An artistic illustration of Hungary’s hideous anti-competition regulation

As you may have heard, the Hungarian government recently announced a crackdown on “cartels,” including a legal change that would further put the burden of proof on companies to prove they aren’t engaged in anti-competitive behavior. But anyone expecting this to lead to a fair-minded cleaning up of Hungary’s collusion-ridden economy could be forgiven for being skeptical, especially after a stunning court decision announced yesterday.

The case in question involves a combined fine of Ft 26.5 million (just under €100,000) initially levied by the Economic Competition Office (GVH) in 2005 against three trade associations representing graphic artists. According to the GVH, the National Association of Graphic Designers, the National Association of Artists, and the Alliance of Fine and Applied Artists were guilty of collusion for jointly publishing “price guides” for various services.

Yet despite being caught red-handed, the three associations have ended up getting off with the lightest of wrist-slaps. According to privatbankar.hu, the original fines, which ranged from Ft 2.5 million to Ft 18 million, were voided by a first-level court (the Budapest Metropolitan Court), and then chopped down to Ft 500,000 for each group by the Budapest Regional Court of Appeals, whose decision is final.

What makes the case of the “art cartel” so ugly is not just the fact that their attempt at price-fixing was so artlessly blatant. (Publishing lists of “minimum” prices which are aimed to be applied across an industry is about as anti-competitive as it gets.) It is that the GVH continues to sanction firms whose alleged offenses are far less obvious. I know of at least one case in which a fine larger than that originally proposed against the “artists” was levied and upheld even though the appellate judge readily conceded that there was no meaningful evidence of collusion whatsoever on the part of one of the sanctioned companies. Probably not by coincidence, the “guilty” party in that case just so happened to be a successful foreign-owned company.

So the question is what the “real” rules are in Hungary in the area of competition law. Will the GVH take a cue from the courts’ lenience in this latest case and decide that prima facie cases of anti-competitive behavior by local trade groups and smaller domestic firms aren’t worth bothering with, and that they should instead spend even more time fishing around for dubious claims against more deep-pocketed (but politically weak) foreign companies?

If so, we can expect a further erosion in sentiment among the country’s already over-taxed and over-regulated foreign businesses. Though what I’d really like to see is one of these firms respond to the “art cartel” case with a bit of legal performance art, and sue the GVH and the courts for collusion, even though the superficial evidence suggests they are working at cross-purposes.