Hungarian Competition Authority

Vj-56/2001/

VJ-56/2001

GYÖNGY FOODS

(Dominant position)

Summary

The Competition Council terminated the proceedings initiated against Gyöngy Foods Kft. (hereinafter Gyöngy Foods) due to alleged application of predatory prices.

Gyöngy Foods focuses its main activity on the wholesale of margarine. Gyöngy Foods imports and distributes four types of margarine, purchased from Belusa Foods (Slovakia).

On the Hungarian margarine market, taking into consideration the consumer habits as well, there are two types of margarine. The cup shaped margarine for eating (direct consumption) represents around 70 per cent of the national demand, while the cube shaped cooking margarine only 30 per cent. Over the recent years Unilever Magyarország had the highest market share with more than 70 per cent, Gyöngy Foods reached 14.9 per cent in the year 2000. Regarding Linco, the product directly concerned by the procedure, Gyöngy Foods had a market share of 8 per cent.

The prices could vary according the fat content of the products. The possible substitute products of margarine could be the various spreadable butter, butter-cream, cheese-cream products.

Under article 21 (h) of the Competition Act setting extremely low prices which are not based on greater efficiency in comparison with that of competitors and which are likely to drive out competitors from the relevant market or to hinder their market entry constitutes an abuse of dominant position. The undertaking`s costs have to be considered when assessing the justification of the applied prices.

In the present case the Competition Council stated that according to its practice, to establish predatory pricing, it is necessary that the applied price causes losses. In the course of its inquiry the Competition Council found evidence that the wholesale margin of Gyongy Foods covered all of its costs, moreover resulted profit as well. According to the Competition Council, in the case of predatory pricing, the relatively low market share does not necessarily indicate the absence of dominant position. However, due to the fact that the pricing policy of Gyöngy Foods did not raise any competition concerns, it was not necessary to examine in detail the issue of dominant position.