Consortium participation, public procurement cartels, and bid rigging in competitive procedures:

In our previous article, we reviewed the most common forms of conduct in public procurement cartels and drew attention to lesser-known infringement types. In this article, we analyse what potential risks and sanctions collusion in competitive tender procedures entails, and what companies can do to avoid infringements or mitigate their consequences.

As mentioned in our previous article, in cartel cases closed during 2025 alone, the GVH (Hungarian Competition Authority) imposed fines totalling more than HUF 2.2 billion. It is clear, therefore, that among the various sanctions mentioned above, even the GVH fine alone — for knowing or even tacit participation in a procurement cartel — constitutes an extremely serious consequence. There are numerous other risks associated with cartel behaviour — let us outline these broadly.

Possible Legal Consequences of Public Procurement Cartels

1. Initiation of Competition Supervision Proceedings and Fines

In the case of public procurement cartels, the GVH is competent to act. These so-called "competition supervision proceedings" typically begin with a dawn raid, meaning the GVH appears unannounced at the company's business premises and seizes both electronic and paper-based documents, on the basis of which it later attempts to prove the infringement. This highly unpleasant procedural act carries significant risk: the GVH may not only take evidence of the infringement specified in the judicial warrant, but also evidence of other infringements, for the use of which it may subsequently seek judicial authorisation. As a result, it is not uncommon in procurement cartel cases for a second set of proceedings to be initiated against the company following the initial case. This can be a significant risk because, if an infringement is established, the GVH may impose a fine that can reach up to 13% of the cartelising company's previous year's group-level net revenues per proceeding, and proceedings that drag on for years entail substantial financial and resource burdens for the companies involved.

Fortunately, there are numerous options available for reducing fines, so it is worth seeking appropriate legal advice during competition supervision proceedings to develop a strategy for fine reduction.

2. Exclusion from Public Procurement

For companies that regularly participate in public procurement procedures, a further serious sanction is exclusion from procurement procedures for a period of 3 years. This exclusion is automatic in the event of any competition-restricting conduct established by the GVH, provided the company is fined by the GVH. Therefore, not only participation in public procurement or other procurement cartels, but any other prohibited competition-restricting conduct (such as resale price maintenance or market sharing) may result in a three-year procurement exclusion, as a consequence of which the cartelising company may not participate in public procurement procedures — among other things — as a tenderer, candidate, or subcontractor for three years. Companies affected by procurement exclusion may clear themselves through self-cleaning, which is subject to strict conditions and presupposes that the company cooperates with the authority already during the competition supervision proceedings.

3. Liability for Damages

The range of possible consequences does not end here, as the cartelising company may also face civil liability for damages — for example, towards the contracting authority or affected business partners. The practice of private damages litigation is still developing in Hungary. However, compensating the contracting authority — or at least offering to do so — is an explicit condition of self-cleaning from procurement exclusion, which is why companies voluntarily pay damages of several million forints in order to achieve self-cleaning.

4. Reputational Harm and Termination of Business Relationships

A cartelising company may also face serious consequences from the negative media coverage surrounding cartel infringements. Certain client groups (e.g. state bodies, major clients) may also terminate their business relationships with the cartelising company in order to ensure the integrity of their supply chains.

5. Criminal Liability

In addition to sanctions affecting the company, it is worth noting that collusion in public procurement or concession procedures constitutes not only a competition law infringement but also a criminal offence, meaning that the individuals involved bear personal liability: they may face imprisonment of up to five years. This sanction applies not to all competitive tender procedures, but only to public procurement and concession procedures.

Let us take a closer look at the actual criminal law exposure in practice.

Statistical data obtained from the IT Department of the Prosecutor General's Office and the Legal Department of the National Office for the Judiciary for the period 2016–2024 reveal a strikingly low number of registered cases. The statistics also show signs of greater activity by the investigating authorities and the prosecution in recent years, particularly from 2020 onwards (e.g. 16 proceedings were terminated in 2023, 18 charges were brought in 2020, and 21 in 2023). This also affected the number of court proceedings (31 convictions were handed down between 2022 and 2024 — a figure that includes multiple sentences and measures imposed on a single convicted person, so it does not indicate the number of individuals convicted). In judicial proceedings, the typical sanction during this period was a fine, applied in 36 cases; imprisonment was imposed rarely — in only 6 cases over 9 years. Suspended sentences were applied by courts in respect of a total of 8 defendants. In 2016, acquittals were handed down in the cases of 3 defendants, and in 2024 in the cases of 5 defendants; no acquittals were issued in the intervening period.

As an outside observer, the overall conclusion to be drawn from the statistics is that the detection of criminal procurement cartel activity is not particularly active, and the number of convictions is quite low. The high number of rejected complaints and terminated investigations, together with the occasional acquittals, suggest both evidentiary difficulties and interpretative uncertainties in the law.

Nevertheless, it must not be forgotten that the GVH has a statutory obligation to file a criminal complaint upon detecting a criminal offence, in respect of which it has no discretion under current legislation. For this reason, individuals who participated in the allocation of procurement procedures covered by infringements sanctioned by the GVH have good reason to be concerned.

6. Employment Law Consequences

Also to be mentioned among personal consequences is the fact that employees who participated in the cartel may be required to compensate the company for the damages caused, and cartel involvement may also lead to the termination of their employment.

Overall, the above legal consequences can severely affect cartelising companies — and, as we see in everyday practice, for SMEs in particular, these consequences can have a far more severe impact on day-to-day operations than on the business of a well-capitalised large corporation.

How Can Infringements Be Avoided?

The answer to this question is complex, and a detailed discussion of all available options would go beyond the scope of this summary. We therefore highlight only a few — but particularly important — tools.

First and foremost, it is worth drawing attention to the importance of competition law compliance.

While larger companies with an international background often have competition law compliance programmes in place, the majority of SMEs still lack adequate knowledge of competition law. However, establishing an in-house competition law compliance framework can play a key role in avoiding public procurement or other procurement cartel infringements. At its core, this involves raising awareness of the distinction between lawful and unlawful conduct, so that the management and staff of a given company understand what they may and may not do in the context of tender procedures.

Reaching an appropriate level of competition law awareness is always a learning process, which must include both the preparation and implementation of an internal handbook containing competition law rules and the continuous competition law training and education of the company's management and staff. Engaging experts with specific competition law expertise is always necessary — and advisable — for developing a high-quality compliance programme.

Our many years of experience show that when a company takes competition law compliance seriously, ad hoc questions tend to arise even after initial in-house training sessions — questions that need to be analysed individually and that, over the longer term, ensure the company's ongoing compliance. It typically takes a process of several years for staff to become sensitised to a given topic, and only once that has occurred can it truly be said that the compliance system is functioning well. At that stage, only refresher training is needed, or perhaps induction training for new employees — but in general, the majority of staff will by then be able to identify and recognise the areas and risks that may be problematic from a competition law perspective.

In our experience, for the majority of SMEs, the need for compliance unfortunately only becomes apparent after GVH proceedings have been initiated, at which point it becomes clear to the company that some form of infringement may have occurred. By then, the only option is to mitigate the negative consequences.

What Can Be Done to Mitigate the Consequences of an Infringement?

Even if the damage has been done, all is not lost — there are several cooperation mechanisms that reward the voluntary disclosure and reporting of an infringement to the authorities with a reduction or full waiver of the fine, as well as exemption from procurement law and criminal sanctions. What options are available?

1. Leniency and Other Fine Reduction Options

The most important such option is leniency, under which a company — by admitting and disclosing the infringement to the GVH — may obtain a full waiver of the fine, provided the authority was not previously aware of the infringement.

Immunity from fines not only avoids a substantial financial penalty but also ensures that procurement exclusion does not apply to the company in question. Moreover, a successful leniency application submitted to the GVH also constitutes a ground for the elimination of criminal liability in criminal proceedings, which applies to all current and former executive officers, members, supervisory board members, employees, and their agents who participated in the cartel on behalf of the company. A successful leniency application — typically submitted before the initiation of proceedings — is therefore capable of providing simultaneous exemption from the most painful sanctions.

However, companies are often only able to meet the conditions for leniency if they have a full understanding of the infringement they committed, if the evidence relating to the unlawful conduct is available to them, and if they are able to secure the cooperation of current and former employees who participated in the infringement.

Even if immunity from fines is no longer available — for example, because competition supervision proceedings have already been initiated and the GVH has seized a substantial amount of evidence — it is still possible to achieve a fine reduction of up to 50% by admitting the infringement and substantiating it with appropriate evidence and statements. Furthermore, by combining other fine reduction options (e.g. a settlement procedure involving admission of the infringement and waiver of appeal, or the subsequent introduction of a competition law compliance programme), a cumulative fine reduction of up to 85% may be achievable.

A successful fine reduction application also has an impact on criminal proceedings, as it may allow for an unlimited reduction of the sentence or, in exceptional cases, its complete omission. These benefits apply to all individuals who acted on behalf of the company.

It is clear that numerous tools can be combined to significantly mitigate the consequences of cartel behaviour. We strongly recommend engaging a competition law expert to map out the advantages and disadvantages of these tools.

2. Self-Cleaning

Even if the GVH establishes the liability of a cartelising company and imposes a fine, some room for manoeuvre remains to mitigate the legal consequences — at least with regard to the automatic procurement exclusion. This room for manoeuvre is provided by the mechanism of self-cleaning.

The essence of self-cleaning is that a cartelising company which is able to demonstrate its reliability before the Public Procurement Authority may be exempted from the three-year procurement exclusion.

Demonstrating reliability is, however, subject to strict statutory conditions. In order to obtain exemption, the cartelising company must satisfy all of the following conditions:

(a) it must compensate the injured party (e.g. the contracting authority) for the damages caused by the cartel infringement to the extent accepted by that party (or undertake to do so within a specified deadline);

(b) by actively cooperating with the competent authorities (e.g. the GVH), it must comprehensively clarify the facts and circumstances of the case; and

(c) it must adopt technical, organisational, and personnel measures suitable for preventing further infringements.

For exemption, therefore, beyond any obligation to pay compensation, the legislation requires not only proof of active cooperative conduct during the GVH proceedings, but also the implementation of measures aimed, for example, at introducing the aforementioned competition law compliance programme or, where applicable, removing from the company those employees or executive officers who participated in the cartel. These measures — particularly those of a personnel nature — can in many cases be extremely painful or even practically impossible to implement, especially for SMEs, for instance when the owner and managing director of a family business are the same person and that individual possesses the years of experience and market knowledge essential for running the company.

The Public Procurement Authority has broad discretionary powers to assess whether the above conditions have been met, within which it may freely evaluate not only whether the measures have been taken, but also their effectiveness and suitability for preventing further infringements. In our experience, the authority has been applying increasingly strict scrutiny of these conditions year on year, making it ever more difficult to successfully demonstrate reliability.

To summarise the above, it is essential for companies participating in public procurement or other procurement procedures to be well acquainted with the relevant competition law rules, in order to prevent potential infringements and mitigate negative consequences. Given the complexity of this area of law, companies are well advised to seek the assistance of experts with specific competition law expertise — ideally before any problem arises, but absolutely once GVH proceedings have been initiated.