-court settlement, arbitration and mediation.

Disclosure. In order to remedy information asymmetry problems a claimant may obtain a court order for the disclosure of evidence that is in the hands of other parties or third parties if the claimant can show that the evidence is relevant to substantiate its claim. It is for the judge to ensure that disclosure orders are proportionate and that confidential information is protected. Plaintiffs may request the disclosure of “categories of evidence” that they have to define as precisely and narrowly as they can “on the basis of reasonably available facts”.

Protection of leniency applicants. Leniency statements and other submissions prepared by the company during the competition law procedure admitting guilt should not be used in  civil actions against the companies who made them. Other documents, like responses to information requests, the statement of objections can be relied upon once the competition authority has closed its proceedings. Pre-existing information is also discoverable.

Decision of NCAs binds courts. Parties will not be able to re-litigate the substantive question of antitrust liability in the context of an action for damages. The recital of the draft directive extends this also to the reasoning part of infringement decisions adopted by national competition authorities. EU Commission decisions are also binding on national courts, but this is regulated by the general procedural regulation No. 1/2003.[6]

Limitation periods. The draft directive envisages a minimum of five years plaintiffs should have to bring a claim, starting from the moment when the plaintiff realized that she had suffered harm. There will be detailed rules on when and how the limitation period should be suspended.

Limited passing-on defense. In line with continental civil law traditions, infringers may invoke the passing-on defense, i.e. that their direct customers offset at least a part of the overcharge resulting from the infringement by raising the prices they charged to their own customers. However, this defense will be unavailable if it is ‘legally impossible’ for the persons to whom the overcharge is passed on to bring a claim for damages.

Favoring leniency applicants. As a rule, cartel members are jointly and severally liable for the entire harm caused by their collusive behavior. That means that the damaged party may seek the whole amount of her damage from just only one of the cartel members (i.e. from that company who is established in the same country). However, leniency applicants with full immunity will only be liable for harm to their own direct or indirect customers. There is one exception though: they remain fully liable if the injured parties were not able to obtain full compensation from the other infringers.

No mandatory collective actions. Unlike the 2008 White Paper, the proposal does not include rules on collective redress (i.e. representative actions or class actions). The Commission opted for a more general applicable to breaches of all EU legislation (especially consumer protection regulations). Furthermore, this horizontal approach is not a hard one:

 

  • a non-binding recommendation has been issued. The recommendation sets out non-binding
  • principles which recommend that some form of collective redress should be available in all EU Member States.

Quick evaluation from a Member State perspective

Some of the envisaged rules consolidate existing rules of procedure, others, like those on U.S. type discovery represent a real novelty for traditional continental legal systems.

Hungary has already put in place procedural rules to encourage private enforcement of Hungarian and EU competition rules in 2009.

 

  1. Decisions of the Hungarian Competition Authority bind civil courts.[7]
  2.   he leniency applicant receiving immunity from fines benefits from a rule that allows to refuse to pay damages as long as the claim can be recovered from any other member of the cartel.[8]
  3. Going much further than the Commission’s position, there is a rule in the competition act providing for a kind of damage assumption of 10% for cartel cases that can be of course rebutted by the respondent (and the plaintiff can also claim more).[9]

According to my best knowledge, however, there have been no successful trials yet awarding damages for the infringement of competition rules.[10] In the follow-on construction cartel cases the court held for example that instead of the State should have been the plaintiff and not the municipality of Budapest directly involved in the bid-rigging case.

 

 


 

 

[1] C-453/99 Courage v. Crehan, judgment of the Court of 20 September 2001; 2001 ECR I-06297.

 

[3] In the first point of  the communication from the Commission notes two types of harms caused by competition law infringements: harm to the economy as a whole and hampering the functioning of the internal market. There is nothing expressly said about short or long term consumer welfare issues.

[5] In the seminal Pfleiderer judgment the Court stressed the need for balancing, on the one hand, the interest of victims of a competition law infringement to have access to crucial evidence and, on the other hand, the interest of maintaining the effectiveness of public enforcement of the competition rules, including the leniency programC-360/09 Pfeiderer AG v. Bundeskartellamt, judgment of the Court (Grand Chamber) of 14 June 2011; (2011) ECR I-05161

[6] According to Article 16 (1) of the Regulation „When national courts rule on agreements, decisions or practices under Article 81 or Article 82 of the Treaty which are already the subject of a Commission decision, they cannot take decisions running counter to the decision adopted by the Commission. They must also avoid giving decisions which would conflict with a decision contemplated by the Commission in proceedings it has initiated.”

[7] Although the Supreme Court has ruled recently that this should be interpreted narrowly to apply only in cases where the civil court suspended her procedure seeking an amicus curiae opinion from the authority, there are legislative works underway to amend and make the language of the act more clear. See Pál Szilágyi, The Watermelone Omen, in Competition Policy International: https://www.competitionpolicyinternational.com/hungarian-competition-law-policy-the-watermelon-omen-3/

[8] Furhermore, Section 88/D of the Act No. LVII provides that lawsuits filed to enforce claims against the leniency applicant shall be stayed until the date on which the judgment made in the administrative lawsuit initiated upon request for a review of the decision of the Hungarian Competition Authority establishing an infringement becomes legally binding

[9] Section 88/C does not directly refer to the size of the damage but refers only to a presumed 10 per cent increase in prices.

 

[10] For a recent summary see Pál Szilágyi: Private enforcement of competition law and stand-alone actions in Hungary, in E.C.L.R. forthcoming (presenting both the statutory background of private anti-trust litigation in Hungary and the practice of the courts).

GUEST BLOG: ÁKOS RÉGER - SUGAR CARTEL – MISSING A PROPER ASSESSMENT

1. Introduction

On 19 December last year, the Hungarian Competition Authority (GVH) has put an end to a long investigation into a possible cartel infringement of the competition law by Hungarian sugar producers.[1] The investigation started after a leniency application by the Nordzucker Group, the parent company of leading Hungarian sugar producers and distributors that time, Matra Cukor and Eurosugar. The alleged infringement also concerned the two other main sugar producers in Hungary, Südzucker (including Magyar Cukor and Agrana) and Eastern Sugar.

2. Description of the case

The investigation lasted from April 2009 to December last year and involved dawn-raids of the alleged cartel members.

According to the GVH, its investigation did not bring to light sufficient evidence for the existence of a cartel. In the published case summary, the GVH also refers to legislative developments as one of the reasons to put an end to the investigation: the Hungarian parliament has recently passed a law that, under specific conditions, allows the Minister of Rural Development to permit producer cartels in the agricultural sector.[2]

The summary of the case indicates that the GVH found evidence showing that representatives of the sugar producers had regular meetings and exchanged recent sales data.[3] The GVH found, however, that the information exchange between the parties did not amount to a restriction of competition between them.

An important element of the Hungarian sugar market is the use of tender procedures by larger customers. The GVH, amongst others, named Coca-Cola Pepsi, Nestle – customers buying sugar for own production; and Tesco, Plus, Penny Market as retailers.

Apparently the GVH did assess the development of prices and found that the prices of the sugar producers “moved together in the investigated period”[4] (but this, according to the GVH, may have been due to the the special regulated environment in the sugar market).

3. Comment

The conclusions of the GVH are surprising, at least on the basis of the publicly available information.

  • First, the Hungarian sugar market has several characteristics that would facilitate collusion.[5] Sugar is a homogeneous product and there were only a few producers active in the market during the period investigated. From 2003 to 2007 there were five manufacturers and distributors owned by three company groups: Magyar Cukor and Agrana (the latter active until 2005) owned by the Südzucker Group, Matra Cukor and Eurosugar owned by the Nordzucker Group and Eastern Sugar. From the end of 2007 to April 2009 there were only two company groups (Magyar Cukor and the Nordzucker Group) active in the Hungarian market, Eastern Sugar left the Hungarian market. In both periods the manufacturers accounted for 80% of Hungarian sugar production. There was no other manufacturer active in the market (import accounted for 5-20% of the volumes in the investigated period).
  • Second, absent evidence of legitimate purposes of the meetings of the representatives and the exchange of information between them, the meetings and the exchange of information appear highly suspicious.
  • Third, the fact that sugar markets are conducive to cartel behaviour is evident from past cartel cases: in 1975 the Commission found a sugar cartel functioning in multiple EU-countries[6]; in 1998 the Spanish Competition Authority revealed a sugar cartel at work in Spain during 1995-1996[7]; the Commission imposed fines on the cartel members of the British Sugar case[8]. But most relevant to the Hungarian case, the Austrian Competition Authority revealed that there was a cartel operating from 2004 to 2008 involving Austrian sugar manufacturers.[9] One of the cartel members in the Austrian case is Südzucker – a company also investigated by the GVH.

One would have expected therefore that the GVH would not only have used the investigation to assess the documents seized during the dawn-raids, but would also have undertaken an economic assessment of the market.

Considering the importance of tender procedures, it would have been particularly relevant for the GVH to investigate potential bid-rigging between the producers. The information exchange for which the GVH did find evidence may have been used in order for the cartel to monitor the behaviour of the members. According to the GVH however, there was no evidence of bid rigging because most of the large customers buy from multiple producers. This does not however prove the absence of bid-rigging and hence does not prove the absence of a cartel. In order to establish this, the GVH should have undertaken a careful assessment of the relevant tender procedures and the bids of the individual sugar producers.

Also the fact that prices have moved together over time does not disprove the cartel. Prices are likely to move together over time both in a competitive market and in a market that is cartelised.

A meaningful pricing analysis should have compared the alleged cartel period with the period before or after in order to find indications for the absence or the presence of a cartel. Moreover, the information apparently exchanged included volume data, which may hint at an enforcement mechanism for market sharing and/or bid rigging rather than price fixing. It would therefore have been useful if the GVH would also have undertaken an assessment of the development of market shares over time. In a market characterised by tenders, one would typically expect market shares to be volatile (depending on the size of the tenders).

The assessment of the GVH hence does not seem to be conclusive and shows a lack of economics in the assessment, even though the evidence of the meetings and the exchange of information would have warranted a thorough investigation (indeed, the European Commission has imposed fines for information exchanges that appear less far reaching than the one found by the GVH[10]).

The reference in the summary of the case provided by the GVH to legislation allowing for cartels in the agricultural sector under certain conditions does not help to convince that the Hungarian sugar producers did not operate a cartel. The GVH might argue that the legislation is to be applied to ongoing cases. However, it is clear from the decision that the Authority’s conclusions are based on the evidences found (and not found) during the investigation.

To be clear, there may well be a legitimate lack of evidence and indeed, a cartel may indeed not have existed, but the information available on the case does not indicate that the GVH has done enough to be sure of its conclusions.

Akos Reger, RBB Economics


[1] GVH decision no Vj/050-226/2009.

[2] CLXXVI / 2012

[3] See e.g. para 106 of the decision

[4] Idem, para 116

[5] On coordinated effects see e.g. The Economics of Tacit Collusion (IDEI Working Paper) by Ivaldi et. al. prepared for the European Commission.

[6] 73/109/EEC

[7] Case no 426/98 of the Spanish Competition Authority.

[8] 1999/210/EC

[9] BWB/K-191 Zuckerkartell.

[10] E.g. British Sugar case (1999/210/EC)

INTERVIEW WITH ME

I am not really a guy who frequently gives interviews, so this invitation surprised me, but I was delighted to have the opportunity.

My article was published in CPI here. A free version is available at SSRN here.

The follow-up interview at CPI is available here.

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