On 1 June 2009, amendments to Hungary's Competition Act came into force. Some of the amended Competition Act's most interesting changes are the provisions on private enforcement.
In June 2008, the European Commission (the "Commission") published its "White Paper on Damages Actions for Breach of the EC antitrust rules" (the "White Paper") which set out a number of suggestions for encouraging private damages actions and making those actions more effective. One of the problems that had been identified is the difficulty for victims of anti-competitive practices of quantifying the damage those practices caused. There is also the issue of how to ensure the attractiveness of the leniency regime (which leads to most of the Commission's competition investigations) is not reduced by any measures encouraging private damages actions.
In relation to quantifying damages, the Commission intended to "draw up a framework with pragmatic, non-binding guidance for quantification of damages in antitrust cases, e.g. by means of approximate methods of calculation or simplified rules on estimating the loss." The Hungarian amended Competition Act offers one option for quantification: Article 88/C creates a rebuttable presumption that the effect of a hard core cartel on the market was to increase prices by 10%. The presumption applies to all actions, both follow-on (where the infringement has already been proven by the Hungarian Competition Authority or the European Commission) and stand-alone. The amended Competition Act still requires the claimant to prove the causal link between the infringement and the damage suffered but henceforth, quantification of that damage is rendered much easier.
In relation to leniency, the Commission's White Paper identified the particular problem of ensuring that prospective leniency applicants are not discouraged by the possibility that their leniency application, and, more importantly, the admission of anti-competitive conduct it contains, be used to establish their liability for damages. The White Paper suggested limiting the claimants who could commence a private damages action against an immunity recipient to direct and indirect contractual partners thus excluding consumers and consumer associations. The Commission, however, stated that the impact of such a limitation on "the full compensation of victims of cartels and on the position of the co-infringers, especially other leniency applicants" should be reflected on.
Hungary's amended Competition Law suggests one solution to this balancing of interests: Article 88/D provides that actions against those undertakings claiming immunity under the Hungarian leniency programme are stayed until the Hungarian Competition Authority's decision becomes binding. Further, immunity recipients may refuse to pay damages as long as those damages can be recovered from any other member of the cartel. This creates a priority of enforcement: a judgment against all the cartelists, including an immunity recipient, could only be enforced against an immunity recipient where the other cartel members are not able to pay the damages awarded. In this way, immunity recipients are offered increased protection from private damages actions.
The provisions adopted by Hungary's amended Competition Law seek to encourage private damage actions while at the same time not tipping the balance too far in claimants' favour. While it remains to be seen whether or not these new provisions operate as designed, Hungary's amended Competition Act is a positive addition to the debate on private enforcement, injecting some much needed innovation into the field of private damage actions.
FRENCH MERGER CONTROL:WHERE THE SELLER RETAINS JOINT CONTROL OF ASSETS DIVESTED
The decision of the Minister for the Economy (the "Minister") of 5 March 2009, authorising the acquisition by Bertrand Distribution group of Inbev France's subsidiaries, provides an interesting illustration of a case in which the seller may be considered as exercising joint control with the buyer over the divested assets.
The Bertrand Distribution group had notified the acquisition of sole control of Inbev's distribution network, the seller retaining only a single share in the subsidiaries. The Minister however questioned this analysis, taking the view that the seller exercised decisive influence over the companies sold.
Analysing the body of evidence, the Minister found that the divestment was accompanied by an extremely long commercial agreement [10-15 years] between the Bertrand Distribution Group and Inbev, under which the seller remained the quasi-exclusive supplier of the divested warehouses, this exclusivity being guaranteed by several contractual provisions (penalties, client advances and the right to review documents and make on-the-spot inspections on the volume of beer sold). The seller also had a right of first refusal on the sale of any warehouse or company, as well as veto rights on a certain number of the future entity's decisions. The Minister concluded that the seller, Inbev, controlled the assets which were the subject of the transaction, jointly with the buyer.
The finding of joint control did not, in this case, have an impact either on the jurisdiction of the competition authority or on the competitive analysis of the transaction. This could have been otherwise, had the sum of the controlling entities' turnovers satisfied the threshold for EU merger control, or had the transaction produced greater vertical integration creating competition issues. In addition, the Minister underlined that the commercial agreement concluded between the parties largely went beyond what was strictly necessary for the survival of the divested assets. This agreement was not therefore covered by the authorisation and was capable of being examined under competition law on agreements between undertakings.
The case demonstrates that it is preferable to avoid such legal risks, by carefully analysing the nature and impact of contractual commitments entered into with the seller at the time of the transaction.
THE PARIS COURT OF APPEAL OVERTURNS THE PARIS COMMERCIAL COURT'S JUDGMENT IN THE "ORANGE SPORTS" CASE
By a judgment of 14 May 2009, the Paris Court of Appeal accepted the appeal by France Telecom and Orange Sports ("FT/Orange") of a judgment of 2 February 2009 by the Paris Commercial Court. The Paris Commercial Court had held that FT/Orange's requirement that subscribers to the Orange Foot Channel offer were also required to subscribe to Orange's broadband Internet service constituted a "combined offer", which was prohibited by article L. 122- 1 of the Consumer Code.
FT/Orange argued that the general prohibition of combined offers set out in article L. 122-1 of the Consumer Code was contrary to Directive 2005/29/EC of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market (the "Directive"), as interpreted by the Court of Justice of the European Communities ("ECJ") in a judgment of 23 April 2009.
In its judgment, the ECJ had specified that, in the context of the exhaustive harmonisation achieved by the Directive, as a general rule Member States could only prohibit certain commercial practices specifically listed in the Directive. Since combined offers did not feature in this list, the ECJ had held that under the Directive, these practices were only unfair where they were contrary to the requirements of professional diligence and capable of materially distorting the economic behaviour of the average consumer to whom they were addressed, notably because they were "misleading" or "aggressive".
In this case, the Court of Appeal noted firstly that the subscription offer for Orange Foot was not "misleading", because it indicated the necessity of being an "Orange television customer". The Court also decided that the offer was not "aggressive", as it used neither harassment nor coercion. This analysis was not altered by the fact that the consumer was required to subscribe to Orange ADSL in order to obtain access to the Orange Sports channel.
This case clearly illustrates the increased leeway provided to businesses in promoting the sale of their products in the context of harmonised European law on unfair practices. In this regard, the Court of Appeal's analysis seems valid for other commercial practices prohibited by the Consumer Code, such as sales with premiums or commercial lotteries. However, caution is still necessary in the absence of clear case-law in this area.
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