We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
03 December 2020
On 20 March 2015 the Hungarian Competition Authority (HCA) imposed a staggering fine on Auchan for abusing its significant market power. The HUF1,06 billion (approximately €3 million) fine is the highest ever imposed by the authority for the infringement of the Trade Act (Act CLXIV of 2005 on Trade). Although the decision is from 2015, the Hungarian courts have only now put an end to the judicial review. The Supreme Court has upheld the HCA's decision in its entirety.
Auchan required most of its non-food suppliers to pay a 'discount contribution fee' between 2006 and 2014. The fee was based on the net value of the products delivered to Auchan, irrespective of actual sales figures. Normally, it ranged between 5% and 15% depending on the supplier; however, in certain cases it spiked at 40%. The amount was usually revised during annual negotiations with the supplier.
The HCA initiated an investigation to determine whether the fee constituted an abuse of Auchan's significant market power against suppliers. The investigation showed no service behind the fee or, at least, that the suppliers cannot point to a specific service which Auchan provides in exchange for this contribution. Some of the suppliers considered it as a straightforward listing fee.
Auchan argued that the fee is an integral part of the pricing process. It allows suppliers to apply their regular list prices with regard to Auchan and pay the fee as a separate contribution. Auchan also argued that its buyer power and market share does not allow for abusive behaviour against large international suppliers such as Samsung and Procter & Gamble, as these players have significant market shares and negotiating power themselves.
In 2015 the HCA concluded the proceeding with one of the most significant fines imposed on a single undertaking in its history. According to the authority, the fee was a fixed payment which Auchan required from its suppliers for featuring their products on its shelves. The Trade Act prohibits undertakings with significant market power from imposing such fees; therefore, the HCA concluded that Auchan's practice constitutes an infringement of the act.
Auchan initiated a judicial review of the HCA decision. It argued before the Hungarian courts that the Trade Act (the prohibition of such fees) breaches European law through the restriction of basic freedoms (ie, the movement of goods and freedom of establishment). Auchan also noted that the decision showed an application of competition law which was inconsistent with EU standards and its market shares in Hungary had indicated no significant market power. It also contested the fine imposed as highly excessive and based on considerations which were irreconcilable with the applicable administrative law.
The first-instance court dismissed Auchan's appeal. It found no breach of EU law and considered the HCA's actions to be in line with the relevant administrative law requirements.
Auchan's appeal to the second-instance court was partially successful. The higher court found that the HCA's investigation lacked certain details. It considered that the authority could not prove without doubt that the fee had not been a result of pricing negotiations and a compensation for service, but merely a charge imposed on suppliers. As a result, the second-instance court repealed the HCA's decision and ordered a more meticulous investigation into the contracts and relevant meetings between the suppliers and Auchan. The court instructed the HCA to repeat the proceeding and establish the specifics of the fee's role in the contractual relationship between Auchan and the suppliers.
The Supreme Court reversed this ruling and disagreed with the second-instance court's conclusion. It ruled that the HCA had correctly established the facts of the case based on the submissions of Auchan and its suppliers and that the second-instance court had incorrectly assumed that further investigation might have led to a different outcome. Moreover, the second-instance court had failed to rule on all of Auchan's claims. Therefore, the Supreme Court ordered a new second-instance proceeding to review the outstanding claims.
As a result of the Supreme Court's instructions, the new second-instance proceeding focused on Auchan's claims regarding the potential infringement of EU law and the potentially unlawful fine. In March 2019 the second-instance court confirmed the initial dismissal of Auchan's actions at the first instance.
This decision – as announced in a HCA press release – has just been upheld by the Supreme Court. Therefore, after five years of litigation before the Hungarian courts, the HCA's historically severe decision (both in terms of interpreting the law and applying available penalties) has been confirmed.
The HCA noted in its press release that as a result of this confirmation, it will continue to investigate potential infringements against suppliers and act against larger retail chains that abuse their market power.
The HCA's recent practice features no cases regarding significant market power. The Spar decision, which similarly revolved around the abuse of significant market power, is from 2012. Therefore, the Supreme Court's ruling might not support, but rather jump-start enforcement efforts in this area.
For further information on this topic please contact András Nagy at Schoenherr Attorneys at Law by telephone (+36 1 8700 700) or email (firstname.lastname@example.org). The Schoenherr Attorneys at Law website can be accessed at www.schoenherr.eu.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.