Hungarian Competition Authority

Hardcore cartels cause serious harm to consumers, business partners, competitors and to the whole economy without any benefit. Hardcore cartels are often set up in secret and are kept secret for their entire operation; consequently, it is extremely difficult to detect such collusion.

Considering that hardcore cartels cause serious harm and it is very difficult to detect them, according to the legislature, it is justified to reward those informants who provide the Hungarian Competition Authority (Gazdasági Versenyhivatal, hereinafter GVH) with indispensable evidence that enables hardcore cartels to be revealed and detected. The informants who disclose the existence of a cartel (e.g., employees, business partners) also take a financial risk because of the cartelists’ possible revenge; this risk has to be counterbalanced so that the motivation to help enforce law-abiding behaviour can be maintained.

Hardcore cartels mean the following agreements and concerted practices between competitors (hereinafter agreements):

• Agreements between competitors which have as their object the direct or indirect fixing of the purchase or selling prices of a product or a service, i.e. the competitors agree on what price they will sell a certain product or service to consumers instead of determining their prices independently of each other (this behaviour is known as price fixing).
• Agreements between competitors the aim of which is to share markets, i.e., the competitors agree in advance among themselves which undertaking is going to sell a certain product or service in which area or to which actual or potential consumer group and agree not to compete among themselves in this area (this behaviour is known as market sharing).

• Agreements between competitors which aim at fixing production or sales quotas, i.e., the competitors agree to limit either the production or sale of a particular product to a specified amount.
• The coordination and collusion of competitors during a tender or a public procurement procedure, i.e., bid rigging. For example, the competitors – before submitting their respective bids – exchange information among themselves about their intention to submit a bid in reply to an invitation to tender or make a secret agreement that one of them will either not submit a bid at all, submit a false bid or submit a bid that is far more expensive than the other’s bid in order to help the latter win the tender.

(The GVH has published information booklets in which it provides detailed information for small and medium-sized enterprises as tenderers on collusion in the course of tenders, the form and adverse effects of such collusion and on how to avoid it as well as for contractors on their possibilities to screen and to prevent cartels in public procurement procedures.)

The establishment of hardcore cartels is prohibited by Article 11 of the Hungarian Competition Act and also by Article 101 of the Treaty on the Functioning of the European Union (hereinafter TFEU).

Cartel agreements seriously harm the functioning of the market economy since they restrict competition or even exclude it completely, thereby leading to an increase in prices and a decrease in consumer choice. The undertakings participating in a cartel cause a loss of efficiency by restricting competition, as they eliminate the external driving force that would result in product development, innovation and the use of more effective production technologies and business models. Their behaviour may even eventually lead to lost competitiveness, decreased employment, and negatively impact the development of the entire economy. Consequently, the GVH considers the fight against cartels to be a high priority.

A reward is only granted if the information provided relates to the most serious type of competition law offence, i.e., hardcore cartel conduct, and if the provided information qualifies as indispensable evidence. Based on the Hungarian Competition Act, the reward may only be granted for the provision of two types of information: a) written evidence qualifying as indispensable in connection with a hardcore cartel and b) under certain conditions, information qualifying as indispensable for obtaining a judicial warrant to conduct unannounced inspections.

It must be emphasised that the mere provision of evidence about a cartel does not automatically result in the granting of the informant reward; the GVH only grants the reward for ‘written evidence qualifying as indispensable’. Practically, these are pieces of evidence qualifying as ‘documents’ specified by Act CL of 2016 on General Rules of Administrative Proceedings (hereinafter GRAP Act), i.e., objects that carry recorded data of any kind. Such evidence must qualify as indispensable for proving the infringement. This usually means that the informant must share ‘internal information’ relating to the cartel in question; it is not sufficient to disclose general signs referring to the cartel activity. As a general rule, a reward may be offered if the informant reveals evidence that can be connected to the elements of the relevant statutory provisions of the hardcore cartel (e.g., undertakings being parties to the cartel, anticompetitive conduct); it is not sufficient to provide evidence that merely helps to identify factors that are relevant when it comes to the setting of the fine.

Based on the above, the informant may be entitled to receive a reward for disclosing the agreement establishing the cartel, submitting written correspondence exchanged in the course of the operation of the cartel or, in a competition supervision proceeding already launched, for providing documents proving that further participants  – unknown for the GVH until that time – were also involved in the cartel, or that the cartel was set up at an earlier date than that known to the GVH or that it covered other product groups as well. However, there are no grounds for a reward if the evidence is relevant in terms of the threats to competition, the impact of the infringement on the market, or the attitude of the undertaking committing the infringement towards its practice.

Whether or not the evidence possessed by a potential informant qualifies as indispensable evidence is assessed on a case-by-case basis. Although the indispensable nature of a piece evidence can only be assessed in light of the entire proceeding, all of the evidence and the decision on the merits of the case containing the legal qualification, the Hungarian Competition Act enables the potential informant to contact the GVH (without revealing his or her identity) to inquire about whether a certain document or piece of information is likely to qualify as indispensable evidence (for details see also the answers given to questions 8 and 9).

In addition to the above, indispensable evidence also includes information – including oral information – based on which the court issues a warrant to conduct an unannounced inspection pursuant to Article 65/A of the Hungarian Competition Act in the course of which the GVH takes possession of written evidence that in accordance with the above qualifies as indispensable.

In the fight against cartels, unannounced inspections (so-called dawn-raids) pursuant to Article 65/A of the Hungarian Competition Act are of key importance. Within the framework of these dawn-raids, with a view to finding means of proof concerning the infringement or concentration under investigation, the case handler of the GVH may search any premises, vehicle or data storage device and enter such premises under his/her own authority, against the will of the owner (possessor) or any other person present, and may open any sealed-off area, building or premises for this purpose and may make copies of the data and documents stored on the data storage devices found at the location. Under certain conditions, unannounced inspections may also be held at the real estate, vehicles or data storage devices serving or used for private purposes. In cartel proceedings, unannounced inspections are of key importance since the GVH may obtain the majority of the evidence necessary for proving the existence of a cartel this way. Dawn-raids held by the GVH are subject to judicial authorisation that can only be obtained if the GVH is in the possession of adequate information about a cartel. It is for this reason that the Hungarian Competition Act prescribes that the informant is not only entitled to the reward if he or she submits to the GVH indispensable written evidence directly concerning the cartel, but also if he or she provides the GVH with other information (even orally) with the help of which the GVH is able to substantiate its request for the authorisation of an unannounced inspection, provided that the unannounced inspection proves to be successful, i.e. the GVH finds indispensable written evidence in connection with the cartel in the course of the unannounced inspection.

As for indispensability, it has to be emphasised that in the course of the proceeding of the GVH the same evidence may emerge from several sources, or a certain relevant fact may be supported by several pieces of evidence. It is for this reason that the Hungarian Competition Act contains, for the benefit of the informant, the rule of sequence. According to this rule, the evidence provided by the informant qualifies as indispensable even if it can be replaced by other evidence that the GVH becomes aware of at a later date.

Any natural person may provide the GVH with evidence that entitles him or her to a reward. Informants may be persons who have been in direct contact with the cartel (for instance they may have been actively involved in the cartel), or persons who possess evidence about the infringement without having any direct contact with it (e.g., a secretary who organises appointments, someone who is responsible for organising (business) trips, an employee of an association representing the interests of undertakings or of a chamber). (See also points 5 and 6.)

However, it is important to emphasise that a reward will not be granted in a case where general information referring to an alleged infringement is provided by an undertaking about its competitors or by a consumer about an undertaking connected to it. Such pieces of information usually do not qualify as indispensable evidence substantiating an infringement.

The Hungarian Competition Act specifies several cases where a reward will not be granted for the information provided (even if it meets the conditions specified in question 3). These cases are the following:

• An executive officer, member, supervisory board member, employee or agent of an undertaking on behalf of which a previous application has been submitted relating to the same conduct for immunity from fines or reduction of fines pursuant to Article 78/A of the Hungarian Competition Act (hereinafter leniency application), is not entitled to a reward (for further details, see the answer given to question 6).
• The informant reward will not be granted in cases where the evidence has been obtained as a result of a crime or an offence. This provision aims to prevent persons who are ‘close’ to the relevant information from being motivated by the reward to commit serious violations of the law. Naturally, it is the authorities dealing with criminal and administrative offence matters that are entitled to establish such infringements rather than the GVH, and the GVH is not even empowered to investigate such matters, except of the evident ones. (In any doubts concerning the assessment of the obtainment of the document pursuant to the criminal law or the administrative offence law it might be justified to ask for advice of a legal expert.) In cases where the proceeding relating to the crime or offence is initiated before the payment of the reward, the payment of such reward is suspended until the final, non-appealable conclusion of the respective proceeding. If the final, non-appealable decision on the commitment of a crime or offence is delivered after the payment of the reward, such reward must be reimbursed to the GVH. However, it must be highlighted that the payment of the reward is not excluded in the case of any other kinds of infringements (e.g., pursuant to labour law or civil law).
• The reward must not be paid to more than one person if it can be established, based on the data available, that the evidence concerned originates from a single source and has been divided among several informants with the sole purpose of obtaining multiple rewards (e.g., one of the informants submits the agreement of the cartel, while another one submits its annexes with the purpose of obtaining multiple rewards). In such a case the single amount of the informant reward shall be equally divided among those who are entitled to it.
• A reward will not be granted if the competition council proceeding in the case has not imposed fines in its decision closing the competition supervision proceeding – including the case where it is not the GVH but the European Commission that decides in the case, as the basis of the calculation of the reward is the fine imposed by the competition council proceeding in the case (see also point 11).

A reward will not be granted if the evidence has been obtained as a result of a violation of the lawful cooperation required by the Hungarian Competition Authority. This provision aims to prevent a potential informant from intentionally not revealing an infringement through the framework of a compliance programme or leniency application in the hope of obtaining the informant reward.

The general answer is yes; the Hungarian Competition Act does not exclude a cartel participant from receiving the informant reward.

However, it must be highlighted that pursuant to the Hungarian Competition Act, if an undertaking taking part in a cartel has previously submitted an application for immunity from fines or reduction of fines to the GVH relating to the same conduct, then an executive officer, member, supervisory board member, employee or agent of the undertaking is not entitled to a reward for the evidence provided. (For further information in English about the leniency programme, please click here.) Nevertheless, the exclusion does not apply to the former employees or former chief executives of the undertaking applying for leniency.

It is important to emphasise that pursuant to Act C of 2012 on the Criminal Code (hereinafter Criminal Code) agreements in restraint of competition in public procurement and concession procedures qualify as a crime (committed in the capacity of either a perpetrator, an aider or an abettor).

Article 420 (1) and (2) of the Criminal Code prescribes that ‘any person who enters into an agreement aimed at manipulating the outcome of an open or restricted tender held in connection with a public procurement procedure or an activity that is subject to a concession contract by fixing the prices, charges or any other term of the contract, or for the division of the market, or takes part in any other concerted practices resulting in the restraint of trade is guilty of a felony punishable by imprisonment of between one to five years’.

‘Any person who partakes in the decision-making process of an association of companies, a public body, a society or similar organisation, and who adopts any decision that has the potential to restrain competition with the aim of manipulating the outcome of a public procurement procedure or of an open or restricted tender published in connection with an activity that is subject to a concession contract shall be liable for punishment in accordance with the previous paragraph.’

However, the perpetrator may be exempted from criminal sanctions, since Article 420 (4) of the Criminal Code stipulates – as a reason removing culpability – the case where the perpetrator confesses the criminal act and the circumstances surrounding it to the criminal investigation authorities before they become aware it. In this case the perpetrator is not subject to punishment.

Pursuant to Article 420 (5) of the Criminal Code, the perpetrator of the crime is also not punishable if at the time of the commission of the crime the perpetrator served as a chief executive, member, supervisory board member, employee or the agent of an undertaking that has submitted – before the competition authority opened an investigation into the case – a request for exemption from the fines to be imposed under the Hungarian Competition Act, and unveils the circumstances of the act. Therefore, this form of exemption from criminal responsibility only applies if the undertaking submits a leniency application.

It follows from the above that disclosing a cartel as an informant in itself does not justify an exemption from criminal law consequences, as the informant must also be the first to unveil the act to the authorities dealing with criminal matters. In addition to the unveiling of the cartel before the criminal investigation authorities, the chief executive, member, supervisory board member, employee or the agent of the undertaking concerned (i.e., who is not entitled to the reward as an informant) may be exempted if the undertaking submits an application for immunity from fines.

In case any person would like to provide information about a cartel or – without revealing his or her personal identity – wishes to inquire about whether the evidence in his or her possession entitles him or her to the informant reward, the Cartel Detection Section of the GVH should be contacted at:

Address: H-1054 Budapest, Alkotmány u. 5.

Tel.: + 36-1-472-68891

E-mail: kartell@gvh.hu

It is also recommended to visit the GVH’s thematic page on cartels and leniency, where anonymous inquiries can be made through the cartel-chat application. For general information about the procedure concerning the informant reward, please contact the Cartel Detection Section of the GVH.

Any person may ask the GVH for information – without revealing his or her personal identity – about whether the evidence in his or her possession may entitle him or her to the informant reward.  Naturally, the GVH is not in the position to provide – even preliminary – a detailed assessment of the provided information in terms of its eligibility for a reward; nevertheless, if necessary, the GVH may provide detailed information about the rules on the reward. The evidence provided is pre-examined by the GVH in terms of its potential eligibility for the granting of the reward, and the GVH informs the informant of this fact and the rules applicable to the payment of the reward at a time that is appropriate in terms of its proceeding. A person who provides evidence that is likely to establish a claim for the payment of the reward must submit an application for the reward within five days upon receiving information about it, otherwise he or she is not entitled to the reward later.

If the evidence provided in the course of an ongoing competition supervision proceeding is incapable or presumably cannot be qualified as indispensable for proving the infringement, the GVH informs the person who has provided the evidence with a separate resolution about this fact.

It is important to emphasise that whether the information provided by the informant qualifies for the granting of the reward can only be conclusively determined when the competition council proceeding in the case adopts a decision on the merits in the given case, since it is only at this time that the evidence can be thoroughly assessed to establish its indispensable nature. As a consequence, information provided by the GVH about the likelihood of the evidence provided being deemed eligible for the reward shall only constitute a preliminary assessment and shall not bind the GVH in the future.

As detailed in the previous point, the GVH may form an opinion in response to an anonymous request about whether the evidence possessed by a potential informant is capable of qualifying for the payment of the informant reward. The GVH will then inform the potential informant about its opinion and, if appropriate, recommend him or her to submit a claim for the reward; however, the provision of this information and recommendation do not bind the GVH, and they do not represent the definitive standpoint of the GVH concerning the potential informant’s entitlement to the reward (see also point 9).

The Competition Council proceeding in the case decides about the amount and the payment of the reward within thirty days from its decision closing the case. The reward is due within thirty days of the resolution becoming final.

Once it has been established that the informant is entitled to receive the informant reward, the granted award will be one percent of the fine imposed by the competition council proceeding in the case, up to a maximum of HUF fifty million. It is important to note that income tax does not have to be paid on the reward.

The amount of the fine imposed in the case and therefore the amount of the informant reward is influenced by several factors (e.g. the duration of the infringement, the fact whether the infringement has ceased to exist or is ongoing, the market share of the undertaking in the relevant market etc).

The basis of the reward is the total amount of the fines imposed in the case, i.e. the fines imposed on separate parties are added together.

The amount of the reward paid will not have to be returned later as a result of a court review of the GVH’s decision, even if the court repeals the decision of the GVH or decreases the amount of the fine imposed, except where it turns out in the course of the court procedure that the evidence provided by the informant was not legal (e.g. the party proves that the written evidence does not originate from it or that the evidence is probably false) and the reason for the illegal nature of the evidence can be traced back to the practice of the informant. In this case the GVH reclaims the reward paid back from the informant.

Since a reward is only granted if a fine is imposed, the informant may obviously only receive a reward if a proceeding is closed by the establishment of an infringement and the imposition of a fine. This also means that in the very rare cases where the European Commission takes over a proceeding and decides upon a case launched by the GVH, a fine cannot be granted because the GVH will not have imposed a fine in the case; a fine imposed by the European Commission does not go into the account of the state budget.

In a case where one person provides several indispensable pieces of evidence, only the simple amount of the reward is granted.

In case more than one different natural person provides indispensable evidence, each person shall be entitled to the informant reward. Each person is only entitled to receive the informant reward once.

Informants who provide evidence about cartels are generally only willing to cooperate with the GVH if they can keep their identity secret. Consequently, the GVH has numerous instruments to keep the identity of informants’ secret. (See also the answer given to question 13.) However, it must be highlighted that according to the law, the informant may be obliged to be heard – depending on his or her role in the proceeding – as a client or a witness during the competition supervision proceeding, and it cannot refuse this obligation except where he or she is exempted based on the GRAP Act.

The informant may be heard as a witness in the course of the competition supervision proceeding, but he or she may ask the GVH to keep his or her natural personal identification data and address confidential. This request of the informant cannot be refused by the GVH. In this case the GVH handles the above-mentioned data of the informant separately sealed within the documents of the case. The GVH guarantees that all the sealed data will remain secret in the course of the proceeding and during access to the file. The authority shall process the documents that contain sealed data (or other limitedly attainable data) separately among the documents of the case in a way that ensures that the limitedly attainable data will only be known by the case handler dealing with the case, other civil servant, member of the competition council proceeding in the case, the president and vice-presidents of the GVH, the court, authority or person who is entitled by law to know the limitedly attainable data in a predefined way and scope. In order to ensure that the parties subject to the competition supervision proceeding have the right to access the documents for review, the GVH prepares a summary of the minutes of the hearing of the anonymous witness in order to prevent conclusions from being drawn about the personal identity of the witness (informant).

However, in this latter case, it must be emphasised that the confidential handling of the informant’s personal identification data may have an impact on the probative force of the evidence provided, and it may ultimately also influence the payment of the reward. The GVH records all the phases of the contact with the informant; however, the parties subject to the competition supervision proceeding cannot inspect these documents, except in relation to the evidence provided that concerns the infringement.

Here it must be noted that the GVH reveals the evidence submitted by the informant to the parties subject to the competition supervision proceeding; consequently, it is possible that a party – purely in view of the evidence – will request the competent authorities to investigate its claim that an offence or crime has been committed in connection with the obtainment of the evidence. In this case – according to the above-mentioned – the GVH shall suspend the payment of the reward until the conclusion of the criminal proceeding.