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14 February 2013
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. The authority will also be able to legally prioritise the investigation of some alleged infringements over others.
The authority expects that prioritisation will mainly enable it to:
Prioritisation has been heavily criticised by competition specialists, who argue that:
The authority has defended prioritisation and assured the public that it will issue a definition of the precise conditions under which cases can be deferred. However, its first draft notice on the definition of administrative proceedings of no public interest and on alternative competition solutions(1) left many questions unanswered.
Under the draft notice, the authority may defer the initiation of administrative proceedings in matters that are not in the public interest where they have only minor adverse effects on competition. The notice defines a 'minor adverse effect' as either:
Conversely, the notice virtually excludes the application of prioritisation in case of alleged abuse of a dominant position and the implementation of prohibited acquisitions.
Under the amended act, the authority must keep a written record of deferred cases. Under the notice, the authority must also inform the complainant (if any) and publish annually details of the types of case which were deferred. No formal decision will be issued.
The authority will also refer all 'harmed subjects' (ie, competitors or consumers) to a court. The authority notes that such parties must prove the anti-competitive behaviour themselves.
The authority has issued the notice for public consultation. It is hoped that the second draft notice will reflect at least the following concerns.
The reasons for deferring a case should be specified and individualised. Whether the adverse effect of the behaviour on competition is minor should be investigated by balancing a variety of interests, after considering all evidence. In order to defer the case, the authority should be required to prove conclusively a minor adverse effect on competition during the preliminary investigation. It should then clearly justify which interests outweigh the public interest (ie, fair competition) in every case for which the matter is deferred.
The authority must remain transparent and predictable in its decision making. The information which it is proposed will be issued in this regard is arguably insufficient. Written records of deferred cases containing a precise description of the alleged behaviour and sufficient reasoning should be publicly accessible.
Published records of deferred cases may also help harmed subjects with their actions before general courts. However, their task of proving a breach of the law before the court will become more difficult, or even impossible, if the authority has found the behaviour in question harmless.
Prioritisation is likely to have a negative impact on the behaviour of competitors and on respect for competition rules. Breaking a red light at three o'clock in the morning cannot be justified by arguing that there was no traffic at the time. Nevertheless, the amendment to the act containing prioritisation will come into force in December 2013. It is hoped that the authority will use this tool carefully, transparently and only in exceptional cases.
The notice virtually excludes the application of prioritisation in cases of alleged abuse of dominant position and implementation of prohibited acquisition.
For further information on this topic please contact Martin Nedelka or Jitka Linhartová at Schönherr by telephone (+420 225 996 500), fax (+420 225 996 555) or email (email@example.com or firstname.lastname@example.org).
(1) The draft notice can be viewed at http://www.compet.cz/fileadmin/user_upload/tiskove_zpravy/2012/Navrh_oznameni_o_vymezeni_rizeni_na_jejichz_vedeni_neni_verejny_zajem_a_o_alternativnim_reseni_souteznich_problemu_2.pdf (in Czech).
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