GVH launches sector inquiry regarding supply of beverages in the HoReCa sector

By Dániel Aranyi, Bettina Kovecses

11-2020

The Hungarian Competition Authority (GVH) launched a sector inquiry in October 2020 in order to analyse the procurement of beverages in the HoReCa sector (hotels, restaurants and cafés).  The GVH suspects that Hungarian HoReCa outlets are reluctant to establish new supply relationships because of exclusivity arrangements with suppliers of beverages, and that this trend has resulted in restricted and narrower supply and higher prices for consumers.

The GVH already investigated exclusivity arrangements in the HoReCa market of beer and accepted commitments (Vj/49/2011, see press release) of the three large breweries in 2015, where Heineken, Dreher and Borsodi undertook to decrease the tied-up volumes on the HoReCa beer market by 10% each both in 2016 and 2017.

In the sector inquiry, the GVH widens the scope and will investigate exclusivity arrangements relating to all beverages (alcoholic and non-alcoholic) sold in HoReCa outlets, not only beer. According to the GVH, the HoReCa industry is interwoven with supplier agreements that contain exclusivity clauses, or restrictive clauses for offering the products of one or a limited number of companies. This practice favours beverage suppliers with wider product portfolios and significant capital strength and hinders the entry of new, typically smaller Hungarian suppliers into the market. Therefore, the GVH believes that the current market practice may harm customers as well as HoReCa outlets, because alternative supply sources cannot thrive and consequently the possibility of changing from one supplier to another decreases.

In the course of the sector inquiry, the GVH will gain insight into the framework and conditions of business relations between beverage suppliers and domestic catering units, as well as the characteristics of distribution in the HoReCa sector. The GVH will investigate the business relations between beverage suppliers and domestic catering units; the suppliers’ strategies; business practices and their effects on the prices.

As this is an official sector inquiry, companies effected are required to cooperate with the GVH, including disclosing certain information to the GVH upon request. It is therefore crucial to have adequate legal guidance on what may be subject to the mandatory disclosure once your company is requested to cooperate.

The results will be concluded in a sectoral report published by the GVH. In case the investigation reveals market distortions, the GVH can initiate competition supervisory proceedings, make recommendations to market players or flag certain issues to the legislator.

Interestingly, exclusivity arrangements regarding beer, soft drinks and natural mineral water supply of HoReCa outlets were prohibited by the very recent amendment of Act CLXIV of 2005 on Trade, which entered into effect on 15 July 2020. Under this new statutory provision, HoReCa outlets must sell beverages of at least two manufacturers in each product category (with the exception of draft beer). Existing exclusivity arrangements are exempted, but those will lose effect by the force of law on 1 August 2021.

The GVH has been tasked with the monitoring and enforcement of this exclusivity ban. The sector inquiry may be a good opportunity for the GVH to test the waters in this respect.

Please find the press release on the sector inquiry here in English and here in Hungarian.

For more information please contact: Dániel Aranyi or Bettina Kovecses

 
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