Czech Republic: Prioritisation in Competition Cases – A Step Forward?
→ Martin Nedelka
→ Jitka Linhartová
The forthcoming amendment to the Czech Act on Protection of Competition (the Competition Act) will bring several changes to the practice of the Czech Competition Authority (CCA). Among other things, the amendment will introduce so-called prioritisation into the practice of the CCA.
Prioritisation means that the CCA will decide not to initiate administrative proceedings of certain alleged breaches of the Competition Act that have a minor effect on competition, and will legally prioritise the investigation of certain alleged infringements over others.
The CCA expects that prioritisation will mainly enable the CCA to (i) focus on serious breaches of law and (ii) save its staff and costs.
Prioritisation as a new instrument has been heavily criticised by competition specialists. Their main criticisms are that:
- the conditions to defer cases will be vague and subject to disputes;
- there will be no way to review “decisions” on deferment of the case by the CCA or the court because there will be no decision in the sense of the Administrative Code or Judicial Administrative Code;
- this instrument could be easily abused, especially in politically motivated cases;
- since the CCA’s recent activity is almost null on prohibited agreements and abuse of dominance, then why does the CCA need to save its staff and costs?
The CCA has been defending prioritisation and has assured the public that precise conditions for cases to be deferred will be defined in its Notice. However, its first Draft notice on the definition of administrative proceedings of no public interest and on alternative competition solutions (Notice)1 left many questions unanswered.
“Low level of adverse effect”
Under the Notice, the CCA may defer the initiation of administrative proceedings in matters not of public interest due to the low level of their adverse effects on competition. The Notice defines low level of adverse effect with: (i) the exact low percentages of market shares (eg, horizontal agreement with hardcore restriction if the total market share of parties to the agreement does not exceed 1% on any relevant market); or (ii) a definition of the relevant market which is marginal from the geographic point of view or amount of affected consumers (eg, local sale of Christmas carps).
Conversely, the Notice virtually excludes the application of prioritisation in cases of alleged abuse of dominant position and implementation of prohibited acquisition.
Under the new Competition Act, the CCA must make a written record of deferred cases. Under the Notice, the CCA must also inform the complainant (if any) and annually publish only what types of cases were deferred. But no formal decision will be issued.
The CCA also refers all harmed subjects (ie, competitors or consumers) to a court. The CCA notes that the harmed subjects must prove the anticompetitive behaviour on their own.
Ideas for the second draft
The CCA retained the Notice for public discussion. It is hoped that the second draft notice will reflect at least the following objections.
The reasons for deferment of the case should be specified and individualised. A low level of adverse effect of behaviour on competition should be investigated by balancing a variety of interests, after considering all the contradictions and comments. If the conduct of administrative proceedings is compromised – the CCA´s aim – the CCA is expected to thoroughly prove a low level of adverse effect on competition during the preliminary investigation. The CCA should then clearly justify which interests outweighed the public interest (ie, fair competition) in every case, if the matter is deferred.
Regarding the particularity of each case, the CCA must remain transparent and predictable in its decision-making. It is insufficient to disclose only certain kinds of annual books with only the types of cases that were deferred. Written records about deferred cases containing a precise description of the alleged behaviour and sufficient reasoning should be publicly accessible.
Published records of deferred cases might also help harmed subjects with their actions before general courts. However, harmed subjects will have a difficult, or impossible, task to prove a breach of the law before the court regarding the fact that the CCA found the behaviour in question harmless.
Prioritisation will likely have a negative impact on the behaviour of competitors and on respect for competition rules. Running a red light at three o’clock in the morning cannot be justified by arguing that there was no traffic. Nevertheless, the amendment to the Competition Act containing prioritisation will come into force in December. It is hoped that the CCA will use this tool carefully, transparently and only in exceptional cases.