30 August 2023

Czech Competition Office Stronger Than Ever – How Are Competitors Affected By The New Amendment?

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The Czech Competition Act has been amended to expand the powers of the Czech Office for the Protection of Competition ("Office") in detecting and suppressing anticompetitive conduct.
Czech Republic Antitrust/Competition Law
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The Czech Competition Act has been amended to expand the powers of the Czech Office for the Protection of Competition ("Office") in detecting and suppressing anticompetitive conduct. Effective from 29 July 2023, the amendment brings significant changes to the Leniency Programme, investigations at business premises, the offering of commitments, discounts on fines, using telecommunication interceptions as evidence and more. Two significant decisions have also been issued by the Office. We have set out our key takeaways below.

Leniency Program and Anonymisation of Notifiers

Since the fines imposed for anticompetitive conduct often reach staggering heights, competitors should be mindful of changes to instruments enabling their reduction or complete remission. The Leniency Programme, allowing parties to prohibited agreements to avoid fines at least partially in exchange for evidence of the existence of a secret prohibited agreement, has so far only applied to horizontal cartels, i.e., agreements between competitors (e.g., producers of the same or substitutable goods). It has now been extended to agreements existing at different market levels (e.g., those between suppliers and downstream sellers of a particular product), enabling more flexibility in determining fines for vertical agreements.

The Office may also learn about anticompetitive conduct by being notified by persons affected by such agreements. Many of these persons, typically suppliers, have nevertheless hesitated to report observed infringements, fearing termination of the business relationship with their partners. Following the recent amendment, the Office may now decide, upon request from the nofier, to keep anything that could identify them out of the case file if the Office concludes that the notifier's legitimate interests could be jeopardised by their submission.

Greater Fine Discretion and Fewer Explanations

Along with incentivising competitors to cooperate with the Office, the legislator also strengthens the Office's powers in several ways. The amendment abolishes the obligation to specify the competitors' business premises before conducting a local investigation. It is now only required to specify the competitor itself, significantly increasing the Office's actionability, as dawn raids may swiftly proceed between several premises.

The amendment also equips the Office with greater discretion in determining by how much a fine is lowered in cases of settlement with an infringing competitor for their above-standard cooperation. Previously, the settlement option led to lowering the fine by a flat rate of 20%. Newly, the Office may decide to lower the fine by 10–20 %, depending on the amount of saved costs otherwise incurred in the proceedings.

Another minor, yet noteworthy change has been made to the Office's discretionary powers to conclude proceedings by accepting the competitor's offer of commitments to remedy the market situation. While it was already at the discretion of the Office whether to accept such commitments, the Office no longer has to justify in writing if it rejects the commitments as insufficient. This may bring uncertainty to competitors as to what requirements commitments offers should meet.

Telecommunication Interceptions as Evidence

Controversially, the amendment has also expanded the Office's evidentiary powers. Recordings and traffic of intercepted telecommunication, as well as police surveillance recordings which have been obtained in criminal proceedings, may now be used by the Office as evidence in cartel proceedings. In criminal proceedings, the use of such delicate and invasive instruments as evidence is decided upon by an independent and impartial court. One of the reasons for concern is that these may now be brought forward by the Office, as an administrative body.

Curbing Defence Preparation Time

These developments are also concerning in light of another change brought by the amendment. Up until now, the Office was obliged to describe the investigated actions and their preliminary legal qualification to the competitor along with communicating the initiation of proceedings. Now, these will only be communicated to the competitor within the statement of objections. This only takes place at the very end of antitrust proceedings, shortly before a decision is handed down, leaving competitors with very little time to prepare their defence.

On average, proceedings take about one year, most of which is available to the Office for collecting evidence and building its case. Competitors will now only have a period of about 1 month for their defence after learning the details of their case. This includes gaining knowledge of the Office's use of evidence such as intercepted telecommunication.

The amendment achieves implementation of the ECN+ Directive and expectedly equips the Office with greater competences to act swiftly and efficiently against anticompetitive conduct. However, it will be interesting to see in practice how the position of competitors will be affected.

Eyebrow-raising Decisions

Concluding with the Offices major recent decisions, the Office prohibited the acquisition of První novinová spolecnost a.s. by Ceská poata, s.p., two major providers of postal services. Such prohibition is an exceptional measure, only resorted to in the most extreme cases. The Office nevertheless concluded that the acquisition would create an undertaking so dominant that competition would significantly be distorted to the detriment of consumers.

More information on this decision is available in English and Czech on the Office's website.

In July, TESCOMA s.r.o. was fined almost CZK 64 mil. (about EUR 2.6 mil.) for violating both Czech and European competition laws by restricting price competition between retailers. The company set minimum retail prices, compliance with which was a condition for business cooperation. Through settlements, the fine was significantly reduced for TESCOMA's exceptional cooperation.

More information on this decision is available in English and Czech on the Office's website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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