Resale Price Maintenance (RPM) in Hungary

The Hungarian Competition Act (Section 11 (2)) provides for a non-exhaustive list of anti-competitive agreements/practices:

  • “(2) This prohibition shall, in particular, apply to the following: (…) a) fixing the purchase or sales prices, and defining other business conditions directly or indirectly; (…)”

Following from this, RPM is prohibited. However, the Hungarian Competition Act provides two kinds of exemptions: aggregated or individual.

The aggregated exemption is set out by the general Hungarian block exemption regulation [306/2022. (VIII. 11.) Korm. Rendelet], which offers an exemption to certain vertical agreements. Besides the exemption, the regulation contains a “black list” of agreements which are considered to be restrictive even if the market share of the relevant parties remains below 30 per cent.

  • The “black list” prohibits RPM  per se violation and is considered to be restrictive of competition by object.
  • Only minimum and certain/fix RPM are forbidden.
  • Recommended prices and maximum prices are allowed.

The individual exemption is specified in the Competition Act (Section 17):

  • The prohibition defined in Section 11 shall not apply to an agreement if:
    a) it contains facilities to improve the efficiency of production or distribution, or to promote technical or economic development, or the improvement of means of environmental protection or competitiveness;
    b) a fair part of the benefits arising from the agreement is conveyed to trading parties who are not parties to the agreement;
    c) the concomitant restriction or exclusion of economic competition does not exceed the extent required for attaining the economically justified common goals;
    d) it does not contain facilities for the exclusion of competition in connection with a considerable part of the goods concerned.”

Some of the most recent decisions from the Hungarian authorities concerning RPM are:

 

  • Casio: An investigation by the Hungarian Competition Authority (GVH) found that FAST Hungary Kereskedelmi Kft. and its Czech parent company, FAST ČR a.s., have for years
    unlawfully set minimum online retail prices for Casio watches and keyboard instruments sold by them. The investigation revealed that the undertakings had published lists of “recommended retail prices” for their distributors – but the application of these prices was not only recommended, but also constantly monitored and, in case of discrepancies, online traders were immediately warned. Undertakings mostly made the calls verbally, by telephone, so that no written record could be kept of them. The GVH’s Competition Council imposed a joint and several fine of HUF 325 million on the two undertakings for the single and continuous infringement of competition law.
  • Yamaha: The GVH has imposed a fine of around HUF 100 million on several domestic and one Slovakian audio equipment retailer for price fixing. The investigation also found that
    Yamaha, manufacturer and distributor of a wide range of musical instruments, had widely fixed minimum resale prices for its products to retailers from 2014 onwards. To avoid open written communication, these prices were agreed with the resellers by using anonymous email addresses. The fixing of resale prices was also an obstacle to competition for consumers, as it was intended to keep prices at a uniform level.

Other noteworthy cases are:

  • Security alarm companies (2019): The HCA established that Paradox Security Systems (Bahamas) and its Hungarian distributors (1) prohibited the export of its products; (2) fixed the minimum prices of installers culminating in fixed resale prices and (3) banned the online announcement of end-user prices. The HCA established a total fine of over HUF 500 million (approx. EUR 1,5 million).
  • The Pick Case (2016): From January 2009 to December 2014, Pick, which is one of the most important meat producers in Hungary, determined minimum resale prices when
    distributing meat products during temporary sales in the framework of its marketing strategy. The Hungarian Competition Authority (the HCA) imposed a fine of HUF 44,000,000 (approx. EUR 142,000) on Pick.
  • Husqvarna (2019): From 2013 to 2016, the recommended retail prices had been specified on products of Husqvarna Magyarország Kft. Furthermore, the undertaking concerned had fixed the maximum level of discount that distributors could grant from the recommended prices. HCA decided to reduce the fine significantly as the undertaking had applied for leniency and settlement submission. In light of the above, the HCA imposed a fine of HUF 111 million (approx. EUR 330 thousand).

The HCA annually publishes summaries of its most important decisions. From these, the HCA stance on specific issues related to RPM can be derived. For example:

  • RPM does not need to be enforceable, it is sufficient if it is part of the parties’ agreement (VJ/37/2014).
  • Consumer price and the RPM are exclusionary conducts, which are likely to restrict the competition by nature, as traders are deprived of determining the prices freely. The restriction is clear if the resale price is defined directly (See VJ/96/2009).
  • RPM restricts directly the prices and the total sales volume, which are formed freely by the competition. In addition, RPM causes an inadequate allocation of resources and has a negative impact on social welfare. RPM withholds such quantities and services, which would create demand at a lower price (VJ/115/2010).

General notices

The president of the HCA issued the following two notices, which also apply to RPM:

  • Notice on the method of setting fines.
  • Notice on the application of leniency rules.