The Hungarian Competition Authority (HCA) started an investigation in 2015 on potential anti-competitive conduct of ten undertakings concerning EU tender ‘Supporting the procurement of health equipment aimed at saving energy’ for the public procurement of specific diagnostic imaging equipments, mostly MRI and CT. After a thorough investigation in its final decision (end 2020) HCA found sales prices fixing and division of market, and imposed an immense EUR 4.8 M fine on the colluding parties, thereby disabling their further participation in public procurements, as undertakings being fined for anti-competitive behaviour by the HCA are automatically excluded from public procurement procedures for three years.
Exclusionary conduct of the undertakings
Diagnostic imaging equipments of significant value were purchased by hospitals through tenders from European Union funds. To maintain the status quo, the undertakings subject to the investigation initiated coordinated needs assessment to determine the supplier or distributor of each manufacturer as tenders for each procurement.
In order to preserve their market share, manufacturers therefore aimed to be able to continuously market their own product to the same hospitals they were previously selling medical equipments to, while hospitals seeked corresponding solutions.
The investigation revealed that the undertakings first identified the hospitals participating in the tenders, then determined which manufacturer’s product is already present in a given institution, which would then be likewise engaged in the public procurement.
On the other hand, hospitals involved their preferred manufacturers in the preparation of technical documentation of the invitation to tender, hence they contributed to the definition of the technical content in such a way that the specification excluded certain manufacturers from entering the public procurement. Through over-specification, participants could narrow down potential tenderers – including manufacturers and suppliers – which also pre-determined the winning undertakings, as the over-specified technical content defined their own products.
HCA established that the above conduct of the participants constituted an agreement restricting competition under Section 11 of the Hungarian Competition Act, which may affect trade between Member States – in particularly due to EU funds and the effect of the misconduct on Hungary as a whole – thus colliding with Article 101 (1) of TFEU.
“Self-cleaning” in the practise of the Public Procurement Authority of Hungary
As under the Public Procurement Act an antitrust fine imposed by the HCA is one of the automatic exclusion grounds from public procurements, and the concerned undertakings were highly interested in not being excluded, this case was a significant landmark that helped the evolution of administrative practice of self-cleaning, as most participants initiated the procedure and could regain their right to participate in public tenders.
As self-cleaning is a fairly new institution in Hungary – implemented by Directive 2014/24/EU of the European Parliament and of the Council on public procurement and repealing Directive 2004/18/EC -, the Public Procurement Authority (PPA) is still in the formation of the applicable criteria and the related administrative and legal requirements.
In general, pursuant to Public Procurement Act the undertaking excluded from public procurement must fulfil the below conjunctive criteria:
- pay or undertake to pay compensation – in the amount accepted by the aggrieved party – in respect of any damage caused;
- clarify the facts and circumstances in a comprehensive manner by actively collaborating with the competent authorities;
- take concrete technical, organizational and personnel measures that are appropriate to prevent further misconduct.
In the present case, when interpreting and applying the above criteria, the PPA established the followings.
It is important to bear in mind that from the fact that the benefit resulting from the anti-competitive behaviour cannot be quantified, it shall not be concluded that the undertaking did not cause any damage. Moreover, as the misconduct was committed in relation to EU-funded public procurements, not only the contracting entities are the potential injured parties, but the budget of the European Union, and indirectly, the Central Budget of Hungary – in which regard, the payment of fine imposed by the HCA cannot be viewed as compensation.
As for the second criterion, the applicant shall prove its active cooperation with HCA, beyond its legal obligations. In the present case, statement of settlement and substantive data provision during the HCA procedure was accepted by PPA as active participation in the investigation of the undertaking’s own misconduct. However, due to the practise of PPA, if the applicant disputes the commitment of infringement in the HCA procedure, it does not automatically mean that PPA would reject the fulfilment of the active cooperation criterion, as in case of an investigation for serious competition law infringement it cannot be fairly expected from the investigated party to admit the infringement and show no defence.
It can be derived from the present case that PPA requires proof of technical, organizational and personal measures directly linked to the underlaying case which are suitable for preventing the occurrence of a similar misconduct. Such accepted measures were the removal liable employees or company directors, restructuring and implementing inner control mechanisms, introducing compliance programmes and organising regular trainings and lectures directly targeting the prevention of a similar anti-competitive infringement.
In light of the above, it is worth considering the initiation of a self-cleaning procedure even in cases with significant breach of competition rules and immense fines, as PPA encourages reparation of legal consequences manifesting in the favourable assessment of active measures taken to prove reliability. Experiences also show that one should lay an eye on the potential self-cleaning criteria already in the investigation phase of the HCA procedure, when the case circumstances may more flexibly be adjusted to the practice and needs of the PPA in self-cleaning procedures.
SBGK Attorneys at Law