New upcoming changes to Czech competition law

This article deals with the amendment (the "Amendment") of Act No. 143/2001 Coll., on the Protection of Competition (the "Competition Act"), which is currently being discussed by the Government of the Czech Republic, and is expected to come into force in January 2023. The Amendment's main objectives are:

1. the transposition of Directive (EU) 2019/1 of the European Parliament and of the Council to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market (the "ECN+ Directive"); and
2. the introduction of various other changes to Czech competition legislation, such as the extension of leniency programmes to vertical agreements, the clarification of terminology regarding the settlement process, the possibility of the Czech Competition Office (the "Office") to propose commitments in favour of preserving competition, and joint and several liability of competitors forming a single competitor for offences. 

The ECN+ Directive transposition

The ECN+ Directive was adopted at the end of 2018 to streamline the enforcement of Articles 101 and 102 of the Treaty on the Functioning of the European Union. It aims to strengthen cooperation and unify the approach of competition authorities in detecting breaches of competition law. The main principles that the ECN+ Directive introduces are to emphasise the independence of national competition authorities, to regulate and enshrine the prerequisites for the appointment and dismissal of the President and Vice-Presidents of the Competition Authority, to regulate the set of tools necessary for the proper enforcement of EU competition rules (a more effective regulation of commitments, prioritisation, powers to impose fines, cooperation between national authorities, and enforcement) and to regulate leniency programmes.

The transposition deadline for the ECN+ Directive expired on 4 February 2020. The Czech Republic failed to transpose the ECN+ Directive on time, but the current draft of the Amendment will rectify this.

Other changes to Czech competition law

Leniency programmes

One of the most substantial changes introduced by the Amendment relates to leniency programmes. Based on the current wording of the Competition Act, the leniency programme applies to horizontal agreements only. The Amendment broadens the applicability of leniency programmes to cover vertical agreements as well.

Leniency programmes thus apply to a narrowly defined range of competition law infringements under the current legislation. The aim of introducing leniency programmes is generally to facilitate the investigation of anti-competitive conduct by encouraging competitors involved in a secret cartel to report their own anti-competitive conduct in seeking leniency, and thus to facilitate the investigation of the cartel as a whole. Leniency programmes are one of the main ways of enabling cartel investigations at the horizontal level. Without this possibility, the parties to the agreement have no incentive to cooperate with the Authority during the investigation, even though in some cases it may be that the mere participation in the cartel is no longer beneficial for them. The introduction of leniency for horizontal agreements has proven to be a very effective tool for detecting horizontal collusive agreements, and for this reason it has been decided to extend its applicability to cover vertical agreements.

The ECN+ Directive distinguishes between leniency and the so-called settlement process. This also exists under the current Czech legislation but is insufficiently distinguished from leniency in terms of the terminology, and this ambiguity has been cleared up in the current draft of the Amendment.

The terminological clarification of the settlement process is intended to allow participants in an ongoing investigation to have their sanction reduced if they provide the necessary cooperation to the Office, in particular by supplying evidence. In the current wording of the Competition Act, this instrument is not sufficiently distinguished from leniency, which can only be requested by a competitor before the Office becomes aware of anti-competitive conduct.

In contrast, the settlement process is intended to facilitate pending proceedings, and therefore its benefits for competitors are lower than those of leniency. In addition to more precisely distinguishing the settlement process from the leniency programme, the Amendment further specifies the process. In particular, it emphasises the discretion of the Office in deciding whether to reduce the applicant's fine or not. The commencement, course and termination of the settlement process is thus entirely within the discretion of the Office, which has the possibility to terminate it at any time in relation to one or more parties if the Office concludes that procedural savings would not be achieved.

The settlement process is intended to allow a party to the cartel to request a settlement process within 15 days after the Office has initiated the administrative proceedings and delivered a statement of objections to the competitor. It may then result in a reduction of the fine by 10 to 20%. When granting the reduction, the Office will take into account the extent to which the applicant's behaviour has contributed to facilitating the investigation and thus to savings for the Office.

Commitments

In addition to the above-mentioned instruments, the Amendment also provides for the possibility of accepting commitments in favour of maintaining effective competition. Again, the discretion of the Office is emphasised, which may or may not accept the joint proposal of the parties to the proceedings. The purpose of the commitments should be to remove concerns about possible distortions of competition, i.e. it should be more of a preventive measure than commitments under the current regulation. The Office also has the discretion to set conditions and obligations necessary to ensure compliance with the commitments thus agreed.

According to the Amendment, this possibility should not apply to secret horizontal agreements and concerted practices, which are considered to be the most serious infringements of competition law. The consequence of the Office's acceptance of the proposed commitments is the replacement of the decision to prohibit compliance with the cartel and the subsequent termination of the proceedings. Any non-compliance with the commitments accepted can be sanctioned with the reopening of the proceedings.

Liability

Another fundamental change brought about by the Amendment to the competition legislation is a change in the view on liability for offences in cases in which the competitor consists of more than one person. Typically, this would be a situation in which the competitor consists of a parent company and its subsidiary. The Amendment aims to adapt the liability regime to a pan-European scale and thus allow for joint and several liability of the competitor as a whole. It seeks in this way to avoid the possibility of escaping sanctions by a mere restructuring. It is also intended to help in situations where, for example, a subsidiary company does not have sufficient resources to pay the fine, which, even under the current legislation, is to be calculated on the basis of the annual turnover of the competitor as a whole. In the case of the recovery of damages for anti-competitive conduct, the likelihood of recovery is also to be increased, as it will be possible to claim damages from more than one entity.