The Hungarian Competition Authority (GVH) has conducted an investigation into a franchise system operated by MANOK-Növényorvos Kft., which focuses on the inspection of pesticide machinery. The investigation revealed that the company had implemented certain restrictions that aimed at market division and price fixing, violating competition laws.

Due to significant environmental risks associated with pesticide machinery, regular inspections are mandatory. MANOK-Növényorvos Kft. established a franchise network known as NGEÁ (Pesticide Machinery Inspection Station), which initially allowed only its members to conduct these inspections. However, as time progressed, other businesses entered the market, leading to the eventual dissolution of the NGEÁ franchise system by MANOK-Növényorvos Kft. this year.

The GVH initiated its investigation after identifying several clauses in the franchise agreements that raised concerns about potential violations of anticompetitive agreements. Following on-site inspections, the GVH's Competition Council determined that from April 1 to December 31, 2023, MANOK-Növényorvos Kft. had engaged in practices that restricted the geographical scope of mandatory inspections and set prices for these services.

In response to the findings, MANOK-Növényorvos Kft. cooperated with the GVH, acknowledged the violations, and waived its right to appeal. Consequently, the GVH imposed a fine of 5.25 million HUF on the company.

The GVH has emphasized the importance of compliance with competition law in the establishment of franchise systems. Businesses and their advisors must exercise caution to ensure that vertical agreements adhere to legal requirements. While necessary restrictions for franchise operations may fall outside the scope of competition law prohibitions, severe restrictions are still applicable. For instance, a franchisor cannot limit the pricing freedom of franchisees, except for setting maximum prices, and passive sales cannot be restricted even in exclusive distribution scenarios.

The GVH aims not primarily to impose fines but to offer various cooperation opportunities for businesses. Active collaboration during investigations can significantly reduce the amount of fines imposed.