RESTRICTIVE AGREEMENT BETWEEN BKV, HIRKER, BUVAHIR, AND LAPKER
The Competition Council (hereinafter CC) imposed a fine of HUF 30 million (115 000 Euro) on BKV and a fine of HUF 30 million (115 000 Euro) in total on HIRKER, BUVAHIR and LAPKER for concluding and implementing contracts which restrict competition.
I. Reasons for the decision
The undertakings concerned
BKV, the undertaking principally concerned is a joint-stock company, which is wholly owned by the local government of Budapest. Besides its main activity which is public transportation operating on schedule, BKV leases its own real estates as well. HIRKER and BUVAHIR belong to LAPKER which deals with newspaper distribution. The main activity of HIRKER and BUVAHIR is also newspaper distribution and the sale of newspapers on the wholesale as well as retail market. LAPKER runs newsagent-chains named RELAY and CITY PRESS. The former has news-stalls in the busiest BKV-stops.
The facts of the case
A contract of tenancy was concluded between BKV as lessor and the legal predecessors of HIRKER and BUVAHIR as tenants in 1996. It provided that the tenants leased news-stalls which were listed in the appendix of the contract, but then the parties were not allowed to assign the lease to third persons. The contract also regulated that new news-stalls could only be set up with the approval of the tenants in those 31 BKV-stops which were mentioned in the appendix of the contract.
BKV concluded a new contract with the three undertakings in 2000. The new contract replaced the former contract. According to the contract, BKV lets the new-stalls mentioned in the appendix to the above-mentioned three companies and the contractors also agreed that the chain of news-stalls could be enlarged in the future. The contract prohibited the tenants from using the news-stalls for anything else then the sale of journals and related goods. The contractors also agreed that the tenants were allowed to assign the lease only with the approval of the lessor. The contractors incurred a liability to establish new, higher quality news-stalls and it was also stated that if BKV would have found new places for further news-stalls, the tenants had the right of first refusal to enter into the lease agreement for the new rental properties.
II. Legal assessment
The investigation report considered the newspaper distribution in news-stalls as the relevant service. The BKV-owned estates and the news-stalls of any other companies within a 200 m radius of the BKV-stops were considered as the geographic market. HIRKER had a market share of more than 90%, while BUVAHIR only had two news-stalls in the relevant geographic market
The investigation also established that the BKV-stops and the areas around them covered only 6% of the whole market of newspaper distribution in Budapest. Thus, the investigation proposed to dismiss the case. Additionally, the report found the contract concluded on 22 December 2000 not to contain any restrictive provisions.
Concerning the contracts, all the parties to the case queried that they contained restrictive provisions and added that the contracts were favourable to the consumers, as they ensured the high quality of the service and enabled the diversified operation of the news-stalls. However HIRKER, BUVAHIR and LAPKER applied for an individual exemption in case the CC would find that the contracts restricted competition.
The Competition Council defined the relevant market and service the same way as it was stated in the investigation report. The CC stated that there was no intensive competition between HIRKER, BUVAHIR and LAPKER on the relevant (geographic) market, moreover, they had no other competitors.
In respect of the contract concluded in 1996, the CC pointed out that the provisions, which ensured that the lessor could set up new news-stalls only with the approval of the tenants, were able to restrict (or even prevent) competition, since the market entry of a new competitor depended on the approval of the co-tenants.
In connection with the contract concluded in 2000, the CC examined first the question whether the right of lease that is regulated in the Civil Code might be evaluated as a vertical restraint in the present case. The CC established that contracts, which are regulated in the Civil Code can also be regarded relevant from the point of view of competition law. The CC pointed out that the tenants` right to lease first the newly established news-stalls was capable to restrict competition, since it gave the possibility to the tenants to hinder the market entry of other companies, if the tenants offered the same or better lease-conditions to BKV than third parties.
Thus, the CC regarded that the contracts were similar in nature and both of them ran counter Article 11 of the Hungarian Competition Act.
Lastly, the CC examined whether there was a possibility to grant individual exemption to the agreements. It found that although there were some benefits for consumers flowing from the agreements, but the restrictions were not justified economically and there were no such common goals that made the concomitant restrictions resulting from the contracts acceptable. Thus, the Council did not grant an individual exemption.