Following an inter-ministerial comment procedure, a draft amendment to the Act on Protection of Competition (Amendment) has been submitted to the Government for consideration. The aim of the Amendment is to increase the effectiveness of the Office for the Protection of Competition (Office) in detecting and punishing anti-competitive conduct.
What does the Amendment bring?
Cancellation of the market share threshold for the presumption of dominance
The 40% market share threshold for the presumption of dominance is to be cancelled.
This change is not essential, as even under the current regulation the Authority assesses the dominant position of a competitor regardless of the specific market share.
“Call in model” in the assessment of mergers
The Office should also be able to review concentrations that do not meet the standard notification turnover criteria.
If the total net turnover of the merging or already merged competitors exceeds CZK 1.5 billion and at the same time the individual turnover of at least two competitors exceeds CZK 100 million, the Office may invite the competitors to submit a proposal for merger clearance (the “call in model”).
The Office may make such a challenge within a maximum period of 6 months from the date on which the merger or the creation of the jointly controlled competitor took place. In the event of a request for a merger clearance by the Office, all rules and procedures applicable to the merger control process apply, except for the application of the simplified procedure. At the same time, a breach of the obligation to submit a merger proposal upon the Office’s request will constitute a new offence under the Act on Protection of Competition.
In addition, the Amendment provides for a new power of the Office to determine temporarily specific notification criteria for particular markets (see below).
The Amendment will therefore allow the Office to control transaction activity more strictly and it can be expected that the number of notified transactions will increase. As a precautionary measure, the Office recommends in the explanatory memorandum that competitors which meet the turnover criteria for the application of the call in model should take advantage of the pre-notification contact with the Office to ensure that the Office assesses the competition effects of the transaction prior to its implementation.
Introduction of a new competition instrument – measures of a general nature
The Office is to have a new competition instrument that will enable it to intervene in markets where effective competition is not functioning without infringing competition rules by issuing measures of a general nature that should lead to the improvement of the situation and the restoration or stimulation of effective competition.
A condition for the issuance of a measure of a general nature is the conduct of a sector inquiry in which the Office finds that effective competition has not been operating on the market under investigation for a long period of time and that this situation cannot be expected to change in the near future. The Office can only intervene in this way in markets that are not subject to the supervision of another regulator (e.g., the CNB, the Czech Telecommunications Office, the Czech Energy Office).
On the basis of a measure of a general nature, the Office will be entitled to set criteria for mergers subject to its clearance or to impose non-structural remedies by decision, e.g., an obligation on a competitor to implement transparent and non-discriminatory norms and standards, to provide access to data, interfaces, networks or other facilities, and to modify certain types of agreements or contractual arrangements. The Office cannot, however, by a general measure, e.g., order the sale of an enterprise, the transfer of assets, etc.
The Office may issue a general measure for a maximum period of 3 years, however, if the conditions of distortion of competition persist, the Office may extend the validity of such a measure or issue a new general measure of a similar nature. The issuance of a general measure will be reviewable in the administrative justice system.
The introduction of the new competition instrument thus significantly expands the Office’s power to intervene even in cases where there has been no breach of competition rules.
Imposing fines also on natural persons for participation in a cartel
The Office will now have the power to fine natural persons (typically managers of the investigated competitor) for entering into or participating in a cartel agreement. A fine of up to CZK 10 million may be imposed on a natural person. The Office may impose a fine of up to CZK 10,000 or a 5-year ban.
It should be noted that according to the Amendment, the mere attempt to enter into a cartel agreement will constitute the legal liability of a natural person.
At the same time, the Amendment also allows individuals to benefit from the leniency programme compared to the current regulation, thus allowing them to achieve the benefit of effective remorse protecting them from criminal sanctions and at the same time allowing them to avoid sanctions by the authorities. In doing so, the Office intends, among other things, to encourage greater use of the leniency programme.
Increasing the transparency of sector inquiries
The Office should now be obliged to announce the launch of sector inquiries and publish the draft final reports on its website. Both of these proposed changes are intended to enhance transparency in the area of sector inquiries and to allow the public to become more familiar with the intentions and results of the Office’s activities in this area.
The public will also have the opportunity to comment or make observations on the subject matter of the Office’s investigations within 60 days of the publication of the draft final report. The Office will publish the comments submitted on its website and indicate which comments have been taken into account in the final report.
New requirements for the Authority’s annual report – assessing the financial benefits of the Authority’s activities
The Office should now be obliged to include in its annual report an assessment of the financial benefits of its activities for both consumers and competitors.
This new obligation is intended to increase the transparency of the Office’s competition activities. It will make it possible to monitor the extent to which the Office selects cases with a significant impact on consumers and competitors when prioritising cases.
