The Czech Competition Authority just announced that it will open a fast-track sector inquiry focused on the prices of four basic food items. While the items remain undisclosed, it is generally presumed that the inquiry follows political pressure regarding price increases of items like sugar, flour, butter, bread or milk. The focus of the inquiry will be on margins in all stages of the food supply chain. The Authority aims to identify why price increases in the four food items have even exceeded the latest inflation rates and whether there are unjustified margin increases on any level of the supply chain.
According to sources, the Authority aims to close the inquiry by the end of April this year, meaning that the next two months will be very intense both for the Authority and addressees of the Authority's requests for information. Given the scope of the inquiry, aimed as it is at all levels of the supply chain, probably more than a hundred requests for information can be expected.
Companies are obliged to respond to a request for information and provide complete, correct and not misleading information under threat of penalty of up to 1 % of annual group turnover. The Authority is also empowered to conduct dawn raids during the sector inquiry, though so far these have been uncommon in sector inquiries.
To be ready for the Authority, companies in the food supply chain should consider consulting a lawyer who specialises in competition law. First, an expert on the ground is essential in case of a dawn raid, as they can protect the company from an unreasonably extensive raid, know the limits of the obligation to cooperate with the Authority, and can help the company avoid potential fines for non-cooperation.
Second, it is highly recommended to consult an expert to draft a response to a request for information. While the company is obligated to provide complete and correct information, there is still a prohibition of self-incrimination in place. Therefore, correctly assessing the limits of the obligation to provide information may protect the company from both breaching the obligation and incriminating itself.
If the Authority identifies a possible violation of the Czech Act on Significant Market Power or Czech antitrust laws, it could initiate sanction proceedings. It is worth pointing out that the fines imposed by the Czech Competition Authority have steeply increased in recent years, with fines reaching the highest limit of 10 % of annual group turnover being no exception.
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