This year, the HCA (Hungarian Competition Authority) imposed a significant fine on Husqvarna Magyarország Kft. (Husqvarna Hungary) for fixing the online retail prices of Husqvarna, Gardena and McCulloch products. In case of Husqvarna Hungary, HCA found that it is necessary to impose a fine, taking into account the role of the company in the infringement and its international presence. HCA decided not to impose a fine for the online distributors, however, accepting measures in order to ensure the compliance with the competition rules were stipulated for the distributors. In addition, Husqvarna undertook to deepen and improve its compliance program not only targeting the operation of its organization but helping its distributors’ compliance in accordance with the applicable competition law.
Background of the undertaking under investigation
The Husqvarna Group is a Swedish group of undertakings that has focused on producing horticultural and other outdoor machines and equipment as well machines for the construction industry for over 325 years. In Hungary, the products manufactured by the Husqvarna Group are sold by the Hungarian subsidiary, the net sales of which were HUF 6.265 billion in 2017.
The examined conduct of Husqvarna Hungary and its distributors
The HCA observed that Husqvarna Hungary annually published a list of central recommended retail prices for the products marketed by its distributers. The investigation also revealed that the appendix of dealer contracts contained the discounts granted to its distributors and the necessary conditions for their application. In the course of the procedure before the HCA, the examination was expanded to further eight distributors that were in commercial relations with Husqvarna Hungary.
As regards the consumer pricing in practice, the internal and business correspondences between Husqvarna Hungary and the eight distributors at issue confirmed the role of Husqvarna Hungary in determining retail prices. This was proved by several evidences, among others a correspondence from 2010 in which the lawyer of Husqvarna Hungary drew the attention to the fact that mandatory retail prices might be considered as an anticompetitive conduct.
It was not disputed that the conduct concerned vertical relations and that the distribution agreements concluded between Husqvarna Hungary and the dealers, and the recommended price lists issued by Husqvarna Hungary clearly affected the conditions for the sale and resale of the horticultural products which are the subject of the proceedings.
During the investigation the HCA found that the share of Husqvarna Hungary in the field of selling horticultural products in Hungary was typically below 30%. The conditions for the 30% market share threshold for distributors was also met in the present case, as it was established during the examination that the individual market weight of the distributors was very limited. Given that the market share neither of Husqvarna Hungary nor of its dealers exceeded the 30% threshold, the use of recommended retail prices would have fallen within the scope of the block exemption where the incentive and coercion offered by any of the parties did not function as a fixed or minimum resale price.
in the investigation procedure HCA established that as of September 2013 a resale price agreement has been in force for online prices. Based on the available evidence HCA found that according to the consensus between Husqvarna Hungary and the participating distributors a maximum of -5% deviation from the recommended retail prices was allowed. This was further supported by the fact that some dealers sometimes requested permission to apply different prices from Husqvarna Hungary
An agreement that provided a reduction of up to 5% was considered to be a minimum price fixing by indirect means. This was further reinforced by “supportive” measures in order to enforce them, in particular indications of distributors to Husqvarna Hungary and / or to each other in the event of observing such prices differed from the agreement.
Based on the foregoing, HCA did not accept the argument of the company that only an intermediary, promoter or a so-called facilitator role was played in the RPM. On the contrary HCA found that Husqvarna Hungary played an active role in building a consensus between itself and its dealers on online prices. Husqvarna Hungary also played an active role in implementing this consensus given that warning of dealers related to price differences was welcomed and responded by Husqvarna Hungary, as well the prices was monitored and the attention of several dealers was drawn to such prices differed from the agreement and their consequences by Husqvarna Hungary.
Based on the above the HCA imposed a fine of HUF 111 million (approx. EUR 330 thousand) on Husqvarna Hungary
Another significant fine imposed for RPM in Hungary
In a very recent case (December 2019) HCA imposed a significant fine of HUF 300 million (approx. EUR 0,905 million) on Paradox Security Systems Ltd distributing security products, and imposed a fine of HUF 240 million (approx. EUR 0,725 million) on its Hungarian distributors, namely Biztonságtechnikai Kereskedelmi Kft. and Trióda Biztonságtechnika Zrt due to the very serious infringement. However, the latter received a reduction of more than 30% of its total fine for admitting the infringement and introducing a voluntary compliance program.
In the course of the investigation HCA established that the undertakings had restricted the competition for nearly 10 years. The investigation revealed that the three undertakings (1) prohibited the sale of Paradox products abroad (2) set the minimum margin, which resulted indirect fixing of retail prices, (3) restricted selling the products online by prohibiting the publication of end-user prices on the Internet.
Thanks to the anticompetitive conduct, resellers and installers were able to achieve high margins for their sales of Paradox products, which resulted higher consumer prices. Using anticompetitive measures urged the resellers and installers to recommend the Paradox products contrary to other security products and devices to their consumers. Given that the consumers have generally low expertise in this market due to the complexity of the devices, the consumers tend to choose the products recommended by the installer or reseller.
December 2019
Máté Borbás
SBGK Attorneys at Law