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.

Criticisms

Pri­ori­ti­sa­tion as a new instru­ment has been heav­i­ly crit­i­cised by com­pe­ti­tion spe­cial­ists. Their main crit­i­cisms are that:

1. the con­di­tions to defer cas­es will be vague and sub­ject to dis­putes;
2. 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;
3. this instru­ment could be eas­i­ly abused, espe­cial­ly in polit­i­cal­ly moti­vat­ed cas­es;
4. 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.

Conclusion

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.

The Notice virtually excludes the application of prioritisation in cases of alleged abuse of dominant position and implementation of prohibited acquisition.

1

Draft notice on the def­i­n­i­tion of admin­is­tra­tive pro­ceed­ings of no pub­lic inter­est and on alter­na­tive com­pe­ti­tion solu­tion (PDF).