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Hungary: The Value of Information - Highest Fine ever Imposed on an Association of Undertakings

Hungary: The Value of Information - Highest Fine ever Imposed on an Association of Undertakings

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On 11 January 2016, the Hungarian Competition Authority (Authority) announced the highest fine it has ever imposed on an association on account of horizontal information exchange. The fine of ca. EUR 12.7 million (HUF 4 billion) was imposed on the Hungarian Banking Association (Association) for the Association's database, which included not only strategically relevant, but also confidential data.

Undoubtedly, the continuous flow of information is one of the key drivers of business and economic growth. The more unconstrained the flow of information becomes, the more conscious undertakings must be in order to identify the inherent legal risks of information exchange and its lawful limits. The Authority's decision is one of the most recent indicators of the relevance of such considerations. 

The Association and the bank database

The Association was established in 1989 in order to represent the interests of the Hungarian banking sector. In June 2000, the Association introduced a rather significant extension of its already existing bank database, which then operated until 2012. This extended version involved a wide range of strategically relevant and confidential data on the financial services provided by the members of the Association and was individually accessible in a well-organized manner. The Association's original aim (based on contemporaneous evidence) was to "aid the members with positioning on the market". According to the ruling of the Authority, this behaviour constituted a cartel in the form of unlawful horizontal information exchange and as such infringed not only Hungarian, but also EU competition law.

Sanctions

The Authority imposed a fine of ca. EUR 12.7 million on the Association and ca. EUR 50,000 (HUF 15 million) on the Institute for Training and Consulting in Banking, which had also contributed to the database's maintenance. The Authority imposed the above fine despite the fact that a significant amount of the information stored in the extended database was publicly available and that the Association voluntarily ceased to operate the database upon commencement of the proceeding. In addition, the Authority deemed the commitments proposed by the Association as insufficient and did not accept them.

Secondary liability of the banks

The Authority imposed the fine on the Association itself and not on the Association's member banks; however, the Authority also indicated the joint and several secondary liability of the 33 banks outlined as participants of the decision. The Authority did not differentiate between the banks under proceeding with regard to their joint and several secondary liability. However, it did terminate proceedings against five banks on the basis that these either had not provided data to the database or that they were not competitors of the other participants of the database. If the Association fails to pay the fine and potential enforcement efforts remain unsuccessful, the Authority will order the banks (as set out in the decision) to pay the fine directly.

The case continues…

The Association claims that the Authority failed to prove the infringement and the database was in fact an efficient and pro-competitive tool in the hands of the market players. The Association intends to challenge the decision "by all national and international means possible." Regardless of the appeal, the Association remains obliged to pay the exemplary fine; however, it may request the court to suspend the enforcement. It will presumably take a few more years to conclude the appeal proceeding(s) before the courts. However, the Authority's ruling definitely illustrates the relevance of caution with regard to both the exchange of confidential and market-relevant information and the behaviour of associations of undertakings. 

Lessons to be learnt

The "bank database" represents a profound indication of the inherent risks of sharing information, including within the framework of an industry association. Sharing sensitive information with competitors or even unilaterally accepting such information may easily qualify as infringements of competition law. The market players must consider the limits imposed by competition law in order to safely maximize the potential business benefits of a functioning association or a system of sharing certain information without the risks of infringing competition law. Professional guidance and due diligence in this respect may help to keep the practice of the association or any participating undertaking on a lawful track and ultimately may prevent a significant fine or a protracted competition proceeding.

By Anna Turi, Attorney at Law, and Andras Nagy, Associate at LawSchoenherr

Hungary Knowledge Partner

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