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Competition: Leniency After the Antitrust Damages Directive in Hungary: A Compromise Between Private and Public Interests?

Competition: Leniency After the Antitrust Damages Directive in Hungary: A Compromise Between Private and Public Interests?

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Fighting against cartels has always been crucial to protecting fair competition and fostering economic growth. A proper leniency program is an important instrument for the competition authorities, allowing them to uncover and penalize such anticompetitive conduct.

In this article we examine the major changes of the Hungarian leniency program after the implementation of the EU Antitrust Damages Directive (Directive 2014/104/EU (the “Directive”)) and the key factors to consider with respect to private enforcement before applying for leniency.

Battle of Interests

Leniency applicants may be rewarded with full immunity from fines if they are the first to notify the Hungarian Competition Authority (HCA) of the yet unknown cartel and provide sufficient information to conduct a dawn raid or to prove the existence of the cartel. If they are not the first, but they supply additional evidence that corroborates the findings of the HCA, they can obtain a significant reduction of the fine. Recipients of full immunity enjoy a favorable position in private enforcement cases. 

On the other hand, there is increasing demand from harmed customers/parties for the highest possible compensation for damage caused by cartels. Otherwise they might feel that their legitimate interests in getting compensated is secondary to the interest in protecting the company, which – despite cooperating with the competition authority – still committed the infringement.  

In seeking to create a balance, the Directive provides guidance on two major private enforcement issues: (i) access to leniency files for the harmed parties, and (ii) the extent of liability of the members of the cartels for damages.

Access to Leniency Statements

In leniency statements, the undertaking applying for leniency is required to describe the functioning of the cartel. Providing full access to these files might deter members of the cartel from cooperating with authorities, as doing so could expose them to third-party litigation. 

The Hungarian legislator already protected leniency statements prior to the implementation of the Directive. Since July 2014, the Competition Act has authorized the HCA to deny access to its files if disclosure would jeopardize the successful application of the leniency program. The HCA and the courts were therefore left to balance the private interests of consumers and the public interest in protecting leniency applicants on a case-by-case basis.

Following the implementation of the Directive – which is also applicable to ongoing proceedings initiated after December 2014 – leniency statements and settlement submissions enjoy absolute protection. They may never be disclosed, even by court order. If the claimant specifically asks for a document to be disclosed, the court will assess whether the document in fact falls within the protected category.

Liability of an Immunity Recipient for Damages

Only leniency applicants granted full immunity from fines are – to a certain extent –  protected by law from the payment of damages. 

For infringements committed after June 2009, immunity recipients (if the HCA granted the immunity) were entitled to refuse to pay the cartel damages as long as the entire amount could be enforced from other liable members of the cartel. Once they paid, these other members could then claim a contribution from the immunity recipient to the extent of its fault in the infringement, and this amount was not limited. 

After the implementation of the Directive, however, the immunity recipient – regardless of which EU competition authority grants the immunity – is only jointly and severally liable to its direct and indirect purchasers and suppliers in case of infringements committed after January, 2017. The other injured parties may only seek redress from the immunity recipient if full compensation cannot be obtained from its co-offenders. Co-offenders, along with leniency applicants granted only a reduction of the fine, face unlimited joint and several liability towards those who suffered damages as a result of the cartel.

The contribution which the other cartel members can claim from the immunity recipient is now limited to the amount payable to its purchasers and suppliers. 

Takeaway

Although we expect a significant increase in the number of damages claims, immunity recipients remain protected compared to other cartel members. Before submitting a leniency application, however, a leniency applicant must carefully assess the above implications in damages lawsuits.

By Anna Turi, Head of Competition, Mark Kovacs, Associate, Schoenherr

This Article was originally published in Issue 5.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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