In a recent resolution for the uniformity of law, the Curia – the supreme court of Hungary – confirmed the correctness of the position of the Hungarian Competition Authority (the “GVH”) on authority decisions taken after the administrative deadline of the investigation expired.
The settled case law in administrative procedures
For decades the consistent jurisprudence about decisions made by public authorities after the technical expiry of the statutory time limit was that should the fact that the decision was taken after the expiration date not affect the merit of the case, it had no bearing on the legality of it. Thus, it was the case law that fines could still be imposed, regardless of the procedural violation by the proceeding authority. Generally speaking, this was applicable also in competition law cases.
The lead-acid battery case and its consequences
This case concerned two undertakings – and several related companies not being parties to the proceedings – who were major players in the market of collecting lead-acid batteries in Hungary.
Through its investigation, the GVH revealed that the undertakings had participated in discussions aimed at the creation of a consortium agreement on the collection of lead-acid batteries. GVH found that in the frames of the planned consortium, the undertakings had committed a single, complex and continuous infringement by aiming to restrict the competition from June 2013 to March 2014 by among others fixing prices, segmenting the market and exchanging strategic data.
The GVH imposed a total fine of HUF 112,520,000 (approx. EUR 360,000) on the undertakings for the infringement. The GVH decision was ultimately brought to the final judicial forum of Hungary (the Curia).
In light of the previous Constitutional Court decisions, the acting chamber of the Curia ruled (Judgement no. Kf.II.37.959/2018/14) against the previous jurisprudence: in a competition law procedure involving a criminal law element, applying a sanction or imposing a fine without extending the administrative deadline is to be seen as the violation of the right to a fair administrative procedure protected by the Constitution of Hungary (the “Alaptörvény”).
The GVH has criticized this interpretation of the law multiple times, often citing decision No. 25/2020 (XII. 2.) AB of the Constitutional Court regarding the Constitutional Court’s interpretation of the law relating to procedural time limits.
In the decision, the Constitutional Court held that in the application of the section of the Taxation Act on the reduction of tax fines and setting aside a tax fine, it is a constitutional requirement that in the course of imposing a tax fine the tax authority should consider ex officio the duration of making the decision. If the authority finds that its decision at first instance was taken after an unreasonably long period of time beyond the statutory time limit, it shall reduce the amount of the tax fine in proportion to the damage caused to the taxpayer or, in particularly justified cases, it may refrain from imposing it; this consideration shall be mentioned in the reasoning of the decision. In the decision the Constitutional Court also made the following finding:
“With regard to the legal nature and other characteristics of the missed deadline, the Constitutional Court points out that it is an administrative, i.e. procedural deadline. Missing a time limit does not automatically mean that the possibility of obtaining a decision is lost. However, the right to be dealt with within a reasonable period of time limits the right to take action.”
In the light of the above, when fined undertakings took the GVH to court, challenging the decisions, they almost always invoked the precedent of the Curia judgement in the lead-acid battery case, claiming that any fine imposed after the administrative deadline is to be considered unlawful.
In the meantime, the Curia had clarified its position regarding time limits in decision Jpe.I.60.019/2022/9., stating “If the proceeding authority exceeds the time limit, the legal consequences are determined by whether the authority has exceeded a substantive or procedural time limit. If a substantive time limit is exceeded, the possibility of imposing a penalty is lost, unless otherwise provided by law. However, the failure to comply with procedural deadlines does not automatically result in the loss of the possibility to impose a sanction; in such cases, the extent of the failure to comply with the deadline and its impact on the fair administration of justice determine whether the sanction of a fine can be waived, the amount of the fine can be reduced or whether the fine as a legal sanction is not affected. ”
Despite the above, the lead-acid battery case still remained as a crutch for fined companies to rely on as precedent.
The clarification of the new jurisprudence and the X-ray machine cartel case
In the X-ray machine cartel case the GVH established that several undertakings producing and distributing diagnostic imaging products (specifically MRI, CT and X-ray machines) had engaged in unlawful conduct related to an EU tender for the public procurement of diagnostic imaging equipment. The GVH imposed a significant fine amounting to 1,6 billion HUF. The decision was challenged before the court.
In the court procedure the panel of proceeding judges appealed to the Judicial Complaints Council of the Curia claiming that they wished to depart from the former precedent set by the Curia in the lead-acid battery case. In this case, the Prosecutor General also expressed their endorsement of the GVH’s interpretation of the law.
The Judicial Complaints Board upheld the motion, and accordingly established that a competition fine may be imposed even after the time limit for concluding the case has expired. Additionally, the amount of the fine must be determined considering the damage caused by the delay. The Judicial Complaints Council has also ruled that the previous Curia decision in question can no longer be invoked as a precedent in court cases.
The legal form of this decision is a resolution adopted for the uniformity of law – a formal decision that binds Hungarian courts from the day of its publication in the Magyar Közlöny (Hungary’s official journal).
As a consequence of the decision clarity was achieved about how this legal situation should be interpreted in cases of protracted litigation. This ultimately also reinforced the position that the GVH has consistently taken in these cases.
Additionally, also the jurisprudence of the GVH has recently changed: in cases where the GVH found that the procedural time limit requirement was breached, it does not waive the imposition of fines in these cases, but may take the lapse of time into account as a mitigating circumstance when determining the amount of the fine. This is also in line with the above cited case law decision of the Curia.
SBGK Attorneys at Law