Vj-97/2000/37

THE DECISION OF THE SOCIETY AND THE ASSOCIATION OF UNDERTAKINGS ON THE SUGGESTED TIME AND EXTENT OF THE PRICE-RAISE HAS A COMPETITION-RESTRICTING EFFECT

(Restrictive agreements)

Summary

The Competition Council of the Hungarian Competition Office ("HCO") issued a decision on 21 July 2000 in a procedure without hearing concerning restrictive agreement initiated against Innovatív Gyógyszergyártók Egyesülete ("Society of Innovative Pharmaceutical Companies"), Magyar Gyógyszergyártók Országos Szövetsége ("National Association of Hungarian Pharmaceutical Companies") and Generikus Gyógyszergyártók és -forgalmazók Magyarországi Érdekvédelmi Szövetsége ("Hungarian Interest-Defending Association of Generic Pharmaceutical Producer and Distributor Companies") (hereinafter jointly referred to as: "Undertakings").

The Competition Council ordered as an interim measure the Undertakings to annul at the latest by 27 June 2000 their decision according to which they "suggest to the member undertakings the raising of the subsidised medical products` producer price by 8,5 per cent from 1 July".

The procedure against the three Undertakings, whose member companies are the Hungarian pharmaceutical firms and importers, was initiated on 2 June 2000. On this day the HCO learned of the said decision of Undertakings which might breach Article 1 of the Hungarian Competition Act No. LVII. of 1996 ("Competition Act"). The investigators of the HCO operating on the basis of Subparagraph (3), Article 71 of the Competition Act found the following facts:

Undertakings notified in a joint letter sent on 19 May 2000 to the Minister of Healthcare, Dr. Árpád Gógl of the above described price-raise. By 31 May 2000 the Ministry of Healthcare and the National Health Insurance Office was informed by 67 companies of a price raise which with few exceptions was around 8,5 per cent as in the said decision. The producer price-raise increased the price paid by consumers in the event of a

a 90-per-cent subsidy of the Social Insurance Fund by 66 per cent,
a 70-per-cent subsidy of the Social Insurance Fund by 27 per cent,
a 50-per-cent subsidy of the Social Insurance Fund by 16 per cent.

The investigators initiated the termination of the above restricting practice by an interim measure on the basis of Clause c), Subparagraph (2), Article 71 of the Competition Act.

Subparagraph (1), Article 11 of the Competition Act prohibits among others decisions by social organisations of undertakings, public corporations of undertakings, associations or other similar organisations, which have as their object or potential or actual effect the prevention, restriction or distortion of competition. According to Clause a) Subparagraph (2) of this Article this prohibition applies, in particular, to the direct or indirect fixing of purchase or selling prices.

A suggestion regarding the joint action of undertakings in itself could be in breach of Subparagraph (1) of Article 11 due to its possible restrictive aim or effect. In the present case the suggestion resulted in real restricting effect on the market. The consequence of the said decision could be the disappearance of competition not only between the member firms of Undertakings but also on the whole pharmaceutical market including imports.

Taking into consideration the close date of introducing the price-raise and the protection of economic interests of concerned parties as well as of sustaining competition, the Competition Council has ordered with an interim measure the elimination of the illicit practice. It also noted that the annulment of the Undertakings` decision does not remedy the breach of the Competition Act, but it only reduces the extent of the breach and the corresponding sanctions.

The final decision should be brought till 29 of October 2000.

October 26, 2000. Budapest

dr. Győrffy István sk. előadó
dr. Bodócsi András sk.
dr. Kállai Mária sk.
Kis Lászlóné