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Competition & Antitrust
Constitutional Court upholds Act on Significant Market Power but declares 3% limit on marketing payments unconstitutionalCzech Republic | 14 May 2020
The Constitutional Court recently upheld the Act on Significant Market Power, despite demands for its repeal by a group of senators almost four years ago. However, the court stated that the provision limiting the amount of suppliers' payments to customers with significant market power to 3% of the suppliers' annual sales is unconstitutional. This decision is of fundamental importance to future cooperation between suppliers and customers.
To facilitate the detection of anti-competitive behaviour, the Office for the Protection of Competition has proposed an amendment to the Act on Electronic Communication. Based on the amendment, the office would be entitled to request individual activity and location data (ie, date, time, mode of communication and duration) from mobile phone operators. However, access to this data would not be possible without prior judicial written permission.
The legality of on-site inspections (also known as dawn raids) carried out by the Office for the Protection of Competition at the premises of betting companies in early 2019 is currently under judicial review. For its part, the office maintains that dawn raids are an efficient tool for investigating possible competition law infringements. Moreover, it recently published an information letter on dawn raids and intervention actions on its website.
New developments in competition authority's decision-making practice: whistleblowers and appointed guardiansCzech Republic | 15 August 2019
The Office for the Protection of Competition recently found two companies guilty of bid rigging in a public tender. While similar bid-rigging cases occur quite frequently and generally fall within the office's purview, this case is unique because, for the first time, the office was informed about the anti-competitive behaviour by a whistleblower and appointed a guardian for one of the parties involved.
The Office for the Protection of Economic Competition recently fined Czech health products supplier TCM Herbs Kc853,000 (approximately €33,500) for resale price maintenance (RPM). TCM Herbs has appealed the decision. The office has not issued an RPM decision in a long time. As such, the outcome of the review by its chair will be closely followed and hopefully indicative in terms of how (or if) the office will consider a more economic approach.
The Office for the Protection of Economic Competition recently reviewed vertical aspects of online platforms and distribution channels, ultimately fining online booking platform Booking.com approximately €0.33 million for using most-favoured-nation (MFN) clauses in its contracts with hotels. Although the decision has not yet been published, it is hoped that it will be instructive in terms of how the office examines the conditions under which MFN clauses may be considered anti-competitive.
The Office for the Protection of Competition recently adopted new guidelines on the method of setting fines for competition law infringements. The new guidelines are intended to underline the repressive and preventive function of fines. As a result, undertakings can expect higher fines for infringements of competition rules than under the previous regime.
Restrictive clauses are common in commercial lease agreements. Such clauses can limit a landlord's ability to lease property to other tenants, restrict a tenant's business activities to a certain geographical area or control the subleasing of property. Restrictive clauses in lease agreements may appear to be problem-free and reflective of the contractual freedom of the parties, which forms one of the pillars of civil law. However, when certain restrictive clauses are scrutinised, a number of issues can become apparent.
The Czech Competition Authority (CCA) recently published an information paper on dawn raids during its annual competition law conference. The paper aims to provide guidance explaining the powers and privileges of CCA officials in the course of a dawn raid and a brief overview of the case law relating to dawn raids, focusing on judicial review of the legality of dawn raids carried out after the European Court of Human Rights' judgment in Delta Pekárny.
With the introduction of the Damages Act, the Czech Republic has finally implemented the EU Damages Directive, which establishes common EU rights for cartel victims seeking damages. The Damages Act introduces many novelties into national law, which aim to improve the procedural status of citizens and businesses that claim compensation before the national courts for damages caused by an infringement of EU or national antitrust rules.
The Office for the Protection of Competition recently fined Czech mobile operators Vodafone Czech Republic as and O2 Czech Republic as a total of Kr99 million after it deemed an agreement on an exclusive, direct interconnection between the two operators included in a 2001 interconnection agreement to be anti-competitive. Another case in the telecoms sector which was originally initiated by the office is now under the jurisdiction of the European Commission.
While the 2016 amendment to the Significant Market Power Act sought to remove and clarify ambiguous provisions within the act and generally provide greater protection to suppliers, several provisions remained vague and were thus open to interpretation. As such, the Office for the Protection of Competition recently issued an information letter to clarify and explain the changes introduced by the amendment.
The Competition Protection Agency recently issued a final decision accepting Hyundai Avto Trade doo's commitments regarding its alleged anti-competitive behaviour. In the agency's view, the commitments will enhance competition between authorised and independent mechanics and help the agency to monitor the behaviour and compliance of the addressees. The addressees must comply with the decision within three months of its adoption.
The Prague Municipal Court recently dismissed the private damages action brought by private railway passenger carrier LEO Express against publicly owned national incumbent Czech Railways due to a lack of evidence. Although the judgment is not publicly available, the available information already raises the question of whether it might shed a negative light on the future of private enforcement of competition law in the Czech Republic.
The Competition Authority recently announced in a press release that it had fined companies from the construction sector approximately €74 million for bid rigging. Despite the fact that only limited information is available, the fine seems exceptionally high compared to those imposed by the Competition Authority in the past.
The Competition Authority recently issued a controversial decision in which it fined Škoda Auto Kr49 million for engaging in anti-competitive practices in the form of resale price maintenance. The decision deviated from the authority's established decision-making practice – in particular, its procedure for setting fines. It is unclear whether this is a one-off aberration or a complete departure from the authority's regular practice.
The Supreme Administrative Court recently issued its judgment in Severní energetická. The court held that since third parties are not parties to administrative proceedings, they are not entitled to challenge merger approval decisions. However, it did leave open the possibility for third parties to challenge merger approval decisions by other means.
A 2003 European Court of Human Rights ruling held that the Office of Protection of Competition (CCA) could not perform dawn raids on business premises without first obtaining a warrant. However, the CCA recently announced that it would once again begin conducting raids on business premises without prior judicial warrants, stating that the absence of a judicial warrant is justified by a follow-up judicial review of the legality of the dawn raid.
The European Court of Human Rights (ECHR) recently confirmed that the Office for the Protection of Competition violated the European Convention on Human Rights when it entered Delta Bakery's premises without first obtaining a warrant. The ECHR's ruling has called into question all past and future administrative investigations on business premises performed with legal authorisation, but without a judicial warrant.
A similarity or even an overlap of parts of bids does not constitute sufficient evidence to establish a breach of national competition law. This follows from a recent Competition Authority decision in an alleged bid-rigging case. By this decision, the authority challenged its own approach concerning the prosecution of bid rigging. Further, the decision has provided a universal excuse for bid rigging among competitors.
A recently published Supreme Administrative Court decision found that a telephone conversation between two individuals was legitimate evidence in administrative proceedings. It is hoped that this judgment will help companies abused by competitors to persuade the CCA that anti-competitive behaviour has taken place.
Following a recent controversial ruling by the Brno Regional Court, parties to notification proceedings are now unable to speed up the legal force of the approval decision issued by the Competition Authority. They must wait until 15 days have passed after issuance of the decision before proceeding with their business. If any third party appeals the approval decision, the notification procedure will be prolonged.
Under existing EU legislation, if there is a causal relationship between harm suffered and an infringement of competition rules, any individual is entitled to claim compensation for such harm. However, potential claimants have remained rather sceptical of bringing antitrust damages actions so far. This may change with the adoption of a proposed EU directive on actions for damages for infringements of competition law.
The Czech courts recently handed down decisions on access to administrative files that will have an impact on all proceedings in the competition arena. Under certain circumstances, third parties can now apply for access to such files and, if granted access, view a non-confidential version of the files. This will impose a considerable burden on the Competition Authority and may prolong proceedings.
The forthcoming amendment to the Act on the Protection of Competition will make several changes to Competition Authority practices. Among other things, the amendment will introduce prioritisation into its practices, allowing the authority to decide not to initiate administrative proceedings following certain alleged breaches of the act where those breaches have a minor effect on competition.
In a recent repeated first instance decision, the Competition Authority imposed a fine of approximately Kr93.1 million (approximately €3.7 million) on Telefónica Czech Republic for abuse of its dominant position in the public telephone services market in relation to undertakings through fixed lines. The authority increased the original fine imposed on Telefónica for such anti-competitive conduct by more than Kr11.4 million.
The Brno Regional Court has defined for the first time the rules that govern access by investigated undertakings to the leniency applications contained in the Competition Authority's administrative file during cartel investigations. The court allowed special treatment for leniency applications, ruling that the authority need not provide justification when restricting or denying access to the administrative file.
The Office for the Protection of Competition recently published a draft amendment to the Competition Act and opened a public consultation to receive feedback. The amendment follows the contemplated abolishment of the Act on Significant Market Power. The main provisions of the abolished act will be incorporated in the Competition Act. The remaining, mainly technical, provisions will be included in the Act on Prices.
The president of the Office for the Protection of Competition recently issued a second-instance decision confirming the authority's decision to fine Sokolovská uhelná for its participation in a vertical agreement. The fine amounted to Kr17.3 million (approximately €700,000) and is the highest ever to be imposed by the authority for participation in a vertical agreement.
The Office for the Protection of Competition recently approved the acquisition of a Czech construction company by a leading central European construction company. The office also imposed fines on a Czech brown coal mining company and a Czech producer of mineral water and soft drinks for the conclusion and performance of restricted export prohibition agreements.