Sustainability and Competition Law in Hungary

Abstract

The concept of sustainable yield—serving as the origin of the concept of sustainable development – was introduced in response to dwindling forest resources in the seventeenth and eighteenth centuries. This suggests that the concept of sustainability is inherently economical, not alien from competition law, but having benefits going beyond simple economic gains.

1 Introduction

1.1 Definition of Sustainability

The concept of sustainable yield—serving as the origin of the concept of sustainable development – was introduced in response to dwindling forest resources in the seventeenth and eighteenth centuries.¹ This suggests that the concept of sustainability is inherently economical, not alien from competition law, but having benefits going beyond simple economic gains.

Although Article Q(1) of the Fundamental Law of Hungary mentions sustainable development,² it does not provide a definition. This is separate from the right to a healthy environment provided in Article XXI of the Fundamental Law of Hungary.

There is no exact definition of sustainability in any Hungarian act or regulation. However, Sect. 8.3.1 of the Annex of Parliamentary Decree No. 18/2013 (III. 28.) on the Framework Strategy of National Sustainable Development provides the following description: “By sustainability, we mean that the generation that creates its own well-being at a given moment in time does not exhaust its resources but preserves and expands them in sufficient quantity and quality for future generations. The interests of those who are not yet born i.e., those who do not yet have the right to vote, can be protected by imposing value, constitutional or other institutional limits on the freedom of movement of those who are alive today. They clarify the boundaries beyond which they will not, or cannot, take certain steps, and to resist the temptation to do so, they put up barriers in advance.”

There is an exact definition for sustainable development, though in Section 4 point 29 of the Environmental Protection Act, it is stated:³ “a system of social and economic conditions and activities that preserves the natural values for the current and future generations, uses natural resources economically and expediently and, in ecological terms, ensures the improvement of the quality of life and the preservation of diversity in the long run”.

The Parliamentary Decree refers to the Brundtland report.⁴ It is considered that the Brundtland report introduced sustainable development into public discourse. A simplified definition of sustainable development is the following: development, which satisfies the needs of today without jeopardizing the satisfaction of the needs of future generations. The three pillars of sustainability in the Brundtland report were environmental, economic and social.⁵ Notably, the Parliamentary Decree accepted these pillars and suggested the addition of a fourth pillar: human resources.

Both the Draft Revised Horizontal Guidelines⁶ and the Sustainability Expert Advice⁷ refer to UN Resolution 66/288,⁸ whereby the UN General Assembly decided to renew its commitment to sustainable development and “ensuring the promotion of an economically, socially and environmentally sustainable future for our planet and for present and future generations”. This confirms the three pillars of sustainability suggested in the Brundtland report.

Due to the three pillars, sustainability covers numerous issues, not just environmental protection. This is exemplified by paragraph 543 of the Draft Revised Horizontal Guidelines, which—non-exhaustively—lists the following issues: “addressing climate change (for instance, through the reduction of greenhouse gas emissions), eliminating pollution, limiting the use of natural resources, respecting human rights, fostering resilient infrastructure and innovation, reducing food waste, facilitating a shift to healthy and nutritious food, ensuring animal welfare”.

However, sustainability is not limited to environmental protection; for the purposes of this report, we focussed on this pillar.

1.2 Sustainability in Competition Law Rules

With respect to the above, it is not surprising that sustainability is not mentioned explicitly in Hungarian competition rules. Nevertheless, Section 17 a) of the Competition Act⁹—regulating the criteria of individual exemption from the prohibition of anti-competitive agreements (Section 11 of the Competition Act)—contains an explicit reference to environmental protection.¹⁰ This provision is the equivalent of Article 101(3) TFEU. As described below, this formed the basis for defensive arguments in various procedures before the Hungarian Competition Authority (GVH). Notably, it could be argued that sustainability benefits not falling under the environmental pillar of sustainability could still fall under other types of efficiency gains mentioned in the Competition Act (technical development, competitiveness).

1.3 Sustainability Rules Relevant from a Competition Law Perspective

We understand that practically any environmental protection rule can be relevant from a competition law perspective because undertakings compete directly (e.g. by advertising their products as more sustainable) or indirectly (e.g. achieving cost reductions by more sustainable production technology) on sustainability. Also, there are secondary markets, which were explicitly created by environmental protection rules. For example, the Deposit Regulation¹¹ enabled companies to introduce a deposit fee on their packaging to facilitate recycling/recollection. On the one hand, companies compete in the amount of the deposit fee (included in the retail price). On the other hand, companies compete to obtain more recycled raw materials at a lower cost than new raw materials.

The main rules regulating companies’ environmental protection obligations are the following:

• Environmental Protection Act: providing for an obligation to use the environment in such a manner that results in the smallest degree of environmental loading and utilization, prevents environmental pollution and precludes damage to the environment

• Environmental Pollution Charge Act:¹² providing for an obligation to pay a charge in the case of releasing certain substances into the air, waters or soil in excess of the environmental protection thresholds

• Environmental Protection Product Charge Act:¹³ providing for an obligation to pay a surcharge in case of certain products (batteries, packaging material, electric and electronic equipment, tyres and motor oil) to facilitate the recollection/recycling of the given products

• Waste Management Act:¹⁴ providing for producers’ responsibility for disposing waste stemming from their products and their packaging and – as of 1 March 2021 – providing for extended producer responsibility, creating an obligation to select production technologies, raw material, etc. most favourable for the environment

• Deposit Regulation: providing for the possibility for producers to apply a deposit fee on the packaging of products

2 Cartels and Sustainability

In this section, we examine the role of sustainability in the assessment of anti-competitive agreements, decisions and concerted practices in the context of Hungarian regulation. We examine two scenarios: (i) ex post, where an agreement is exempted on the basis of sustainability considerations, and (ii) ex ante, where an agreement is not unlawful due to sustainability considerations.

2.1 Use of Sustainability Ex Post (Exempted Agreements)

2.1.1 Legislative Framework

As mentioned above, the rules of the Competition Act on anti-competitive agreements take into account sustainability considerations as part of the assessment of individual exemption. Examples of potentially exempted agreements could be the following:

• An agreement between competitors to jointly develop a production technology that reduces energy consumption

• An agreement between competitors to share infrastructure with a view to reducing the environmental footprint of a production process

• An agreement between competitors to jointly purchase products having a limited environmental footprint as an input for their production

• An agreement between competitors to only purchase from suppliers observing certain sustainability principles.

As confirmed by the courts, all four conditions of individual exemption must be fulfilled simultaneously for a given anti-competitive agreement to be exempted.¹⁵ Therefore, these agreements could only be exempted if the undertakings can prove other conditions too (particularly, that the sustainability benefits cannot be achieved without the anti-competitive agreement).

Pursuant to Section 75 (1) of the Competition Act, the GVH can accept commitments instead of finding an infringement and imposing a fine if the commitment decision can ensure the effective protection of public interests. Pursuant to the Commitment Notice of the GVH,¹⁶ the effective protection of the public interest means that the commitment will result in an – even indirect – benefit, perceptible for the market and a wide range of consumers. As of 1 January 2021, point h) of paragraph 19 of the Commitment Notice explicitly mentions as an example of such benefits commitments that contribute to sustainability or environmental protection and thereby to consumer welfare. Notably, paragraph 12 of the Commitment Notice suggests that hard-core cartels are typically unsuitable for commitments (unless it is a novel type or carried out by small and medium-sized enterprises (SMEs)).

Pursuant to Section 78 (3) of the Competition Act, the fine shall be determined taking into account all applicable circumstances (including any cooperation with the investigation). Pursuant to the Fining Notice of the GVH,¹⁷ active reparation is considered as a form of cooperation. As a result of (voluntary) active reparation, the GVH may grant immunity from or a reduction of the fine. Under the Fining Notice, conduct is considered to constitute active reparation where the undertaking subject to the infringement—in whole or in part—remedies the negative effects of the infringement (compensation). As of 1 January 2021, paragraph 33 point iv) of the Fining Notice explicitly mentions as an example of such benefits conduct that contributes to sustainability or environmental protection and thereby to consumer welfare. Notably, active reparation must be supported by data and analysis beforehand and verified by audited results afterwards.

Finally, the GVH can also apply EU competition law. According to the case law,¹⁸ in the case of proceedings with a dual legal basis, Article 101 TFEU takes precedence over the provisions of Hungarian law. This also means that if an anti-competitive agreement is not prohibited under Article 101 (3) TFEU, there is no longer a need for any justification for a separate exemption under Hungarian law. On the one hand, the GVH could apply the Article 101 (3) Guidelines,¹⁹ which clarifies that cost efficiencies and qualitative efficiencies (though certain sustainability benefits would clearly qualify as qualitative efficiencies) are not the only types of efficiencies acceptable under Article 101 (3) TFEU; rather, the individual exemption applies to all objective economic efficiencies (paragraph 59). On the other hand, the GVH could apply the Horizontal Guidelines,²⁰ or its likely successor, the Draft Revised Horizontal Guidelines, which dedicates a whole chapter to sustainability agreements. This is a likely scenario, particularly, because the GVH does not have equivalent guidance at the national level.

2.1.2 Sustainability Agreements in Hungarian Case Law

Although the GVH has rejected applications for individual exemption based on sustainability in all cases so far, it is important to highlight that the GVH is hearing sustainability defences. In the next sections, we demonstrate this relevant case law.

2.1.2.1 Portable Batteries Case

The most relevant case for the use of sustainability as a shield is the Portable Batteries case.²¹ In Hungary, the obligation of recollection of portable batteries and accumulators was defined by the Waste Batteries Regulation.²² The manufacturers could delegate their obligation to a coordinating/intermediary organisation in return for a fee. The coordinating organisation set up a collection system on behalf of its contractual partners, placing common collection containers in shops, schools and other community places and coordinating the emptying of full containers and the disposal of used batteries. To ensure effective recycling, the three investigated companies (Energizer, Procter & Gamble, Spectrum) established a non-profit organization (RE’LEM) to fulfil their obligation. The representatives of the companies as board members of RE’LEM agreed to set a waste management fee that RE’LEM collected from the companies on a per kilogram basis. Being an industry standard, the GVH confirmed that the way the companies set RE’LEM’s waste management fee was not anti-competitive (although RE’LEM was held liable as a facilitator). What the GVH found anti-competitive, however, was that the manufacturers coordinated the uniform passing on of the waste management fee to retailers (and thereby to consumers).²³ The GVH considered this a restriction by object. Notably, the waste management fee was only a negligible percentage of the wholesale price of portable batteries and accumulators; however, this was only assessed in connection with the calculation of the fine (gravity of the infringement).

P&G and Spectrum argued that passing on did not affect their wholesale prices and that passing on (and the implementation of the agreement) was not complete. It was RE’LEM that put forward environmental protection considerations, in particular that the agreement followed environmental protection goals and that the passing on was a waste management industry standard. These considerations were assessed by the GVH in connection with the calculation of the fine as a mitigating factor concerning RE’LEM’s fine. RE’LEM only alluded to the possibility of an individual exemption. This unsupported argument was dismissed by the GVH. Notably, the GVH mentioned that it would have been unlikely to exempt the agreement – even in the case of verified benefits – due to the hard-core nature of the infringement.

2.1.2.2 Lead-Acid Accumulators Case

Another relevant cartel case for the sustainability defence is the Lead-Acid Accumulators case.²⁴ The three investigated companies (Fe-Group, Alcufer, Jász-Plasztik) were all active in the recollection of waste lead-acid accumulators. Jász-Plasztik was also a manufacturer of new lead-acid accumulators. When Jász-Plasztik decided to construct a new recycling plant, the three companies started negotiations to create a consortium. As the capacity of the new plant covered the entire supply of waste lead-acid accumulators in Hungary, Fe-Group and Alcufer agreed to sell all or at least most of their recollection to Jász-Plasztik. To make recollection more efficient, the parties agreed to allocate regions in Hungary. On the one hand, Jász-Plasztik guaranteed Alcufer and Fe-Group a favourable take-over price (by passing on a part of the savings on transport costs). On the other hand, the parties agreed on a maximum price for the purchase (recollection) of waste lead-acid accumulators. The GVH considered this a restriction by object. Notably, the GVH found that the relevant geographic market was wider than national because—in the absence of a Hungarian recycling plant at the time—waste lead-acid accumulators recollected in Hungary were sold to processors in other EU Member States, including Austria, the Czech Republic, Slovakia, Slovenia, Bulgaria and Romania

In the course of the procedure, two companies used the sustainability defence in their arguments. Relying on individual exemption, Alcufer argued that (i) Section 17 of the Competition Act mentions environmental benefits, but coordinating the transport of waste to the recycling plant also creates efficiency gains; (ii) the cost savings are passed on to sellers, while consumers enjoy environmental benefits by lowering emissions from more efficient transport; (iii) the related restriction of competition was proportionate; and (iv) the agreement did not eliminate competition due to the high number of competitors in the market. Jász-Plasztik invoked the proximity principle as an environmental argument: if the capacity of the recycling plant is covered by Hungarian recollection, there is no need for waste import. Jász-Plasztik also argued that efficiency could have been only achieved through coordinated collection.

The GVH dismissed these arguments. The GVH emphasised that the environmental objectives of the agreement do not eliminate liability for an anti-competitive agreement. The GVH stated that the companies failed to demonstrate that the efficiencies outweigh the restriction of competition. The company only relied on general statements concerning the benefits being shared with consumers. The GVH considered the hard-core restrictions (market allocation, price fixing) to exclude individual exemptions. Nevertheless, the GVH assessed these arguments in connection with the calculation of the fine.

In judicial review, the Kúria—upholding the dismissal of the sustainability defence—stated that for an individual exemption, the benefits must significantly outweigh the harm caused by the restriction. The Kúria also emphasised that it is the obligation of the companies to present and prove this.

2.1.2.3 Beer Case

The sustainability defence was also used in the Beer case.²⁵ The GVH investigated the exclusive purchase and sale clauses in the contracts of the four Hungarian breweries (Heineken, Borsodi, Dreher and Pécsi) concluded with HoReCa (hotels, restaurants, catering) customers. Ultimately, the GVH considered that (a) due to its market share, Pécsi qualified for de minimis, and the procedure was terminated against Pécsi; (b) due to their market shares, the three other breweries qualified for block exemption, but due to the cumulative effects of the agreements, the GVH withdrew the block exemption; (c) the GVH accepted the commitments of the three other breweries to limit the proportion of “reserved quantities” by 19%.

All breweries referred to both block exemption and individual exemption, but it was Borsodi that submitted a sustainability defence. It argued that close cooperation between breweries and HoReCa units contributed to increasing distribution and production efficiency, allowing long-term sales planning, which is particularly important in the case of perishable products like beer, with a relatively short shelf-life. Borsodi stressed that by preventing the production of surplus quantities, the agreements have a positive environmental impact due to the more efficient use of resources and the possibility of avoiding the destruction of surplus. Borsodi also relied on arguments concerning (i) intensive competition in the market (strong competitors, price-sensitive consumers), ensuring the fair share of consumers; (ii) the difficulty of long-term planning without the investigated contractual clauses, making the restriction indispensable; and (iii) the low market share of its HoReCa partners, suggesting no elimination of competition.

The GVH accepted that efficiency gains could arise (without mentioning sustainability benefits as such) but considered that other conditions of individual exemption were not met.

2.1.2.4 Lubricants Case

Finally, in the Lubricants case,²⁶ the GVH examined whether clauses restricting resale below the gross retail price and exclusivity clauses that are longer than 5 years, set by Castrol in its contracts with car repairers for the sale of lubricants, could restrict economic competition.

Castrol submitted detailed arguments concerning individual exemption and also referred to the environmental protection goals mentioned in Section 17 of the Competition Act. On the one hand, in Castrol’s view, the exclusivity clause contributed significantly to production and distribution efficiencies and increases the cost-effectiveness of production. Castrol emphasised that a professionally maintained car is demonstrably less polluting and consumes less fuel when used properly, which is a benefit felt both locally (at the user level) by stakeholders and globally (at the community level). To secure this benefit, it is essential for Castrol to exclude free riding. On the other hand, in Castrol’s view, the use of exclusivity indirectly contributed to the achievement of environmental objectives. Castrol – via a specialised company but at its own expense – carried out the treatment of waste lubricants for the repairers. If repairs were to distribute and use other lubricants, competing companies would benefit from the advantages offered by the collection scheme of Castrol.

Ultimately, the GVH established the infringement; however, it did not impose a fine on Castrol because it has not yet enforced the investigated clauses. The GVH only obligated Castrol to remove the RPM clause and limit exclusivity to 5 years. The sustainability defence of Castrol was not addressed by the GVH.

2.1.2.5 Comments to the Case Law

It is clear from the case law that the GVH is open to assessing sustainability-related arguments; however, the benefits must be clearly demonstrated, and quantified, and other conditions of individual exemption must also be met.

The general consideration of sustainability-related literature in environmental law is the promotion of the polluter pays principle.²⁷ In simple terms, the most environmentally friendly solution to non-sustainable production is that the polluter should bear all costs related to the ecological impact. By obliging manufacturers to organise the effective collection and recycling of their products, the legislator decided to follow the polluter pays principle (at least in relation to recycling). Of course, depending on the level of competition in the market, some of the costs related to recycling are expected to be passed on to customers. In Portable Batteries case, the GVH was correct to expect companies to compete in the level of passing on the waste management fee, similarly to how they compete in the level of passing on other types of costs.²⁸

Agreeing to pass on these costs in the form of a separate item in the invoice, however, resulted in the consumer paying the costs of recycling fully. Although not an enforcement priority of the European Commission (EC), one could argue that the most environmental-friendly solution is when the environmental costs are fully reflected in consumer prices.²⁹ Such an approach may be beneficial if the purpose of the legislation was, for example, to reduce the consumption of unsustainable batteries or encourage more environmental-friendly manufacturing and purchases. However, for a battery recycling system only, a passing-on agreement does not seem indispensable to achieve the goals set by the legislator. The shared collection and recycling in exchange for a fee paid by battery sellers seems sufficient for the system to work well; a market-wide passing on of these fees to consumers is not a necessary element.

In Hungary, environmental regulations on battery recycling require that a certain percentage of all batteries sold is collected and recycled. Such regulations were in place throughout the entire infringement period of the Portable Batteries case. However, regulation did not prevent battery manufacturers from collecting and recycling more batteries than what was required by law. This could have clearly been an environmental-friendly initiative, benefitting society. According to the Draft Revised Horizontal Guidelines, the willingness to pay of battery consumers should be considered.³⁰ The Draft Revised Horizontal Guidelines suggest that Article 101(3) may be applied if battery consumers were willing to pay a higher price for a more efficient battery recycling system than the cost of recycling (because they benefit from reduced environmental pollution). Measuring the difference can be done by analysing battery purchasing data or by carrying out surveys involving a pool of representative consumers.³¹ Therefore, if the Draft Revised Horizontal Guidelines would have been applicable, the companies involved in the infringement should have first demonstrated that the efficiency, territorial coverage or other aspects of the recycling procedure would have been enhanced by the agreement of passing on those extra costs. Moreover, they should have also shown that battery consumers were willing to pay for the cost of more efficient recycling. Notably, the Draft Revised Horizontal Guidelines also accept an assessment of collective benefits.³² Such benefits have been invoked in the Beer and Lubricants cases. However, this may result in a lower threshold for individual exemptions. In the Portable Batteries and the Lead-Acid Accumulators case, it may have been said that toxic chemicals of non-recycled batteries may poison the topsoil of agricultural land. Therefore, an agreement resulting in better recycling activities benefits society. However, estimating out-of-market benefits could have been challenging.

2.2 Use of Sustainability Ex Ante (Preventive Integration)

Hungarian competition law is not characterised by preventive integration in the assessment of anti-competitive agreements, i.e. interpreting competition law in a way that leads to, for example, the prevention of environmental degradation. The reason for this is that within the institutional framework of Hungarian competition law, the use of preventive integration instruments is subject to certain limitations. The use of preventive integration may exceed the scope of competition law, and the GVH may exceed its own powers, thus risking the separation of powers. For this reason, the Hungarian competition rules on anti-competitive agreements do not contain environmental standards as such environmental standards are set by the relevant legislator. For the above reason, the use of preventive integration tools does not arise in Hungarian competition proceedings concerning cartels.

However, theoretically, the violation of sustainability by an anti-competitive agreement could be considered by the GVH. If a restriction by object cannot be established, the effects of the agreement need to be examined, including whether the agreement had a negative effect on innovation.³³ An anti-competitive agreement leading to suppression of unsustainable production or distribution could be considered harmful to innovation. Also, the violation of sustainability could be considered an aggravating factor in the imposition of fines in the case of a restriction by object. Such an approach has not been reflected yet in the practice of the GVH.

However, this approach could change. The GVH follows the practice in the EC. In the Car Emissions case,³⁴ the EC’s competition law analysis showed that a certain level of preventive integration is easily achievable. The EC is focusing on harm to innovation, which in turn has led to environmental damage. Such an approach seems to be a viable way to indirectly enforce sustainability through competition law instruments.

3 Abuse of Dominance and Sustainability

In this section, we examine the role of sustainability in the assessment of abusive practices under the Competition Act.

3.1 Legislative Framework

The prohibition of abuse of a dominant position is regulated by Section 21 of the Competition Act, equivalent to Article 102 TFEU, with some more examples of the prohibited abusive behaviours.³⁵ The definition of a dominant position is regulated in Section 22 of the Competition Act, equivalent to the case law of the Court of Justice of the European Union.³⁶

3.2 Use of Sustainability as a Sword

The rules of the Competition Act on abusive practices fail to directly mention sustainability (or environmental) considerations. This makes it more difficult to use Section 21 of the Competition Act as a sword to achieve sustainability-related objectives.

Notably, Section 21 of the Competition Act defines abuse so broadly that it may be interpreted to imply a prohibition of measures aiming to, or otherwise resulting in, harm to the environment if it also involves an appreciable restriction on competition. As an example, Section 21 (b) of the Competition Act (equivalent to Article 102 (b) TFEU) prohibits the limitation of technical development to the detriment of consumers. The term “technical development” may be construed to include, inter alia, the more sustainable production and distribution. However, the GVH’s practice on abusive practices has not endorsed this broad interpretation yet.

3.2.1 Practice

In the Budapest Waste Collection case,³⁷ the GVH investigated a Consortium Agreement among ten waste collecting/management companies, and the Municipality of Budapest in 1998 aimed at collecting communal and other mixed waste in the territory of Budapest. The Consortium carried out its activities exclusively as a public service against fees capped by the municipality. In 2001, the waste collection regulatory regime was amended to require business or industrial polluters to collect (and transport) their non-communal waste either by themselves or through a third-party service. While communal waste collection remained in the public service domain reserved for the Consortium, non-communal waste collection became a liberalised activity, free of regulatory constraints. The new market entrants collected both the communal and the non-communal waste at unified prices, significantly lower than those the Consortium charged for the collection of the communal waste. Therefore, the Consortium offered even lower fees. This measure was investigated by the GVH as a possible collective abuse of dominant position by the Consortium aimed at foreclosing competitors through low prices (predatory pricing). The GVH concluded that because the customers failed to adequately separate their non-communal from their communal waste before collection, the mixed waste had to be treated generally as communal waste, the collection of which was also a public service. The only activity that remained under the scope of the Competition Act was the collection of purely non-communal waste, which accounted at that time for a small fraction of the waste collection activities. While the GVH emphasised in its reasoning the importance of the sustainability objectives, its conclusion may be seen as an overly broad interpretation of public services and an inadequate limitation of the scope of competition law.

Ultimately, the GVH did not assess whether sustainability could support the finding of an infringement, and it terminated the procedure without the finding of an infringement. The GVH concluded that it had no jurisdiction to assess the effects of the Consortium’s behaviour even on the only market where the Competition Act remained applicable (the collection of purely non-communal waste).

3.3 Use of Sustainability as a Shield

As explained in connection with the cartels in Sect. 8.2 above, competition law can be used as a shield (defence) to permit measures targeting sustainability objectives to offset specific anti-competitive effects otherwise stemming from the same practice. In the realm of the abusive cases, we see only a few examples where the reason (or notion) of sustainability was invoked as a defensive argument.

3.3.1 Practice

3.3.1.1 Children’s Safety Service Case

In the Children’s Safety Service case,³⁸ the GVH investigated whether the Municipality of Budapest—as the owner of the largest recreational park of Budapest—abused its dominant position when it refused amusement park services from the International Children’s Safety Service³⁹ (ICCS), which intended to organise an international children’s day event.

The Municipality of Budapest argued that the refusal was based on environmental protection considerations: the protection of the plants and vegetation in the recreational park, which had a unique vegetable environment. It further argued that its decision was based on the local regulation adopted by the municipality to protect the climate and vegetation of Budapest. According to the municipality, the amusement park services provided to ICCS in the previous years resulted in major deterioration in the park’s plants, vegetation and grass, which was no longer tolerable.

The reason for the lack of competence was that the refusal of the municipality was adopted based on local regulation, i.e. the decision was of a public law enforcement nature rather than a market behaviour.

Ultimately, the GVH did not assess the sustainability argument because it terminated the procedure without the finding of an infringement. The GVH concluded that it had no jurisdiction to assess the municipality’s decision because it was not a commercial act (market practice) but rather an administrative act (public law decision).

3.3.1.2 Rail Freight Case

In the Rail Freight case,⁴⁰ the GVH investigated a complaint that Hungarocombi, as a retaliatory measure, refused to deal with some of its customers who had previously cancelled their orders too often. Hungarocombi was a joint venture established to facilitate, organise and manage the transportation of loaded commercial trucks via railway through Hungary and Austria (Rolling Road or RO-LA services).

In support of the lawfulness of its practices, Hungarocombi argued, inter alia, that RO-LA services were based on environmental protection considerations as they intended to mitigate environmental damage by lessening the commercial road transportation traffic.

Ultimately, the GVH did not assess the sustainability argument because it terminated the procedure without the finding of an infringement. The GVH concluded that the dominant position of Hungarocombi cannot be excluded; however, the investigation showed no abuse. The Reservation System of Hungarocombi was in line with the nature of the RO-LA services, and there was no evidence of Hungarocombi deviating from the system, which would suggest an unjustified refusal to deal.

4 Mergers and Sustainability

In this section, we examine the role of sustainability in the assessment within the framework of merger control.

4.1 Legislative Framework

To date, there have been a few explicit references to sustainability in the regulation of merger control. This raises the question of whether there is a need to take legislative actions to accommodate such considerations. This section will explore the currently existing institutions that could hypothetically devise and implement sustainability considerations into merger control rules.

The most obvious basis from the currently existing toolbox is the public interest considerations in merger control. Including sustainability considerations in public interest considerations has its pros and cons. On the one hand, such an inclusion would expand the application of the already highly debated⁴¹ public interest instrument in merger control. On the other hand, however, it would enable local enforcement agencies to include sustainability considerations in their merger control analysis through (general) public interest considerations, without the need for a long legislative process.

From a European viewpoint, where the Hungarian regime stands, a merger either has a community dimension under the EUMR⁴² or is subject to one (or more) national jurisdiction(s). Thus, we will approach the legislative background review from these two angles.

4.1.1 Mergers with a Community Dimension

In line with Articles 1(2) and 1(3) of the EUMR, the EC has an exclusive right over mergers that have a community dimension. However, Article 21(4) of the EUMR allows Member States to take appropriate measures to protect legitimate interests other than those taken into consideration by the EUMR. The EUMR specifies three such considerations that are regarded as legitimate interests: public security, plurality of the media and prudential rules. Further, other elements can be taken into consideration as well, but those must be communicated to the EC at the outset and shall be recognised by the EC after an assessment of its compatibility with the general principles and other provisions of EU law.

Some authors⁴³ already argue that sustainability considerations can fall within one of the recognised legitimate interests of the EUMR, most likely falling under public security interests, which can be interpreted in multiple ways. Another possibility for sustainability considerations is that they may fall into the category of any other public interest, also mentioned under Article 21(4) of the EUMR, which needs to be communicated and approved by the EC before the measure of the Member State has taken place.

4.1.2 Mergers with No Community Dimension

Mergers that do not have a community dimension are subject to national merger regimes. As we mentioned before, there are very limited examples of explicit references to sustainability considerations. One such example is Spain, where Article 10 of the Competition Law⁴⁴ contains a non-exhaustive list of grounds for public interest, including the protection of the environment. But this is the rare exception to the more common situation where national merger regimes make no such references.

As for Hungary, pursuant to Section 24/A of the Competition Act, “The Government may, in the public interest, and in particular to preserve jobs and to assure the security of supply, declare a concentration of undertakings to be of strategic importance at the national level”. The public interest exemption does not explicitly refer to sustainability, but just as with the above-described EUMR, it may be covered by the notion of public interest for the purposes of this provision. Notably, to date, the public interest exemption in Hungary has never been used to exempt mergers based on sustainability considerations, but we cannot exclude that it will be used to serve that purpose in the future.

We can already see examples from other Member States, such as the Miba/Zollern merger in Germany. This merger was initially prohibited by the German Competition Authority, but the decision was ultimately overridden by the German Federal Minister for Economic Affairs and Energy, who granted ministerial authorisation to the parties for environmental policy reasons.⁴⁵

Additionally, while the Hungarian merger control regulation is based on the SIEC test, there is one aspect of Hungarian merger control that bears the hallmarks of the public interest test. Section 67 (4) b)of the Competition Act refers to Section 171 (1) of the Media Act,⁴⁶ which provides: “The [GVH] shall obtain the opinion of the Media Council relevant to the notification of concentration of enterprises under Section 24 of the [Competition Act], such enterprises or the affiliates of two groups of companies as defined in Section 15 of the Competition Act bearing editorial responsibility and the primary objective of which is to distribute media content to the general public via an electronic communications network or a printed press product.”

The Media Act further sets out the rules of this administrative procedure; among others, it makes it clear that the GVH may prohibit a merger that was approved by the Media Council in respect of the public interest set out in Section 171 of the Media Act. The Media Council may also provide an opinion prior to the notification of the merger so that the notifying parties can assess whether (or under which circumstances) the notification could be approved by the Media Council.

If sustainability and environmental protection become an institutionalised policy of the Hungarian State, i.e. a professional administrative body is set up to carry out tasks related to furthering sustainability aims and policies and/or providing supervision over the proper implementation thereof, a public interest test related to sustainability could be introduced based on the template of the media plurality test described above. In this case, the regulation could make the approval of the merger dependent on the prior approval of the administrative/regulatory body responsible for sustainability. This would allow for the sustainability aspect of the merger to be examined by professionals in the field, as well as taking over the burden from the GVH regarding follow-up investigations and/or other obligation(s) undertaken for the merger to be compatible with sustainability goals and policies.

4.2 Competition Analysis

This section will focus on the analysis of public interest considerations in merger control. First, we focus on the use of sustainability as a sword, i.e. when the theory of harm is based on sustainability-related harm. Second, we consider the use of sustainability as a shield, i.e. when the otherwise anti-competitive merger is exempted based on sustainability-related benefits.

To preface, we must note that the analysis of complex mergers is in and of itself a complicated task, which—especially for Phase II mergers—requires economic expert support. Accordingly, regarding sustainability cases, it is likely that additional, more specialised, expertise may be required in order to carry out the necessary assessment.

4.2.1 Use of Sustainability as Sword

As a preliminary note, it is to be underlined that sustainability as a sword in merger control is currently more of a theoretical concept than an enforcement reality. There are two very apparent scenarios that we can envisage here.

4.2.1.1 First Scenario: Effects on Sustainability Pointing in the Same Direction as Effects on Prices

In the first scenario, the merger, which adversely affects prices on the relevant market, also has a harmful effect on sustainability. In such a case, sustainability operates as a sword, but not as a stand-alone theory of harm, since it points in the same direction as price increases.

To date, there is very limited case law to refer to in this scenario. The GVH, for instance, has thus far not conducted such an assessment, where a clearly articulated theory of harm in a merger case was based on sustainability considerations. Nevertheless, such investigations are not without precedent in the EU. The Dutch Competition Authority (ACM) opened an in-depth probe into a deal in the calf-purchasing sector where one of the theories of harm that the ACM investigated was based on sustainability and animal welfare. President Snoep said that investigators were concerned the deal could lead to “purchasing power and monopsony pricing” and wanted to know “whether these possible lower prices will lead to a degradation of animal welfare and less investment in sustainable dairy farming in the Netherlands”.⁴⁷ The ACM was concerned that lower prices can, particularly in the long term, lead to fewer investments in sustainability and animal welfare, for example.⁴⁸ Eventually, the merger was cleared as the ACM determined that it was not likely that the acquisition would lead to lower purchase prices of calves or the foreclosure of competitors.⁴⁹

4.2.1.2 Second Scenario: Effects on Sustainability Pointing in a Different Direction Than Effects on Prices

The second scenario arises if the merger does not adversely affect the prices on the market but instead has harmful effects on sustainability. In this case, sustainability operates as a stand-alone theory of harm.

Since the effects on sustainability and prices do not point in the same direction, competition authorities need to undergo a complex balancing exercise to establish which consideration should eventually prevail.

The questions arise as to how one should measure the effects of the merger on sustainability and what the applicable test is to balance these effects towards each other. It is a well-established concept that a decrease in quality, choice or innovation can be as harmful to competition as an increase in price. Therefore, it could be a viable option to consider sustainability as a non-price dimension of competition (i.e. dynamic effect).⁵⁰

Measuring the non-price effects of mergers is a difficult but not an entirely new exercise as competition authorities, particularly the EC,⁵¹ recently put special emphasis on their analysis, especially in regard to the effects of mergers on innovation.⁵² This is also reflected in paragraph 38 of the Horizontal Merger Guidelines,⁵³ which underlines that “in markets where innovation is an important competitive force […] effective competition may be significantly impeded by a merger between two important innovators, for instance between two companies with ‘pipeline’ products related to a specific product market”.

Innovation is a good analogue not only because it can be assessed as a non-price effect but also because it directly relates to sustainability. For instance, in the Dow/DuPont merger, the EC underlined that the innovation in crop protection is not only of the utmost importance to farmers or consumers but must be evaluated due to its given impact on food, environmental safety and human health.⁵⁴

As for the GVH, we cannot mention such cases where sustainability-related harm was established as a stand-alone theory of harm. However, the above-mentioned approach to focus on non-price effects is not unprecedented in the GVH’s practice. Recent investigations into mergers in the digital markets⁵⁵ indicate that the GVH recognised that in certain markets, the assessment of the effects on prices is highly difficult and will therefore likely not lead to a verifiable theory of harm. Consequently, the GVH also determined that more emphasis should be put on the assessment of the non-price effects, namely the merger’s effect on quality, variety and innovation.⁵⁶ Thus, it would seem that the GVH has already developed a way to deal with such non-price effects in the event sustainability-related cases emerge in the near future.

4.2.2 Use of Sustainability as a Shield

Sustainability as a “shield” encompasses situations where anti-competitive effects are found but, taking into consideration the possible positive effects of the merger on sustainability, the merger is nonetheless likely to be cleared. This situation differs from the balancing exercise described above as competition agencies reach this determination long after establishing SIEC, not before.

One of the already existing instruments that can be mentioned here is the efficiency test, which could be applicable to mergers involving environmental benefits. In paragraphs 76–88 of the Horizontal Merger Guidelines, the EC sets out the three cumulative conditions that efficiency claims must satisfy if they are to lead to a merger being cleared. They have to (i) benefit consumers, (ii) be merger specific and (iii) be verifiable. The relevant guidance document⁵⁷ of the GVH largely echoes the EC’s approach to accepting efficiency claims. Some argue⁵⁸ that sustainability claims are easy to fit into these requirements as environmental benefits are clearly consumer benefits. However, with regard to its verifiability, given that many environmental benefits may take some time to materialise and can thus be correspondingly difficult to quantify, it would be advisable to avoid taking an overly narrow financial approach,⁵⁹ which would make the application impossible.

Although we find it reasonable to accept efficiency claims based on sustainability reasons, it has to be noted that such claims have not yet been accepted by the EC or the GVH in their enforcement practices relating to mergers. Moreover, the above-mentioned concerns regarding verifiability raise practical concerns as competition agencies seem to be reluctant⁶⁰ to accept such claims even in normal cases, let alone in such sustainability cases where the possible benefits cannot be predicted with high certainty at the time of the merger.

Finally, as a specific application, we can mention the role of sustainability-related remedies as shields. Such remedies are not shields in the sense that they cannot be used as good arguments to mitigate the harmful effects of the SIEC. However, under merger control, remedies are a way of avoiding the prohibition of mergers due to SIEC, and therefore, from a certain perspective, sustainable remedies can be regarded as shields. As an example, the merger inquiry of South East Water Ltd/Mid Kent Water Ltd can be put forward where the behavioural remedy accepted by the UK Competition Commission was designed to preserve the water resource benefits arising from the merger.⁶¹ A practical difficulty here lies in the fact that competition agencies normally have a strong preference for structural remedies, which are more difficult to be shaped in an environment-friendly way, as opposed to the less desirable behavioural remedies.

5 Greenwashing

In this section, we examine the role of sustainability in the assessment of unfair commercial practices.

In Hungary, as in some other Member States (e.g. Italy), the GVH also has the competence to deal with unfair commercial practices that may affect (distort) free competition in the Hungarian markets. The GVH mainly deals with B2C advertising – if the advertisement in question is broadcasted to a sufficient number of people to influence the course of free competition – based on the UCPD⁶² and its national equivalent, the UCP Act.⁶³ Sometimes, however, the GVH also uses its powers to step up against unfair B2B practices to maintain the healthy competition process in Hungary and even has competence to investigate and, if necessary, ban comparative advertising.⁶⁴

According to the established legal theory (specifically mentioned in the official reasoning by the Ministry of Justice of the various amendments to the Competition Act) and case law, the GVH was provided this competence not long after Hungary’s accession to the EU, so that its legal toolkit would be enhanced to safeguard free competition within Hungarian markets. Misleading advertising may distort competition: when an undertaking is allowed to use false claims to manipulate the transactional decisions of consumers and consequently gain additional market share, it can have a similarly adverse effect on competition as (both horizontal and vertical) restrictive practices and the abuse of a dominant position.

Against this background, the authors of this report are of the view that when discussing the role of sustainability and environmental aspects in antitrust enforcement, the description of the Hungarian landscape could not be complete without mentioning the more and more frequent phenomenon of greenwashing and the competition authority’s approach towards it.

By stepping up against greenwashing—as sustainability becomes a priority for more and more consumers when making their choices—the GVH can ensure free and healthy competition: undertakings introducing actual green technologies or solutions may win additional consumers in the competitive process, whereas false claims must be acted against so that they do not award their users unfair advantages in competition.

The constantly growing importance of green claims in the consumers’ decision-making process has been supported by a Factsheet published by the EC.⁶⁵ The document highlights:

• Eighty per cent of webshops, webpages and advertisements contain information about the environmental impact of products.

• Fifty-six per cent of EU consumers said they had encountered misleading green claims.

5.1 Soft Legal Framework: Strict Approach

The GVH first addressed the issue of greenwashing in 2020 when it warned consumers of more frequent misleading green claims⁶⁶ and then published its so-called Green Marketing Notice.⁶⁷ However, in 2020, the GVH seemed to put on the top of its agenda the curbing of the spread of unlawful greenwashing activities and green claims; there has not been much development regarding this matter since then (see Sect. 8.5.2 below).

In its warning, the GVH attempted to draw consumers’ attention to possibly misleading green claims of businesses and urged consumers to check the accuracy of such claims before making transactional decisions. The authority has set out that untrue environmentally friendly statements, as well as true statements in misleading contexts, are to be considered unfair commercial practices.

According to GVH’s Green Marketing Notice, “[g]reenwashing means the marketing or PR strategy of an undertaking with the intention of giving the impression that the undertaking in question is environmentally friendly and responsible for environmental protection while in its actual operation no substantive steps can be identified to achieve these goals”.⁶⁸

In the Green Marketing Notice, the GVH stated that it aims to assist undertakings in developing appropriate advertising practices regarding the environmentally friendly and sustainable nature of their products and services and, by this way, to help undertakings avoid infringing the law. The Green Marketing Notice specifies that it provides possible self-evaluation factors only with regard to the assessment of misleading commercial practices under the UCP Act and comparative advertising under the Competition Act.⁶⁹

On the basis of the above, it is clear that GVH not only considers untrue statements about the product/service in question, e.g. “green”, “organic”, or “recyclable”, to fall under the term greenwashing, but also includes the so-called priority claims, e.g. “the greenest” or “most eco-friendly” etc. This means that a green commercial communication may be found infringing the UCP Act and the Competition Act at the same time, e.g. “the most environmentally friendly product on the market”, as a misleading commercial practice and unlawful comparative advertising. In our view, the latter is only applicable when—by the use of such a claim—one or few competitors are clearly identifiable: in highly competitive markets with numerous market players, such priority claim does not identify all the competitors (we refer to the definition of comparative advertising laid down in Section 6/A of the Competition Act), whereas in oligopolistic markets, the term “greenest” may refer to the fact that the identifiable competitors are less green, and as a result, their products/services are less desirable.

The guide summarises the criteria for undertakings to be kept in mind when designing eco-related advertisements/green claims:

• (i) it provides general recommendations with examples, such as express the claim clearly and concretely, in clear and understandable language, in a realistic and accurate manner, without exaggeration, and in a verifiable and substantiated manner;⁷⁰

• (ii) it discusses the requirements for providing proof in relation to certain typical green claims concerning ingredients/material, production process and future commitments;⁷¹

• (iii) it discusses the requirements for substantiating comparative and priority claims;⁷² and

• (iv) it describes the legal framework of using certification marks.⁷³

Based on the Green Marketing Notice, the GVH intends to apply a strict approach when assessing green claims as it requires a high standard for the appropriate substantiation of such claims, as well as it requires their regular review (e.g. whether the claim that was true at the beginning of a marketing campaign is still applicable later):

Green claims must be based on solid, independent, verifiable and well-supported evidence, which takes into account the latest scientific findings and methods. Such evidence may include independent professional research, relevant test results or other credible data. Regarding justification, it is always important to keep in mind the specificity of the claim in question.

The relevant evidence must already be available to the undertaking when it publishes its green claims for the first time. (…) In addition, it is recommended to consider the constant development of science and technology, as well as any changes to the relevant results; any green claims made based on these may be required to be reviewed from time to time.⁷⁴

It is worth mentioning that according to Section 14 of the UCP Act, “the undertaking shall provide proof to verify the authenticity of any fact comprising a part of commercial practices. In the event of the business entity’s failure to comply, the fact in question shall deemed to be untrue”. Regarding green claims, this provision also means that a company using such a claim must be able to appropriately substantiate it when requested by the GVH: if it fails to do so, it might expect a hefty fine⁷⁵ from the GVH.

5.2 Case Law: Less Focus on Enforcement

While the GVH has previously expressed that greenwashing might be a priority on its agenda, presumably due to the outburst of the pandemic, its focus shifted to misleading commercial practices concerning COVID-related communications.⁷⁶ At the time of completing this report (15 July 2022), we are aware of only one case⁷⁷ where an advertisement of an “organic” feature of a product was investigated by the GVH.

The GVH found that FOX CONSULTING Ltd., which operates the bio tanning salon franchise “KiwiSun”, had breached the prohibition of unfair commercial practices with its advertisements by using statements such as—among others—“green bio” and “with the power of nature”. In this case, the claims about the greenness of the product were considered “health claims” (statements on the positive impact on health) and not green claims (statements on the positive impact on the environment). The GVH found that FOX CONSULTING failed to substantiate and explain the meaning of its statements “green bio”, “bio” and “with the power of nature”, which in themselves, but especially when put together with other health claims, constituted unsubstantiated health claims.

The GVH imposed a fine of approx. EUR 21,200 and prohibited the undertaking from continuing the unlawful practice. Although the GVH assessed the compliance of classic “green claims” in this case, it did not implement a clear test on how to use such green claims as the authority found that the claims under investigation were rather “health claims” than “greenwashing”.

5.3 Expectations for the Near Future Connected to Greenwashing

It would not be surprising if the GVH—together with other national competition authorities in other Member States—would step in the footsteps of the EC when setting “greenwashing” as a new priority (not only in terms of soft law anymore but also through actual enforcement) in its UCP enforcement agenda.

The EC published its New Consumer Agenda⁷⁸ in late 2020, where it states the following important indications: “Consumers need to be better protected against information that is not true or presented in a confusing or misleading way to give the inaccurate impression that a product or enterprise is more environmentally sound, called ‘greenwashing’. Actions to that effect are also being developed in the area of sustainable finance. Furthermore, the Commission will propose that companies substantiate their environmental claims using Product and Organisation Environmental Footprint methods to provide consumers with reliable environmental information.”⁷⁹ Based on this policy paper, the EC already issued Recommendation (EU) 2021/2279 on the use of the Environmental Footprint methods to measure and communicate the life-cycle environmental performance of products and organisations. The logical next step for enforcement agencies would be to start assessing whether advertisers comply with the recommendations when advertising their products/services with green claims.

According to the press release of the EC, further legislative proposals are on the agenda of the European Union in the field of greenwashing. On 30 March 2022, the EC announced that it proposed amendments to the UCPD in relation to green claims as well as the early obsolescence of products.⁸⁰ The proposal⁸¹ supplements the list of main product characteristics (Article 6 (1) of the UCPD) with the environmental and social impact/reparability/durability of the products, about which the trader must not mislead the consumers. Furthermore, the proposal includes new practices that are considered misleading after a case-by-case assessment (Article 6 (2) of the UCPD), such as making an environmental claim related to future environmental performance without clear, objective and verifiable commitments and targets and without an independent monitoring system. The proposal introduces new items on the so-called Blacklist (Annex I of the UCPD) as well. These practices shall in all circumstances be regarded as unfair should the proposal be adopted. According to the communication of the EC, these new Blacklist commercial practices would be the following:

• Making generic, vague environmental claims where the excellent environmental performance of the product or trader cannot be demonstrated

• Making an environmental claim about the entire product when it really concerns only a certain aspect of the product

• Displaying a voluntary sustainability label that was not based on a third-party verification scheme nor established by public authorities

The proposed changes to the UCPD are fully in line with the expectations set forth by the Green Marketing Notice of the GVH. Should the proposal be adopted by the competent EU bodies and later by the national legislators, the enforcement actions to detect, substantiate and punish greenwashing practices would be easier and more effective by the application of the legal provisions.

In our view, the GVH will primarily focus on B2C commercial practices as consumers are becoming more conscious about environment-friendly technologies. On the other hand, it is also possible that green claims will become increasingly important in B2B aspects as well: eco-friendly and ethical business models are to be followed, especially by larger publicly listed companies, and consequently, their green claims will have to be substantiated in B2B relations as well.

6 Private Enforcement and Sustainability

In this section, we examine the role of sustainability in the assessment of the private enforcement of competition law.

6.1 Public and Private Enforcement of Competition Law

If (the public enforcement of) competition law will take into consideration sustainability benefits, this will automatically affect the private enforcement of competition law: on the one hand, the substantiation of damage claims could become more difficult if defendants have an additional form of defence; on the other hand, there could be more damage claims if plaintiffs can rely on violations of sustainability as the basis for their claim.

6.2 Sustainability, Competition Law and Private Enforcement: Setting the Framework for Interpretation in Hungary

6.2.1 Underlying Principles Serving as Potential Cornerstones of Interpretation

Under Article 28 of the Fundamental Law of Hungary, “[i]n the course of the application of law, the courts shall in principle interpret the laws in accordance with their objective and with the Fundamental Law. The objectives of a law shall in principle be determined relying on its preamble, and/or on the explanatory memorandums of the relevant legislative or amendment proposal. When interpreting the Fundamental Law or any other law, it shall be presumed that they are reasonable and of benefit to the public, serving virtuous and economical ends.”

All goals and aims codified in the Fundamental Law (see Sect. 8.1 above) are to be considered by the courts when applying the relevant laws, including competition law. Therefore, it may be held that when Hungarian courts are applying competition law, they may indeed consider the aims and goals of environmental protection and sustainability as an overarching interpretative framework.

6.2.2 The Prohibition of Agreements Restricting Competition and the Prohibition of the Abuse of Dominance as the Basis for Claiming Damages

6.2.2.1 The Prohibition of Agreements Restricting Competition

The prohibition of anti-competitive agreements has been serving as a basis for damage claims for a number of years, and there have indeed been many actions in the EU Member States that have been filed before national courts.⁸²

There have, however, not yet been any judicial actions in Hungary in which a plaintiff based its claim on an anti-competitive agreement that had as its subject a sustainability- and/or environment-related issue.

Nevertheless, an illustrative example of bringing damage actions before courts based on a decision of the EC is the truck cartel (AT.39824 Trucks), which has been the basis of claims not only in Hungary but also in Spain, Germany, the Netherlands, and the United Kingdom. In Hungary, these private actions all concern damages that allegedly resulted from the cartel practices of truck producers (MAN, Volvo/Renault, Daimler, Iveco and DAF), whereby they coordinated their prices at the gross list level for certain types of trucks in the European economic area. However, the truck manufacturers have also engaged in a cartel relating to (i) the timing for the introduction of emission technologies to comply with the European emission standards and (ii) the passing on to customers of the costs for the emission technologies required to comply with the European emission standards.

We know certain large Hungarian transportation companies, which had purchased trucks in the time period affected by the cartel, have considered the possibility of launching damage actions on the basis of the truck producers’ market practices that relate to the above-mentioned environmental issues. The damages that the transportation companies have suffered because of the cartel at stake may have been higher fuel prices (due to the less efficient methods of fuel consumption of the trucks), shorter life cycle of the products and higher maintenance costs. However, we are not aware of any private actions in Hungary that have been based on the aforementioned environment-related competition law infringements.

6.2.2.2 The Prohibition of Abuse of Dominance

As to the prohibition of the abuse of dominance, there is currently an emerging line of academic works contemplating the possibility of applying the prohibition as a means of limiting the pollution of certain undertakings and promoting social equality.⁸³ According to the aforementioned school of thought, competition law should and can act as a public policy tool to further environmental and social sustainability goals. In Hungary, there have not yet been any cases in which private parties claimed damages in connection with the abuse-of-dominance scenarios that were in connection with sustainability- and/or environment-related issues.

6.3 The Material Criteria for Awarding Damages on the Basis of Competition Law Violations in Hungary

The below criteria must be demonstrated by the plaintiff to obtain damages on the basis of a competition law infringement.

6.3.1 Infringement of Competition Law

According to Section 88/B(9) of the Competition Act, the plaintiff must prove that the conduct of the defendant was unlawful, while the defendant must prove the conditions of exemption (de minimis, block exemption or individual exemption). Thus, a sustainability defence in damage litigation should be available, at least in the case of stand-alone claims. Notably, the standard for individual exemption based on sustainability benefits is likely to be at least as stringent as in the case of public enforcement (the burden of proof is higher before the courts).

6.3.2 Damages Suffered

For the claim to succeed, the plaintiff must prove that it has suffered damages (direct loss, loss of profit and costs of claiming damages⁸⁴). Sustainability considerations are relevant from this aspect because the plaintiff would need to show that non-compliance with sustainability standards lead to actual damages (public interest harm caused by unsustainable practices are unlikely to qualify for damages).

6.3.3 Causal Link

The plaintiff must demonstrate that there is a causal link between the competition law infringement and the damages that the plaintiff has suffered. Sustainability and environmental aspects may come into play here as well. However, as has been elaborated above, establishing a close enough causal link between the environmentally damaging behaviour of an undertaking that violates competition law seems difficult to prove.

6.4 Procedural Considerations of Damages Actions

6.4.1 Follow-on and Stand-Alone Damage Claims

As has been set out above, a damage claim in Hungary may be filed before courts either as a follow-on action (subsequent to the decision of the GVH/EC) or as a stand-alone action (which does not follow on from a previous finding of a competition law infringement by the GVH/EC).

6.4.2 Action in the Public Interest

It should also be mentioned that where an infringement falling within the competence of the GVH caused damages to a large number of consumers, the GVH may bring a civil law claim against the undertaking concerned on behalf of the consumers. The condition of such a claim is that an investigation has already been launched by the GVH regarding the infringement (the GVH may request the court to suspend litigation until the end of the investigation). Such an action does not affect the right of consumers to commence proceedings against the defendant in their own right.⁸⁵

In this respect, it should be highlighted that environmental damages are, by their very nature, capable of affecting a large number of consumers; therefore, it may be expected that the GVH will identify cases that concern sustainability and environmental issues and that are thus capable of being the subject of an action in the public interest, as set out above.⁸⁶

6.4.3 Collective Redress (Class Action)

The rules governing collective redress have recently been codified by the Civil Procedure Code.⁸⁷ The Civil Procedure Code regulates both opt-in collective actions and representative actions. Notably, opt-in collective actions are limited to certain cases. Interestingly, competition law infringements are not included in this list (although it could be debated that competition law infringements fall under the category of “claims arising in connection with consumer contracts”), while claims stemming from health impairment resulting directly from unforeseeable environmental pollution caused by human activities or arising in consequence of negligence are included (although it could be debated that simple unsustainable practices do not fall under this category).⁸⁸

7 Agency Perspective

Sustainability considerations in competition law enforcement are regarded by the GVH as an important emerging topic. It is also regarded as a significant challenge. Both importance and challenge are manifested in the recent activities of the GVH in the field and the current situation, described below.⁸⁹

7.1 Activity in the Area

7.1.1 Enforcement

The GVH has a modest case experience involving sustainability considerations. Parties have put forward sustainability considerations only in a few cases, which the GVH qualified as unfounded attempts at individual exemption. Those cases are discussed elsewhere in this report.⁹⁰

So far, the GVH has not encountered genuine sustainability initiatives/agreements (either lawful or unlawful under the Competition Act and/or the TFEU). Similarly, significant sustainability considerations have not emerged in merger cases of the GVH or its abuse of dominant position investigations either.

7.1.2 Non-enforcement

The GVH took part in several activities aimed at exploring the topic. In its special project as the host of the ICN Annual Conference in 2021, it conducted a global survey among competition agencies and non-governmental advisors of the ICN, stocktaking existing experience and expectations, primarily, but not exclusively, about anti-competitive agreements.⁹¹

Results of the survey showed, inter alia, that there is very little enforcement experience and that the presence of the issue is not temporary. Competition agencies need to bridge expertise gaps, and there is a vocal demand from practitioners for more and better guidance. However, competition policy research to solve difficult analytical problems and measurement issues is a precondition for moving forward. These and other findings and conclusions have been disseminated broadly in Hungary as well as internationally.⁹²

The survey was complemented with a high-level panel discussion at the conference with the participation of the president of the GVH.⁹³ Another high-level panel discussion at the next ICN Annual Conference in 2022 in Berlin, moderated by the president of the GVH, can be regarded as a follow on of the 2021 initiative.⁹⁴

The GVH also took part in an ECN-level effort to deal with sustainability in the context of anti-competitive horizontal agreements, which in turn provided input for the Draft Revised Horizontal Guidelines.

On top of that, the GVH is closely following international developments, including the efforts of leading competition agencies and international organisations to develop and identify good practices.⁹⁵

In summary, the GVH has little case experience but keeps an eye on international developments and evolving good practices. Experience gained from all these activities suggests that there is no inherent trade-off between sustainability and competition. Competition is, in fact, consistent with sustainability as a default. Whether there is a trade-off depends on the facts of the case. International good practices have not much evolved yet, and while the general analytical framework seems to be applicable, many details are yet to be explored. The degree of progress across agencies is likely explained by differences in agency parameters (such as size and the general level of development) and by differences in the overall societal, political and business environment (including the quantity and quality of sustainability-oriented private initiatives).

7.2 State of Affairs and Related Considerations

The GVH is open to incorporating relevant sustainability considerations into its competition enforcement. In the case of anti-competitive agreements, this is backed by a statutory provision that explicitly identifies positive effects on the environment as a benefit to be considered in an Article 101 (3) TFEU type of analysis.⁹⁶

However, this does not mean that the GVH is naïve when receiving sustainability claims from parties. Cautionary tales are cases where such claims were put forward without any serious substantiation in the context of hard-core cartels. The GVH refused such greenwashing attempts and learned the lesson that greenwashing is a real danger when it comes to alleged sustainability benefits.⁹⁷ Also, the burden of proof is on the parties when it comes to Article 101 (3) TFEU and its Hungarian equivalent.

As far as using sustainability as a sword is concerned, the GVH is certainly open to the theory of harm that was applied by the EC in its Car emissions case. It is worth noting that in the theory of harm in question, there was an element of restriction of competition, albeit not in terms of pricing. In other words, it was about a sustainability-related competitive concern.

Also, the emergence of sustainability considerations (either as a shield or as a sword) is a factor that makes launching a formal procedure by the GVH more likely. This means a ceteris paribus higher probability of case launch, instead of automatically triggering a formal investigation. When it comes to case selection, sustainability is only one factor, and parties’ sustainability claims are not taken at face value by the GVH. This overall approach reflects the interest of the GVH in the topic due to its importance and novelty.

In the absence of proper case experience and solid international technical metrics, the GVH has not issued any own guidance documents concerning sustainability in competition enforcement, and currently, no such guidance is under preparation. Nevertheless, the Draft Revised Horizontal Guidelines are available for parties and practitioners and provide an appropriate level of guidance for the time being.⁹⁸

The lack of GVH guidance documents does not reflect any lack of recognition of the merit of useful guidance or a lack of intention to provide guidance when possible. Indeed, the GVH issued guidance on how to make green claims in the context of consumer protection at the end of 2020, a somewhat related topic, based on international best practices.⁹⁹ International and/or domestic developments may lead to the issuance of a GVH guidance document about sustainability in competition enforcement in the future.

The GVH is not aware of any ongoing or planned legislative actions with regard to sustainability in competition enforcement. In addition to the reasons discussed already in the context of guidance documents, sustainability is already referred to in the Competition Act, as mentioned above.

So far, the GVH has not engaged in “hard” capacity-building projects, i.e. those entailing a structural change of the organisation or its personnel, such as hiring specialists or setting up a dedicated department to deal with cases involving sustainability considerations. At the same time, “soft” capacity building, such as getting knowledgeable about the topic and following international developments, is ongoing, as described above.

The GVH regards its current level of engagement as adequate, given the low number and the type of sustainability-related cases up to now. Being aware of international developments and evolving practices will be useful and can serve as a basis for a more informed adaptation in the future if and when genuine sustainability cases emerge in Hungary and parties put forward better-founded sustainability claims and analyses.