Vj-145/2001/
VJ-145/2001
TRIPE CARTEL
(Restrictive agreements)
Summary
Facts
The Office of Economic Competition (GVH) launched a procedure after having acquired a document in which a price agreement was concluded. According to that document nine undertakings (firms and individuals) operating restaurants in the same village of a popular tourist region agreed that they would not sell certain meals under the agreed price.
According to the investigation, the operators of these restaurants came to an agreement, which they put in writing just before the summer holiday season (28th June) in 2001. In this "minutes" they fixed the minimum price of five drinks, twenty-three meals and meals for children. One could not sell the products under the settled price (there was a 10 HUF /app. 0,04 Euro/ possible reduction). On the next day one of the participants showed the document to his attorney who advised that it should be revoked immediately, which they did, also in writing. However, later the investigation showed that in practice each member followed the agreed prices during the summer.
Arguments of the parties
The participants stated that the agreement was a consequence determined by the structure of the market, with the aim to maintain the level of service on one hand, and to prevent "dumping" prices. It was spontaneous, there were no sanctions for breaching it.
They argued that the withdrawal was valid and in force, it was not a "formal", ineffective act. They did not follow the revoked agreement, their prices were decided by themselves without acting in consent. There is a certain limit under which they could not go, anyway. There were 20-50-100 HUF (0,1 - 0,25 Euro) differences, therefore one cannot talk about concerted practices. In the parties` view the "agreements or concerted practices" in the text of the Act are not alternative but conjunctive conditions, i.e. the undertakings must agree and act in concert to be condemned.
Furthermore, the parties argued, that the violation did not take longer than one day, therefore imposition of fine was impossible.
Legal assessment by the Competition Council
The Competition Council found that the relevant market was the hot food providing restaurants, not including snack bars, coffee shops, etc., which operate on the beach. These restaurants are usually opened seasonally, from late spring - early summer till end of August, beginning of September. Although, in this particular case the market definition could even be left open since the main question was the distortion of competition as aim or effect of the agreement, and not the market share. (According to the Hungarian competition law price fixing agreements may not fall under the de minimis provision of the Competition Act.)
Although they indeed had written a revoking document, during the investigation it was proven that they followed the contents of the agreement in practice, i.e. they did not leave or revised their consent but only removed its written form. Consequently, the agreement remained in force between them. The lack of sanction did not deprive the agreement from its effective nature.
The Competition Council did not pay attention if their prices were identical or not but to the fact whether they crossed the limit price or not. If they had really wanted to abort the agreement, they should have shown their intention by setting lower prices than the fixed limits of the agreement.
The wording of `agreements or concerted practices` are alternative, therefore either of them is enough to establish breach of law.
Price fixing is the first example of agreements or concerted practices, which have as their object or potential or actual effect the restriction of competition. Their conduct not only aimed at distortion of competition but also had the effect of it.
The decision
Price fixing is one of the most dangerous aspects of anti-competitive behavior. Therefore, the undertakings infringed the Competition Act. Because of their conduct, the Competition Council imposed a fine amounting 3,3 - 3,8% of their revenue (out of the maximum ten percent, admitted by the law), 100 - 700 thousands HUF (400 - 2800 Euro).
In one case, the Competetion Council did not impose a fine, because - applying the same criteria as in the other cases - it would have been too low and the person in question ceased its economyc activity in September 2001.