Vj-34/2001/
VJ-34/2001
BRITISH AMERICAN TOBACCO MAGYARORSZÁG
(Dominant position)
Summary
The Competition Council terminated the proceedings against British American Tobacco Magyarország Kft. (hereinafter BAT), initiated due to alleged abuse of dominant position.
In the early 1990`s the state monopolies in the field of tobacco manufacturing and the wholesale of tobacco products ceased to exist when the tobacco factories were sold to multinational companies of the profession, as follows:
Tobacco factory of Eger - Philip Morris (USA)
Tobacco factory of Pécs - British American Tobacco (Great Britain)
Tobacco factory of Debrecen - Reemstma (Germany)
Tobacco factory of Sátoraljaújhely - Reynolds (Germany).
In 1997 Reynolds sold its interest to a Hungarian owner, V-Tabak. In 2000 the market shares of the parties were as follows:
Tobacco factory of Pécs (British American Tobacco) - 38 per cent
Tobacco factory of Eger (Philip Morris) - 32 per cent
Tobacco factory of Debrecen (Reemstma) - 22.8 per cent
Tobacco factory of Sátoraljaújhely (V-Tabak) - 7.2 per cent
As a result of the modernization and developments carried out by the new owners after the privatisation, there are approximately 50 brands on the Hungarian market and about 200 type of cigarettes is produced.
The cigarettes can be classified according to the size, nicotine or tar content, quality or price. According to the most common classification based on the latter two aspects, we can distinguish the lower, medium, upper-medium and premium categories of tobacco products.
As to the distribution of tobacco products, we can observe that each of the manufacturers has its own exclusive dealer like BAT. These dealers are free to deliver products to retailers as well, BAT sold 8.8 per cent directly to retailers.
BAT distributed nationwide the premium category Kent products between 1996 and 1999, however with little success, consequently in February 2000 these products were withdrawn from the market. In May 2000 the product family was introduced with renewed quality and packaging through a distribution system with the characteristics of selectivity. Therefore the Kent products are available only at Budapest, at selected retail premises, like hotels, places of entertainment, petrol stations, hypermarkets, etc.
As an exclusive dealer of the Tobacco factory of Pécs, BAT has a market share of 38% on the national market and 0.1 per cent of it is related to the Kent products. Selective distribution is a usual method for the marketing of luxury products (for example luxury cosmetics), which aims to stress the exclusive character of the products. BAT took into consideration similar goals. However the distribution system can be criticised or legally evaluated only if BAT has a dominant position on the Hungarian cigarette and premium cigarette market.
It was alleged that BAT abused its dominant position when it refused to supply some retailers. In order to determine the alleged infringement the relevant market has to be defined. The relevant product market is the market of premium category, light cigarettes, the relevant geographic market is Hungary. Due to the fact that BAT has only a market share of 2.1 per cent on the relevant market, in the absence of a dominant position the Competition Council did not determined an abuse of such position.