Competition law in Czech Republic: overview

A Q&A guide to competition law in the Czech Republic.

The Q&A gives a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures. In particular, it covers relevant triggering events and thresholds, notification requirements, procedures and timetables, third party claims, exclusions and exemptions, penalties for breach, and proposals for reform.

To compare answers across multiple jurisdictions visit the Competition Country Q&A tool.

This Q&A is part of the PLC multi-jurisdictional guide to competition and cartel leniency. For a full list of jurisdictional Competition Q&As visit www.practicallaw.com/competition-mjg.

For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-mjg.

Robert Nešpůrek and Robert Neruda, Havel, Holásek & Partners
Contents

Merger control

1. Are mergers and acquisitions subject to merger control in your jurisdiction? If so, what is the regulatory framework and what authorities are responsible for merger control?

Regulatory framework

Merger control in the Czech Republic is regulated by the Act on Protection of Competition (No. 143/2001 Coll.), as amended (Competition Act). The Competition Act contains key provisions on the control of concentrations and conforms to Regulation (EC) 139/2004 on the control of concentrations between undertakings (Merger Regulation). The Czech Republic is a member of the EU and the competition rules broadly conform to EU legislation.

Regulatory authority

The Office for the Protection of Competition (Competition Office) is the central administrative authority with responsibility for:

  • Competition.

  • Public contracts.

  • State aid.

  • Control of substantial market power.

The Competition Office's specialist merger department investigates mergers and ensures compatibility with competition law. A chief economist department is also involved in merger investigations (see box, The regulatory authority).

Triggering events/thresholds

2. What are the relevant jurisdictional triggering events/thresholds?

Triggering events

The following transactions are subject to merger control under the Competition Act (Article 12, Competition Act):

  • Merger. A merger of one or more undertakings previously operating independently in the market.

  • Asset acquisition. The acquisition of an enterprise of another undertaking's enterprise (or a part of the enterprise) by contract, auction or by other means.

  • Shares acquisition. The acquisition of direct or indirect control of another undertaking by one or more entrepreneurs or by one or more persons who already control at least one undertaking. In particular by:

    • an acquisition of equity shares, business or membership interests;

    • contract; or

    • any other means allowing control of another undertaking.

  • Full function joint venture. Establishment of an undertaking jointly controlled by two or more undertakings and which functions as an autonomous economic entity.

Thresholds

Concentrations are subject to merger control if any of the following thresholds are satisfied:

  • The total net turnover in the Czech market of all concerned undertakings in the last accounting period exceeds CZK1.5 billion (as at 1 December 2011, US$1 was about CZK19) and, at the same time, the net turnover of at least two of the concerned undertakings in the last accounting period each exceeds CZK250 million.

  • The net turnover achieved in the last accounting period in the Czech Republic market by at least one of the parties to the merger, the acquired enterprise or a substantial part of it, the undertaking over whom the control is acquired, or at least one of the undertakings establishing a joint venture, is higher than CZK1.5 billion, and at the same time the worldwide net turnover achieved in the last accounting period by another undertaking concerned exceeds CZK1.5 billion.

The method for calculating the net turnover is outlined in the Competition Act and in the Competition Office's Notice on Calculation of Turnover for the Purpose of the Control of Concentrations between Undertakings (see www.compet.cz/fileadmin/user_upload/Sekce_HS/Guidelines/Turnover_Calc_eng.doc). The "net turnover of undertakings" is the net income of an individual undertaking in the course of pursuing its day-to-day business activities. The joint net turnover of the undertakings does not include turnover achieved through a sale of goods between participating undertakings.

Concentrations with a Community dimension are not subject to merger control in the Czech Republic (Merger Regulation).

Notification

3. What are the notification requirements for mergers?

Mandatory or voluntary

Notification is mandatory if:

  • The transaction does not fall within the jurisdiction of the European Commission under the Merger Regulation (see Question 2).

  • The transaction amounts to a concentration of undertakings.

  • The transaction falls within the turnover thresholds (see Question 2).

Timing

Notification must be submitted to the Competition Office before or after an agreement establishing a concentration is finalised. However, a concentration must not be implemented before the Competition Office's final approval.

Formal/informal guidance

Pre-notification discussions are held in strict confidence at meetings (or in writing in less complex cases). The rules on Pre-notification contacts are found in the Competition Office's Notice on the pre-notification contacts with merging parties (see www.compet.cz/fileadmin/user_upload/Sekce_HS/Pre-notification_cotacts_mergers.doc).

The Competition Office can discuss during the pre-notification stage:

  • Procedural issues, particularly issues on the Competition Office's powers to review transactions and issues connected with the proposed transaction.

  • Merger notification and individual details contained in the merger notification, including the questionnaire for the merger review.

  • Preliminary concerns about anti-competitive practices.

Responsibility for notification

In a merger and joint venture, all participating undertakings have a joint responsibility for notification. In an acquisition of control and an acquisition of an enterprise, the undertaking or undertakings gaining control must lodge the notification.

Relevant authority

The notification must be filed with the Competition Office.

Form of notification

The merging parties must submit a formal written application for approval and file a completed notification.

Filing fee

The filing fee for a merger notification is CZK100,000.

Obligation to suspend

The merging parties must not implement the concentration without the Competition Office's prior approval unless the parties are granted an exemption from the statutory standstill duty.

Procedure and timetable

4. What are the applicable procedures and timetable?

Ordinary procedure

Proceedings start on the day the party submits the application to the Competition Office for approval of the concentration and the completed notification form.

After this, the Competition Office must assess whether the concentration is a concentration that meets the notification thresholds (see Question 2) and is subject to its approval. If the thresholds are met, the Competition Office carries out a substantive examination of the proposed concentration (see Question 7) and issues a decision within 30 days from the start of proceedings.

If the parties propose commitments within the initial investigation, the deadline is extended by 15 days.

The concentration is deemed to be approved if the Competition Office does not issue a decision within the 30-day time limit.

If the concentration raises serious competition concerns, the Competition Office must notify the parties (within the same 30-day period) in writing that it is continuing proceedings and must issue a final decision within five months from the start of proceedings.

The concentration is deemed to be approved if the Competition Office does not issue a decision within the 30-day deadline or fails to issue a final decision within the five month time limit.

The five month period is suspended if the Competition Office requests the party to the proceedings to provide any further documents, information or other evidence necessary for issuing a decision. The deadlines are suspended for the period between the day on which the party receives the request and the day on which the obligation is fulfilled.

In addition, if the parties to the proceedings propose commitments in the second phase, the five month period is extended by 15 days.

Simplified procedure

The simplified proceedings begin on delivery of a simplified notification form. The Competition Office must issue a decision approving the concentration within 20 days from the start of proceedings.

Simplified notification of a concentration may be filed when either or both of the following apply (Article 16a, Competition Act):

  • None of the participating undertakings is operating in the same relevant market, or their combined share in the relevant market does not exceed 15%, and at the same time none of the undertakings concerned is operating in the market vertically connected to the relevant market in which another undertaking operates, or their share in every such market does not exceed 25%.

  • The transaction concerns an undertaking acquiring exclusive control over the joint venture in which it has participated in joint control so far.

For an overview of the notification process, see flowchart, Czech Republic: merger notifications.

Publicity and confidentiality

5. How much information is made publicly available concerning merger inquiries? Is any information made automatically confidential and is confidentiality available on request?

Publicity

Once ordinary proceedings have started, details are announced in the Commercial Bulletin and on the Competition Office's website without delay. The announcement includes:

  • The date of the notification.

  • The identity of the participating undertakings.

  • A description of the undertakings' business.

  • A description of the relevant market.

Details of the simplified notification proceedings are announced only on the Competition Office's website.

There is a deadline to submit any objections against the concentration or any other comments; in most cases it amounts to five days from the date the announcement is published.

Decisions are also published on the Competition Office's website and in its annual report once they come into force. Any decision contains an operative part, grounds of the decision and the notice to the participants. In the operative part of the decision, the merging parties, the type of merger and the legal title are identified, as well as the information, if the merger was approved, conditionally approved or dismissed. The reasoning of the Competition Office's decision includes the identification of relevant sources of evidence used and the arguments supporting its decision, including how the Competition Office settled the objections of third parties. However, in simplified proceedings, short decisions are issued that, in its grounds of decision, contain only an indication of the parties to the proceedings, the relevant market, or a sector in which the parties to the proceedings operate, and the fact that the decision was issued in the simplified proceedings. The last formal part of this decision is the notice containing information on whether, where and within what period it is possible to lodge an appeal against the decision. A decision is notified to the participants by the delivery of a counterpart of the decision.

Procedural stage

Information is published at the start of proceedings, including non-confidential aspects of the decision. Confidential information is not disclosed at this stage.

Automatic confidentiality

No information automatically remains confidential.

Confidentiality on request

The parties must indicate that information and documents containing a business or banking secret are confidential and therefore protected by law. The relevant information and documents are subsequently excluded from the published decision and made inaccessible. The Competition Office employees or any persons in any other relationship are under a duty not to disclose any business secrets or confidential information.

In order to benefit from the confidentiality protection the parties will in their submissions and other documents indicate the specific information and attach the notice that the information constitutes the business secret. Without an explicit indication, the information must not be protected and kept confidential. The Competition Office may request the parties wishing to protect confidential information to provide the Office with a non-confidential version of the document.

Rights of third parties

6. What rights (if any) do third parties have to make representations, access documents or be heard during the course of an investigation?

Representations

Third parties have the right to raise objections against a notified concentration. The Competition Office can request information from third parties at any stage of an investigation and third parties must comply with the request.

Document access

Third parties have no special rights to receive decisions or statements of objections but can access the file if they meet very strict legal requirements.

Be heard

Third parties can submit comments and the Competition Office will take those comments into account. Oral hearings with third parties are only held in exceptional circumstances. Third parties cannot appeal the decision by the Competition Authority.

Substantive test

7. What is the substantive test?

The Competition Office can only approve a concentration if it does not pose a substantial risk to competition in the market and particularly if it would strengthen a dominant market position. The general position is that the concentration does not restrict competition if the combined share of all merging undertakings in the relevant market does not exceed 25%. The Competition Office takes into consideration various factors when determining a substantial risk to competition. The most important factors are:

  • Market shares and market structures.

  • Barriers to entry and expansion.

  • Buyers' power.

  • Financial power of the merging undertakings.

Remedies, penalties and appeal

8. What remedies can be imposed as conditions of clearance to address competition concerns? At what stage of the procedure can they be offered and accepted?

The merging undertakings can propose conditions to address any competition concerns. They may propose remedies either before initiating proceedings or during proceedings but no later than 15 days from delivery of the statement of objections to the last of the parties to the proceedings.

In exceptional circumstances, the Competition Office may accept the proposed conditions or proposal changes if the conditions or changes are submitted within 15 days from the original 15-day period.

In order to prevent the extension of the investigation, the parties may submit the proposal of remedies before initiating proceedings or at any stage during the initial 30-day investigation (no deadline exists within the initial investigation). In the latter case, the 30-day period is extended by 15 days.

There are cases where behavioural remedies are considered more appropriate but the Competition Office shows a preference for structural remedies as they are usually easier to control and enforce and prevent the strengthening of a dominant position because they amount to a lasting change of the structure of the market affected by the merger. The divestiture of subsidiaries or certain assets in markets where the activities of merging entities overlap is the most common structural remedy.

 
9. What are the penalties for failing to comply with the merger control rules?

Failure to notify correctly

The Competition Office must retract its approval if it finds that the concentration was approved on the basis of incorrect or incomplete documents, data and information provided by the merging parties, or where approval had been obtained through deceit. The notifying party can be fined up to 1% of its net annual turnover.

Implementation before approval or after prohibition

The Competition Office has the power to impose a fine of up to 10% of the undertakings net annual turnover if it finds that the concentration was implemented:

  • Before approval.

  • After a prohibition.

  • Without filing a notification.

In addition, the Competition Office can impose on the undertakings a duty to:

  • Sell stakes.

  • Transfer whole or part of an enterprise.

  • Discharge the contract.

  • Implement other measures necessary to restore competition.

Failure to observe

The Competition Office must retract its approval if it finds that the parties to the proceedings failed to fulfil the conditions imposed in the approving decision. A civil fine of up to 10% of the undertaking's net annual turnover can be imposed. If the fine is not paid, the tax authority (that is, an agency responsible for collecting fines in the Czech Republic) can enforce the duty.

 
10. Is there a right of appeal against any decision? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties or only the parties to the decision?

Rights of appeal and procedure

Decisions can be appealed by a party to the proceedings within 15 days of a party receiving a decision under the Czech Administrative Procedure Code (Act No. 500/2004 Coll.).

The chairman of the Competition Office decides on the appeal. Following the appeal hearing, a draft of the chairman's decision is prepared by an appellate commission; an impartial and independent advisory body consisting mainly of experts not employed by the Competition Office. Appellants can apply for a judicial review against the Competition Office's decision within two months to the Regional Court in Brno. The Regional Court can rescind or uphold the decision. If the merging parties or the Competition Office are not satisfied with the court's decision, they have the right to complain to the Supreme Administrative Court within two weeks after delivery of the Regional Court's decision. The courts have full jurisdiction to review the Competition Office's decision.

Third party rights of appeal

Third parties have no right of appeal.

Automatic clearance of restrictive provisions

11. If a merger is cleared, are any restrictive provisions in the agreements automatically cleared? If they are not automatically cleared, how are they regulated?

A decision to approve the concentration automatically applies to ancillary restrictions (that is, restrictions directly related and necessary to concentrations specified in the merger notification). The Competition Office will apply the principles set out in the European Commission's notice on restrictions directly related and necessary to concentrations (OJ 2005 C56/24) when considering restrictive provisions. The most common ancillary restraints are non-compete and non-solicitation obligations for a two or three-year period.

Regulation of specific industries

12. What industries (if any) are specifically regulated?

There is no specific regulation in the Czech Republic which exempts an undertaking in any sector. In the energy and telecommunications sectors, the specifics of the parallel existence of competition law and sector regulation (or the Competition Office and the regulator) must be taken into account.

 

Restrictive agreements and practices

Scope of rules

13. Are restrictive agreements and practices regulated? If so, what are the substantive provisions and regulatory authority?

Restrictive agreements and practices in the Czech Republic are regulated by the Competition Act. Agreements which could risk eliminating competition are prohibited under the Competition Act.

The Competition Office is the sole administrative body responsible for investigating restrictive agreements in the Czech Republic and holds additional powers. The Competition Office can impose civil fines on companies under the Competition Act. In addition, individuals are liable to criminal prosecution under the Criminal Code. There is a three pillar enforcement of cartel agreements in the Czech Republic. These include:

  • Private enforcement by the civil courts.

  • Administrative enforcement by the Competition Office.

  • Criminal enforcement by the criminal courts.

Where the fines imposed by the Competition Office are civil, the penalties imposed by the criminal courts on individuals are criminal. Criminal liability, however, covers only horizontal hard core cartels, such as price-fixing or market sharing, and not other horizontal or vertical agreements. The offences under the Criminal Code are investigated by the police, prosecuted by the State Attorney Office and decided by the criminal courts. There is no criminal liability for companies in the field of competition law in the Czech Republic.

 
14. Do the regulations only apply to formal agreements or can they apply to informal practices? Are there broad categories of agreements that might violate the law?

The statutory prohibition applies to formal agreements and informal practices, such as concerted practices, and decisions by associations of undertakings aimed at distorting competition.

Exemptions and exclusions

15. Are there any exemptions? If so, what are the criteria for individual exemption and any applicable block exemptions?

Individual exemptions apply to restrictive agreements if they meet the following conditions under the Competition Act:

  • They contribute to improving the production of distribution of goods or to promoting technical or economic development, while allowing consumers a fair share of the resulting benefit.

  • They do not impose restrictions on the undertakings which are not indispensable to attaining the objectives above.

  • They do not make it possible for the undertakings to eliminate competition in relation to a substantial part of the goods market, the supply or purchase of which constitutes the agreement's object.

The EU block exemption regulations adopted by the European Commission apply directly in the Czech Republic, even if the relevant agreements do not affect trade between EU member states (that is, if they are otherwise covered by the Czech competition law only). There are no specific block exemptions issued by the Competition Office.

 
16. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?

Exclusions

Restrictive agreements between undertakings with insignificant impact on competition are not prohibited (the de minimis rule) if:

  • The aggregate market share held by the parties to the horizontal agreement does not exceed 10%.

  • The market share held by each of the parties to the vertical agreement does not exceed 15%.

The de minimis rule does not apply to hard-core cartels, such as price-fixing agreements, market sharing agreements and so on.

The Competition Office has set out details of the de minimis principles in the Notice on agreements of minor importance which do not appreciably restrict competition (de minimis).

Statutes of limitation

Liability for an administrative offence will cease to exist if the Competition Office does not initiate formal administrative proceedings within five years after the day on which it learned of the administrative offence, but no later than ten years after the administrative offence was committed (section 22b(3), Competition Act). It is not possible to suspend these limitation periods.

Notification

 
17. What are the notification requirements for restrictive agreements and practices?

Notification

There is no obligation to notify the Competition Office of individual exemptions or other clearances under the Competition Act. The rules on exemption from prohibition apply automatically.

Informal guidance/opinion

The Competition Office is in some cases willing to provide informal guidance to undertakings whether or not an agreement is prohibited under competition legislation in the Czech Republic. However, the informal guidance cannot lead to a final binding opinion or influence the decision-making process of the Competition Office.

Responsibility for notification

Not applicable.

Relevant authority

The relevant authority is the Competition Office.

Form of notification

The informal guidance can be provided in writing or orally.

Filing fee

Not applicable. The informal guidance is free of charge.

Investigations

 
18. Who can start an investigation into a restrictive agreement or practice?

Regulators

Investigations can be started by the regulator on its own initiative.

Third parties

Third parties can file a complaint with the Competition Office. The Competition Office will then initiate an investigation on the basis of the complaint. The Competition Office can also initiate formal proceedings in its own right (see above, Regulators).

 
19. What rights (if any) does a complainant or other third party have to make representations, access documents or be heard during the course of an investigation?

A complainant or other third party has very limited rights during an investigation. However, there is a right to be informed by the Competition Office about the outcome of an investigation.

Representations

Third parties have the right to file a complaint with the Competition Office. The Competition Office can request information from third parties at any stage of an investigation and third parties must comply with the request.

Document access

A complainant or other third party has no right to receive a final decision or to automatically access case files.

Be heard

A complainant or other third party has no right to automatically be heard.

 
20. What are the stages of the investigation and timetable?

There is no liability for infringement of competition law if the Competition Office initiates proceedings later than either:

  • Five years after the date on which it learned of the infringement.

  • Ten years after the infringement took place.

The Competition Office does not have to adhere to any statutory deadlines during the proceedings but it can be bound to issue a decision within a reasonable time limit.

The main stages in the investigation are as follows:

  • Phase 1 (informal investigation). The first stage is a preliminary investigation following a complaint. The investigation is closed if the Competition Office finds the complaint to be unsubstantiated. The complainant is informed of this outcome.

  • Phase 2. The Competition Office will begin a full investigation if it finds that a complaint provides substantiated grounds indicating an infringement. The Competition Office can also start an investigation on its own initiative (see Question 18, Regulators). The second stage of the investigation may prove an infringement did not take place and the Competition Office can close the investigation and inform the complainant of this as a result. There are no statutory limits for the duration of this phase. However, the court has declared a two-year long investigation during this phase to be inappropriately long.

  • Phase 3 (formal proceedings). The Competition Office begins administrative proceedings if it finds there are reasonable grounds to prove infringement. If the proceedings reveal no infringement of competition law, the Competition Office closes formal proceedings. The average duration for administrative proceedings is one year.

The Competition Office must issue a statement of objections if it finds there is an infringement of competition at the formal proceedings stage. The seriousness of the infringement and the concerned parties' reaction to the statement of objections can prompt the Competition Office to issue a decision imposing a fine or any other measures to prohibit conduct.

 
21. How much information is made publicly available concerning investigations into potentially restrictive agreements or practices? Is any information made automatically confidential and is confidentiality available on request?

Publicity

The Competition Office publishes its non-confidential final decisions once they are in force. Sometimes, the adoption of first instance decision is announced in the press, even though it is not final yet. The Competition Office is sometimes willing to publicly confirm that it is conducting a specific investigation but this is not always the case.

Automatic confidentiality

No information automatically remains confidential (see Question 5).

Confidentiality on request

The parties to the investigation and third parties must request the Competition Office to keep information and documents related to business, banking or similar secrets confidential. The information and documents are made inaccessible and any person employed by (or in any other relationship with) the Competition Office is prohibited from disclosing any business secret or confidential information. The Competition Office requests parties wishing to protect confidential information to provide a non-confidential version of the document.

 
22. What are the powers (if any) that the relevant regulator has to investigate potentially restrictive agreements or practices?

Before and during an investigation, the Competition Office has the power to:

  • Request for information and documents.

  • Interview witnesses and parties.

  • Investigate business premises and enter business premises without the undertaking's consent (that is, dawn raids).

  • Enter the homes of individuals connected to the undertaking with the prior consent of the court.

 
23. Can the regulator reach settlements with the parties without reaching an infringement decision? If so, what are the circumstances in which settlements can be reached and the applicable procedure?

The Competition Office can decide to terminate proceedings on condition that the parties to the proceedings propose to discontinue or take action to eliminate the effect on competition. The Competition Office may impose conditions and obligations to ensure the commitment is met.

The parties to the proceedings must submit a proposal in writing within 15 days from the delivery date of the statement of objections. The Competition Office must not take into account any proposal made after this period.

If the commitments contained in a proposal are insufficient, the Competition Office must inform the relevant parties in writing and continue with the proceedings. It is possible for the Competition Office to settle proceedings and reduce the penalty to parties willing to admit liability for infringing competition. No detailed rules about settlements have been published to date.

Penalties and enforcement

24. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?

Orders

The Competition Office declares the infringement of an agreement in its final decision and prohibits performance of the agreement. It may also impose remedial measures to restore effective competition and specify a reasonable deadline for their fulfilment.

Fines

The Competition Office can impose an administrative fine on an undertaking found to have breached the Competition Law of up to CZK10 million or up to 10% of the undertaking's net turnover in the last accounting period. The tax authority can enforce the obligation if the undertaking fails to pay the imposed fine.

Personal liability

Where the corporate liability is civil, the liability of individuals is criminal. An individual can face imprisonment for up to eight years, a fine, a prohibition of an activity and forfeiture under the Criminal Code (No. 40/2009 Coll.).

Immunity/leniency

The Competition Office has set out rules on leniency in the Notice on Leniency Programme. The Notice outlines the approach to adopt when imposing fines on undertakings willing to co-operate with the Competition Office. The Leniency Programme is available to undertakings connected to cartels only and can allow for a reduction in fines or grant full immunity from fines.

The basic conditions for granting the full immunity from the fine are as follows:

  • The undertaking is the first to submit evidence which enable the Competition Office to carry out a dawn raid and Competition Office did not, at the time of the application, already have sufficient evidence to carry out a dawn raid in connection with the alleged cartel arrangement (Immunity IA).

  • The undertaking is the first to submit information and evidence which in the Competition Office's view, enables the finding of an existence of an alleged cartel, the Competition Office did not have sufficient evidence to find infringement in connection with alleged cartel and no undertaking had been granted conditional immunity from fines according to previous bullet in the same case (Immunity IB).

The undertaking may be awarded partial immunity from the fine if it provides the Competition Office with evidence of the alleged cartel, which represents significant added value relative to the evidence already in the Competition Office's possession at the time of the application. The significant added value is assessed according to the extent to which the evidence provided strengthens, by its very nature and/or its level of detail, the Competition Office's capability to prove the alleged cartel (direct evidence is preferred to indirect, conclusive evidence to statements and so on). The first applicant may be awarded a fine reduction of between 30% and 50%, the second applicant between 20% and 50% and any other applicant a fine reduction of up to 20%.

In addition, the undertaking must fulfil the following conditions:

  • The applicant must co-operate during the entire proceedings, which includes, among other things, providing the Competition Office with all relevant information and evidence, with complete and not misguiding information, answering promptly any requests from the Competition Office, not destroying, falsifying or concealing relevant information or evidence and not disclosing the fact or any of the content of the leniency application before the Competition Office has initiated administrative proceedings.

  • The applicant must end its involvement in the cartel agreement.

  • The applicant did not destroy, falsify or conceal evidence relevant to the alleged cartel or disclosed its intention to submit leniency application before the application was submitted.

  • The applicant was not the instigator, the coercer or the leader of the cartel.

Impact on agreements

According to the Competition Act, a part or the whole agreement distorting competition is null and void. This might be declared by the ruling of a civil court (private enforcement). If part of an agreement breaches competition law, then only part of its content is considered invalid, if it can be severed from the rest of the agreement (severability). If not, the whole agreement is void.

Third party damages claims and appeals

25. Can third parties claim damages for losses suffered as a result of a prohibited restrictive agreement or practice? If so, what special procedures or rules (if any) apply? Are class actions possible?

Third party damages

There are no specific rules governing third party claims in the Competition Act. However, the general rule provides that persons in breach of a contractual duty must provide compensation for the damage (or damages) caused to the other party under the Commercial Code (No. 513/1991 Coll.). Although the provision refers to a breach of duty arising from a contractual relationship, the rules also apply to liability for damage caused by a breach of obligations.

Special procedures/rules

There are no specific procedural rules governing claims for damages in the Czech Republic. The civil courts follow the general rules under the Civil Procedure Code (No. 99/1963 Coll.). With the exception of arbitrators and the general courts, there are no specialised competition courts or other bodies with jurisdiction to decide on damage claims.

Courts are bound by the decisions of the Competition Office, although private claims for damages must be decided in a court whether or not the Competition Office is dealing with the case or has decided on the case.

Class actions

Class actions and representative actions are not available in the Czech Republic. The following are available (Civil Procedure Code (No. 99/1963 Coll.)):

  • The addition of a party to a proceeding conducted by other parties, where that party is interested in the result of the proceeding.

  • The joining of procedures in the interest of procedural economy.

It may be possible to join damage claims by a single entity purchasing those claims, although this has not been reported so far.

 
26. Is there a right of appeal against any decision of the regulator? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties, or only to the parties to the agreement or practice?

This is the same as for merger control (see Question 10).

 

Monopolies and abuses of market power

Scope of rules

27. Are monopolies and abuses of market power regulated under civil and/or criminal law? If so, what are the substantive provisions and regulatory authority?

The Competition Act regulates monopolies and abuses of market power in the Czech Republic. Abuse of a dominant position to the detriment of other undertakings or consumers is prohibited. The Competition Office investigates any abusive practices and has the power to impose administrative fines for breach of the Competition Act.

 
28. How is dominance/market power determined?

One or more undertakings (jointly) have a dominant position in the relevant market if their market power enables them to behave independently to a significant extent, as defined in the Competition Act. This definition conforms to the approach adopted by the European Court of Justice. The market power is assessed on:

  • The market share of the undertakings.

  • The economic and financial power of the undertakings.

  • The buyer's power.

  • Any legal or other obstacles to enter into the market.

  • The level of vertical integration.

  • The market structure of the undertakings.

  • The market shares of their immediate competitors.

The Competition Act also contains a rebuttable presumption that an undertaking or undertakings are not in a dominant position, if the share(s) in the relevant market does not exceed 40%. This presumption may be challenged by the Competition Office taking into account factors determining the dominance other than market shares, such as barriers to entry or buyers' power. However, in such cases, the burden of proof lies on the Competition Office.

 
29. Are there any broad categories of behaviour that may constitute abusive conduct?

The Competition Act sets out examples of conduct that can constitute abuse of dominance, including:

  • Direct or indirect enforcement of unfair conditions in agreements with other participants in the market.

  • Making the conclusion of contracts subject to the other party's acceptance of supplementary acts with no connection with the object of the contracts.

  • Applying dissimilar conditions to identical or equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage.

  • Termination or limitation of production, sales or research and development to the prejudice of consumers.

  • Consistent offer and sale of goods for unfairly low prices, which results or can result in distortion of competition.

  • Refusal to grant other undertakings access for a reasonable reimbursement to own transmission grids or similar distribution networks or other infrastructure facilities.

This list is not exhaustive as the Competition Office has recently investigated abusive behaviour of predatory pricing, margin squeeze and other exclusionary practices.

Exemptions and exclusions

30. Are there any exemptions or exclusions?

There are no exclusions and exemptions.

Notification

31. Is it necessary (or, if not necessary, possible/advisable) to notify the conduct to obtain clearance or (formal or informal) guidance from the regulator? If so, what is the applicable procedure?

The Competition Office is sometimes open to discuss with undertakings whether some conduct is prohibited under competition law in the Czech Republic but no formal clearance is provided (see Question 17).

Investigations

32. What (if any) procedural differences are there between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices?

This is the same as for restrictive agreements and practices (see Questions 18 to 21 and Question 23).

 
33. What are the regulator's powers of investigation?

This is the same as for restrictive agreements and practices (see Question 22).

Penalties and enforcement

34. What are the penalties for abuse of market power and what orders can the regulator make?

There is no criminal liability for abuse of dominance in the Czech Republic, but the Competition Office can impose administrative fines on an undertaking found to have breached the Competition Law, as for restrictive practices and agreements (see Question 24, Fines).

Third party damages claims

35. Can third parties claim damages for losses suffered as a result of abuse of market power? If so, what special procedures or rules (if any) apply? Are class actions possible?

This is the same as for restrictive agreements and practices (see Question 25).

 

EU law

36. Are there any differences between the powers of the national regulatory authority(ies) and courts in relation to cases dealt with under Article 101 and/or Article 102 of the TFEU, and those dealt with only under national law?

There are no differences between the Competition Office and the courts in relation to cases dealt with under EU law and national law. The same substantive and procedural rules and standards apply.

 

Joint ventures

37. How are joint ventures analysed under competition law?

A joint venture constitutes a concentration where the establishment of an undertaking jointly controlled by undertakings serves as an independent economic entity. If the joint venture co-ordinates the owners' competitive behaviour only, it is assessed under the restrictive agreements criteria.

 

Inter-agency co-operation

38. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to infringements of competition law? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information)?

The Competition Office co-operates with the European Commission and other national competition authorities of EU member states. The Competition Office has the power to exchange information such as confidential information with the European Commission and other authorities to use as evidence when investigating infringements.

 

Proposals for reform

39. Are there any proposals for reform of competition law?

The Competition Office has drafted an amendment to the Competition Act. The aim is to incorporate the rules on leniency and settlement (currently regulated by soft law) into hard law. Rules ensuring the efficiency of the leniency program in the context of recent criminalisation of cartels will be inserted in the Competition Act or Criminal Procedure Code.

The government will discuss the draft amendment at the end of 2011 and the amendment is likely to come into force mid-2012.

 

The regulatory authority

Office for Protection of Competition (Competition Office)

Head. Petr Rafaj (Chairman)

Contact details. třída Kpt. Jaroše 7
604 55, Brno
Czech Republic
T +420 542 167 233
F +420 542 167 112
E posta@compet.cz
W www.compet.cz

Outline structure. The Competition Office is headed by the chairman and is further divided into four main sections:

  • Chairman's Section (including International, Appeals, Legal Departments).

  • Competition.

  • Public regulation.

  • Public procurement.

These sections are further divided into departments. The competition section is divided into:

  • Cartels department.

  • Mergers department.

  • Dominance and vertical agreements department.

  • Chief Economist department.

The Competition Office has the following responsibilities:

  • Anti-trust law:

    • restrictive practices;

    • abuse of dominance;

    • mergers; and

    • competition advocacy.

  • Public procurement surveillance.

  • State aid control (advisory and monitoring functions only).

  • Substantial market power control (retail chains regulation).

Procedure for obtaining documents. The Procedure for obtaining information is set out on the Competition Office website (see above) or can be requested by e-mail.


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