The bill forsees the introduction of Article 22/A:
(1) The Competition Authority may, taking into account the criteria set out in paragraph (2), determine in a competition supervision procedure that an undertaking is of fundamental importance for competition and consumers across markets (hereinafter referred to as a "fundamental undertaking"). (2) In order to qualify as a fundamental undertaking, the following shall be examined in particular (a) its market share, (b) its financial strength or access to other resources, (c) its vertical integration or its activities in otherwise related markets, (d) its access to competitively relevant information, (e) the essential importance for consumers or the economy of the services it provides or the goods it produces or distributes; or (f) any activity which is relevant to third parties or consumers in order to gain access to supply and sales markets, whereby it can influence the business of third parties.
The bill also makes it clear that the rules on competition supervision procedures apply, so there will be the possibility of court review. The GVH has three month to decide a case under Article 22/A. During an investigation the investigator might order interim measures which can be reviewed by the Competition Council. The Competition Council can impose several obligations on undertakings deemed to be fundamental.
In its decision adopted in the procedure pursuant to Article 22/A (1), the acting Competition Council
(a) may prohibit an undertaking of fundamental importance (aa) to treat its own offer more favourably than that of its competitors, (ab) to use for its own purposes data collected from its customers without their explicit consent, or to combine data collected by it with data from other sources relevant for competition without the explicit consent of the parties concerned, (ac) to impede the interoperability of products and services or the portability of data,
(b) impose an information obligation on an undertaking of significant importance to provide information on the performance, quality or success of the service it provides to its customers,
(c) where the fundamental undertaking is unable to perform its functions or is in a situation where it is in imminent danger of being unable to meet its obligations, to maintain or restore the level of operations necessary to ensure security of supply, taking into account the principle of gradual reduction, (ca) may require the owners of the essential undertaking to sell all or part of the essential undertaking, (cb) may require the assets necessary for the continuous and secure supply, trade and production of the essential services to be transferred to a designated service provider for operation at a cost-based charge and to provide the records and data necessary for the exercise of the activity, (cc) initiate the election or appointment of another person to a senior position in the management body of the essential undertaking having management powers, (cd) suspend the voting rights attached to ownership interests, (ce) require the transfer of ownership interests to other owners, (cf) require the board of directors to convene a general meeting and to call upon it to discuss specific items on the agenda and to take specific decisions.
Written by Dr. Szilágyi, Pál (Director, Competition Law Research Centre) on .
Budapest, 1 February 2024 - The Hungarian Competition Authority (GVH) has closed another major public procurement cartel. The GVH found that between 2011 and 2014, seven major road salt distributors in Hungary engaged in anti-competitive collusion and collusion in seven tenders, most of which were public procurement tenders. The national competition authority imposed fines totalling around HUF 400 million on six companies, four of which admitted the infringement. Restrictions of competition in the context of public procurement procedures are considered to be the most serious competition law infringements and the GVH therefore gives priority to the elimination of public procurement cartels.
Just four months ago, at the beginning of October 2023, the GVH announced that a large number of road painting and road signage companies had divided the domestic market between themselves between 2012 and 2014. The national competition authority imposed fines of around 300 million HUF on 17 companies for a series of collusive practices covering the whole country, with some of those responsible also facing criminal sanctions.
The Competition Authority has now closed another similar cartel case. The national competition authority opened an investigation in 2014 after it found that major road salt distributors in Hungary had colluded on the prices to be submitted in public tenders for the purchase of anti-slip materials and divided the tenders among themselves. The competition monitoring procedure showed that the companies concerned agreed on their bid prices, the winning bidder and the allocation of some tenders between them in seven tenders, mostly public tenders, between 2011 and 2014. These included the procurement of Magyar Közút Zrt., Fővárosi Közterület-fenntartó Zrt. and tenders in Székesfehérvár and Gödöllő. In two cases, the illegal negotiations were conducted through intermediaries.
The GVH was forced to suspend the complex cartel proceedings investigating a significant number of companies and a large number of tenders, as the collusion under investigation not only entailed competition authority consequences, but also criminal proceedings were pending in relation to certain public procurement contracts. The GVH waited for a total of around 3.5 years for the final conclusion of the criminal proceedings, which also necessitated a reassessment of the available evidence. In several of the tenders under investigation, the Metropolitan Court of Budapest also found in its final judgment that a cartel offence had been committed.
In its assessment of the infringements committed, the Competition Council of the GVH considered as a particularly aggravating circumstance that they were aimed at allocating procurement procedures involving public funds and that the companies' senior officials were also involved. However, the competition authority took into account the cooperation of some of the participants as a mitigating circumstance, as four of the six undertakings fully admitted the infringement, waived their right to appeal and undertook to implement a compliance programme, in the framework of a so-called settlement procedure.
The Competition Council of the GVH finally imposed fines of HUF 139 million on MAGYAR PLASTIROUTE Kft, HUF 112.4 million on SOLINWEST 2000 Kft, HUF 74.4 million on SZABOLCS-MAG 98 Kft, HUF 42 million on "TRANSIT-SPEED" Kft, HUF 24 million on Kelet-Trans 2000 Kft and HUF 8 million on Agrochimtranspack Kft, i.e. a total of HUF 399.8 million.
The GVH–MNB Competition Statistics database contains annual indicators on the sectors of the Hungarian economy, which are suitable for characterising the conditions and intensity of competition.
By creating and publishing the database, the GVH and the Hungarian National Bank (MNB) intend to provide publicly available data to researchers working on market theory and competition policy issues, thus contributing to an objective analysis of competition issues in the Hungarian economy.
The database is intended for general statistical and research purposes only, allowing mainly comparisons over time and (to a limited extent) across sectors for a relatively wide range of statistically defined sectors. The database is not intended to directly support competition or other GVH proceedings (e.g., sector inquiries), nor is it intended to characterise relevant markets in the sense of competition policy. The database is not suitable for this purpose.
The database (including the methodological documentation) may be freely used provided that the source (“GVH–MNB Competition Statistics Database”) is indicated.
The GVH proposes a multi-level, state-regulated sustainability labelling system
Budapest, 11 January 2024 - In many cases, green advertising messages are unclear and confusing, and a significant number of consumers are not aware of the exact content and meaning of certain claims and labels - among other things, these are highlighted by the recently concluded market analysis of the Hungarian Competition Authority (GVH), in which the national competition authority's case handlers analysed green claims and advertising messages. In the study published on its website, the GVH also made recommendations for market players and legislators.
In November 2022, the Hungarian Competition Authority launched a market analysis to investigate in detail the use of environmental (“green”) claims by undertakings in the food, clothing, chemical and cosmetics sectors. The purpose of the investigation by the national competition authority was twofold. On one hand, to assess the extent to which these green claims influence consumers' purchase intentions, and on the other hand, to assess the spread of these messages in different communication channels and how undertakings justify them.
Many market players use them for branding, but a significant proportion of consumers do not understand the confusing green messages.
The GVH's research shows that messages about environmental sustainability are less common in advertising, with green claims and logos appearing mostly on websites and product packaging. Many of the claims made in advertising relate to the packaging of products, even though packaging is not typically the cause of the vast majority of the products' environmental burden. The research also reveals a strong emphasis on building a sustainable brand image among green claims: image advertising was extremely common, with around 40% of ads with sustainable content focusing exclusively on building an environmentally conscious brand image.
As part of a comprehensive market analysis, the GVH carried out a sweep of 60 domestic websites in early 2023. In the course of the analysis, the GVH's experts found that domestic undertakings communicate about sustainability in a very broad and unsystematic way. Many companies use so-called trust marks or logos to underline their "green" credentials, but the certification body or criteria behind them are not always identifiable (or not available in Hungarian) to consumers.
As part of the market analysis, a controlled, randomized experiment carried out in cooperation with Eötvös Lóránd University (ELTE) showed that the display of green claims on product packaging has an impact on consumers' perception of the product and their purchase intention. However, a significant proportion of consumers are not aware of the exact content of the claims they see and often misunderstand them.
As a result of the research and sweep carried out in the framework of the market analysis, and based on international experience, the GVH has formulated several recommendations. Some of these are addressed to market players. Their aim is to help undertakings avoid misleading consumers by communicating in line with the Authority's guidelines. With the other set of proposals, the GVH provides advice to the legislator in the context of competition advocacy.
Key recommendations for undertakings:
Undertakings should understand and map the environmental impacts of the production and consumption of their products before developing their environmental and sustainability-related information.
Knowing the real environmental impacts of undertakings and their products, it is worth identifying which environmental improvements, investments and modifications can have the greatest positive environmental impact.
Undertakings’ communication on sustainability and the environment should focus on those activities that have the greatest impact on reducing environmental impacts. The claims, logos and labels used should be substantiated and verifiable and should be made available to consumers.
Finally, claims that are poorly worded, overly general or generalisable and vague should be avoided.
Main proposals for the legislator:
Facilitating the provision of credible information to consumers is essential to shift demand towards greener products. To this end, the GVH experts propose the development of a tiered, state-regulated labelling system for sustainability and environmental impact. In the long term, an environmental labelling scheme could increase consumer confidence and help consumers to make choices that are genuinely beneficial to them and the environment.
It is also worthwhile to accompany the established certification and labelling scheme with consumer education campaigns, raising consumer awareness of the scheme and its benefits, and encouraging consumers to take it into account in their transactional decisions.
A study summarising the results of the market analysis, including the GVH experts' partial recommendations and their justification, is available on the website of the GVH.
Written by Dr. Szilágyi, Pál (Director, Competition Law Research Centre) on .
Artificial Intelligence (AI) is increasingly affecting many aspects of our lives. AI is a rapidly evolving family of technologies that can contribute to a wide range of economic and social benefits across a spectrum of sectors and societal activities, but also presents risks. With the rapid development of AI-based tools and their integration into various platforms and other digital services, they will increasingly become part of everyday life, not only for users and businesses, but also, in time, for public administrations. By improving forecasting, optimising operations and resource allocation, and customising the digital solutions available to individuals and organisations, the use of AI can provide businesses with a key competitive advantage, delivering social and environmental benefits in areas such as health, agriculture, education and training, infrastructure, energy, transport and logistics, public services, security, justice, resource and energy efficiency, and climate change mitigation and adaptation.
However, the recent explosion in the uptake of AI, and the urgency with which developers are pushing it to market, may create unforeseen problems.
The problem may be that AI is a technology in its infancy, requiring enormous resources to develop, resources that only the largest technology companies have. Access to AI could therefore easily become a privilege for a narrow group of companies, who could limit competition in their markets. AI can put consumers in a vulnerable position by taking the collection and use of consumer data to a new level, as well as the use of dark patterns and personalised advertising/offers. A particular potential risk of chatbots, the most prevalent AI technology today, is that due to their conversational nature, it may not always be clear to consumers whether the responses given by the chatbot are solely responses gathered from relevant sources or whether they also contain paid advertisements. There is a sense that AI is at the heart of today's digital revolution and is a priority area for various authorities and legislators around the world. Several European competition authorities have already examined the impact of AI on competition. At the end of October 2023, the European Commission endorsed the G7 leaders' agreement on international guiding principles for AI and the Hiroshima process on a voluntary code of conduct for AI developers. These Principles and the provisions of the Voluntary Code of Conduct are expected to complement the legally binding rules at international level that EU lawmakers will finalise in the context of the draft AI law.
The European Commission's draft AI legislation has already been submitted to the European Parliament and the Council on 21 April 2021 and is expected to be adopted in the near future. In December 2023, the European Parliament and the Council reached a political consensus on a regulation for the functioning of AI in the Commonwealth, making the EU the first to regulate this area, which has been a major challenge for policy makers, politicians, lawyers and technologists alike in the last year or two.
2. The purpose of the market analysis
The aim of the market analysis is to gain a better understanding of the deployment of ICT, its diffusion among domestic market players and its impact on market competition and consumer behaviour. This is particularly important as AI is likely to become increasingly relevant in future competition proceedings (the GVH is currently conducting proceedings against Microsoft).
It also appears that some competition authorities have already carried out market analyses in this area for similar purposes.
3. Investigative steps of the proposed market analysis
The GVH envisages several investigative steps in the market analysis. In the first instance, it plans to consult with national professional organisations and academic actors (e.g. MILAB - National Laboratory for Artificial Intelligence) to establish the basis for the topic and to map the markets concerned by AI. Based on and following these, three main types of investigation steps are planned.
Firstly, a desk research type study will be needed to identify international practices and experiences. This will require a detailed review of the work of other competition authorities, the AI strategies of national and EU countries and reports on this topic.
Secondly, as in previous market analyses, the study plans to commission an external market research company to identify domestic business practices. This will essentially involve in-depth interviews to map the use of AI in the country by both businesses and consumers, to assess the opportunities, problems, challenges and implementations in the country, and to understand consumer perceptions of AI.
Thirdly, the GVH plans to use data request questionnaires to contact large technology companies (e.g. Google, Microsoft) and developers of currently available generative AI models (e.g. OpenAI) to get a comprehensive picture of their functioning and their developers' views on the competition and consumer implications.
4. Scheduling
The planned timing of the market analysis is summarised in the table below.
Task
Deadline
Launch of the market analysis - 4 January 2024
Consultation with national professional organisations, universities - January-February 2024
Implementation of desk research - January-April 2024
Procurement and implementation of market research - January-April 2024
Send out data request questionnaires - February 2024
Receipt and processing of data request questionnaires - April-May 2024
Publication of market analysis study - Mid-July 2024
5. Legal background to the market analysis
Pursuant to the provisions of Section 43/C of Act LVII of 1996 on the Prohibition of Unfair Market Behaviour and Restriction of Competition (Act on the Protection of Competition Act), the GVH may, in order to perform its statutory duties more efficiently and effectively, carry out market analysis, in the course of which it assesses and analyses the functioning of certain markets, market developments and trends, certain market practices and their effects on competition and business partners, in particular final customers, by collecting public information and data based on voluntary responses.
The GVH shall publish on its website the fact that a market analysis has been launched, the markets and market practices to which it relates, the issues covered and the planned timing of the market analysis.
As a result of the market analysis, the GVH will prepare and publish on its website a study setting out the issues examined, the facts and findings of the market analysis, any further action that may be necessary and the methodology used.
In accordance with Art. Pursuant to Article 43/F of the Act, if the results of the market analysis indicate the existence of a market disturbance that cannot be remedied or cannot be fully remedied by means of a competition supervision procedure, the GVH a) may inform the competent committee of the Parliament, the minister or the authority, b) may issue a recommendation, c) may initiate the drafting or amendment of legislation, if necessary.
This is an automatic translation of the GVH Notice.