Lucie Bányaiová

COMPETITION LAW II
Public Law Protection of Competition

• Antitrust (cartels; abuse of dominant position,

abuse of market power)
• Merger control
• State aid
• Public procurement, PPP - public private
partnership

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Public Law Legislation

• Legislation on protection against cartel conduct, abuse of

dominant position and merger control rules are contained
in Competition Act No. 143/2001 Coll.
• Abuse of market power prohibited in Act No. 395/2009
Coll. on substantial market power
• Rules relating to state aid are contained in Act on State
Support No. 215/2004 Coll.
• Public tendering legislation is contained in Public
Procurement Act no. 137/2006 Coll. and Concession Act
no. 139/2006 Coll.

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Supervising Authority

• Supervision over observation of all aspects of public

competition legislation is performed by Office for
Protection of Economic Competition (‘the Competition
Office’).
• Amendment of Competition Act – supervision over other
public authorities and bodies in respect of possible
anticompetitive conduct

• www.compet.cz

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Relevant Market

• Competition happens in a market – its definition is crucial

namely for application of antitrust and merger control
rules.
• Relevant market comprises a product or group of products
or services (interchangeable/substitutable) and the
geographic area in which these products are produced
and/or traded.
• Two components of relevant market: the product market
and the geographic market.

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Product Market

• The relevant product market is determined according to

three criteria:
- Demand-side substitution;
- Supply-side substitution;
- Potential competition.
Factors influencing supply/demand: transportation cost,
fidelity of customers, long-term contracts, administrative
costs, start-up costs….

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Geographic Market
• The geographic market is an area in which the conditions
of competition applying to the product concerned are the
same for all traders.
• The same factors used to determine relevant product
market should be used to define the relevant geographic
market. Obstacles limiting accessibility of
products/services from geographic perspective – e.g.
transportation costs, lack of information on the part of
potential purchasers, administrative barriers/technical
norms
• Case of Funeral Organizers/Undertakers Association
• Case of Dr. Max and Lloyds Pharmacies merger
• Case of RWE, case of Poultry Breeders – national market 6
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State Aid
• Aim is to minimize the unjustifiable advantages in
economic competition by receiving unjust and unjustifiable
state assistance with their business – e.g. tax relieves,
financial support, privatization of state property.
• State aid is not permitted and is granted only under
extraordinary circumstances.
• State aid rules contained in EC legislation.
• Supervision over state aid vested in the European
Commission. The Competition Office functions as
a monitoring, coordinating and consulting body. The Act
on State Aid merely defines the role of the Office.

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Public Procurement
• Ultimate goal is the preservation of public funds, via competitive
bidding in a competitive climate.
• From competition perspective – aim is to ensure free and open
competition between the suppliers.
• Public procurement Act sets detailed procedure to be followed in order
to achieve the above goals.
• Applies not only to state institutions as such but to any person that
should use public funds – e.g. municipalities or foundations or entities
that for a certain project received state funding.
• Competition Office supervises and monitors observance of public
procurement rules and may impose remedial measures as well as
penalties on the tenderer.

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Public Private Partnership

• Means of cooperation between the state and a private entity in the area
public services
• State entrusts to a private entity total or partial management of certain
services of public nature and the private party assumes part or full risk
for due performance of the service.
• From competition perspective – aim is to ensure free and open
competition between the potential providers of the service.
• The PPP Act sets detailed procedure to be followed in order to achieve
the above goals, in case of lack of rules, the rules contained in the
Public Procurement Act to apply.

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Cartel Regulation – Prohibited Agreements
• Under Article 3 of the Competition Act, any agreement between
entities, decision by associations of entities, and concerted practice
which result or may result in the distortion of competition is
prohibited. Prohibition applies also to agreements entered into by
entities outside of the Czech Republic which may distort or do
distort competition in the Czech Republic, provided of course there
is no EU dimension to the pertinent agreement.
• Agreements – wide interpretation - include any type of agreements,
including gentleman ententes and oral arrangements.
• Decisions of associations – decisions of various professional
chambers, regardless of voluntary or mandatory nature of
membership. Case of Funeral Organizers AssotiationUndertakers,
Case of Association of Graphics and Graphic Designs
• Concerted practice – coordinated behavior that replaces
independent business decision – case of Drug/medicine
distributors,
• Prohibition applies to both horizontal and vertical agreements.
• No factual participation is no excuse – case of GIS 10
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Statutory Examples of Prohibited Agreements
The Competition Act provides a list of examples of such agreements:
• direct or indirect fixing of prices or other business terms and
conditions; case Delta – bakeries case, case HUSKY, case CRT
• limiting or control of production, sales, research and development
or investments; case of Albatros
• division of markets or sources of supply (market allocation); GIS
case
• tying;
• application of different conditions to identical or equivalent
transactions with other entities, thereby placing them at a
competitive disadvantage; and
• group boycott.

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Other Frequent Cartel Behavior

• Bid rigging – GIS case

• Non-compete arrangements

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Effect of Prohibited Agreements

• Pursuant to the Competition Act such agreements

are null and void unless exempted either by the
Competition Act itself or in a decree issued by the
Competition Office or otherwise.

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General Statutory Exemption
• Following agreements are exempted:
Contribute to improving the production or distribution of
goods or to promoting technical or economic progress, while
allowing consumers a fair share of the resulting benefit and
do not:
• impose on the competitors concerned restrictions that are
not indispensable to the attainment of the above
objectives, and
• afford such competitors the possibility of eliminating
competition in respect of a substantial part of the
products in question.
For an agreement to be excluded from the general
prohibition, all of the conditions must be observed.

Example – networksharing in mobile telephony

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Block Exemptions
• Competition Act refers to block exemption under EC law for further
agreements that are exempted from the general prohibition under
Article 3.
• Most commonly used:
• Commission Regulation (EC) No 330/2010 on application of Article
101 of the Treaty on categories of vertical agreements and concerted
practices.

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Vertical Agreements Exemption
• Applies to vertical agreements where market share of the
supplier and purchaser does not exceed 30 % of the
relevant market on which it sells the contract goods or
services.
• Hard-core arrangements not exempted, such as:
- RMP; Tuperware case
- restriction on passive sales outside of territory;
- non-compete obligations exceeding 5 years.

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De Minimis Exemption
Section 6 of the Competition Act stipulates that the
following agreements are exempt from the general
prohibition of restrictive agreements stipulated under
Section 3 of the Competition Act:
• Horizontal agreements if the aggregate market share held by
the parties to the agreement does not exceed 10 per cent on
any of the markets affected by the agreement.
• Vertical agreements if the market share held by each of the
parties to the agreement does not exceed 15 per cent on any
of the markets affected by the agreement.

HUSKY case

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Effect of Exempted Agreements

Agreements satisfying the above conditions will be

automatically valid ab initio – as of their execution – and
will be in full force and effect and binding upon the
parties.

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Leniency
• Incentive for parties to prohibited agreements to cooperate with
the Competition Office.
• As of 1 December 2012 – part of Competition Act, previously
as soft law in guidelines
• Amount of fine reduction or full immunity from fines dependent
on the usefulness of the provided information on knowledge of
the Competition Office of the notified cartel agreement.
• Conditions for obtaining full immunity:
- Competition Office had no knowledge of the notified offence;
- Detailed description of the alleged cartel arrangement,
including its aims, activities and functioning, names, positions,
office locations of all involved individuals, all other evidence of
cartel agreement must be provided to the Competition Office.
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Dominant Position
• Under the Competition Act, a dominant position on the
market is held by one or jointly by more competitors (joint
dominance) which have the market power to a substantial
extent, that allows them to behave independently of other
competitors or consumers.
• The Competition Act contains a rebuttable assumption of
dominance. Unless the contrary is proven, it is deemed that
the dominant position is not held by a competitor should its
market share on the relevant market achieved during the
period subject to examination be less than 40 percent.

• RWE Case

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Abuse of Dominant Position

• The fact that the competitor or competitors enjoy a

dominant position on certain relevant markets is not
prohibited, only the abuse thereof.
• Section 11 (1) of the Competition Act generally prohibits
any manner of abuse of dominant position to the detriment
of other competitors or consumers. In addition to the
general prohibition of abusive behavior, Section 11 of the
Competition Act offers a non-exhaustive list of types of
abusive conduct:

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Examples of Abusive Behavior

• Direct and indirect enforcement of unfair (unreasonable)

conditions and terms set forth in agreements or contracts
with other market participants. RWE case (excessive
advance payment for gas supplies)
• Tying.
• Application of dissimilar conditions to equivalent
transactions with other competitors, placing them at a
competitive disadvantage. RWE case (different conditions
for operators of regional distribution networks outside of
RWE group)

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• Staying or limiting production, sale or research and

development to the detriment of consumers.
• Predatory pricing. Case of STUDENT AGENCY. Case of
České dráhy/RegioJet
• Denial of access to other competitors for a reasonable
consideration to its distribution networks or other
infrastructure equipment. RWE case (denial of storage
space, denial of natural gas to wholesalers outside of RWE
group)

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Substantial Market Power

• Regulated by Act No. 395/2009 Coll. on substantial market
power
• Applicable to supplies of agricultural and food products.
Aimed to restrict abusive behavior of participants in the
market with significant power towards its suppliers but
without dominant position. (economic dependance)
• Case of KAUFLAND– first fine under the Act on
Substantial Market Power

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Proceedings before Competition Office
• Formal proceedings by serving a notice on initiation of proceedings to
the pertinent party.
• Competition Office has broad investigative powers, including search of
the premises of undertakings concerned and homes of their employees
and executives.
• Dawn raids and violation of privacy, prior consent of court with search
of premises – case of Delta – Bakeries case (ECHR case – Société
Colas Est vs. France).
• NEW - Amendment of Competition Act – dawn raid to be based on a
written authirization of Chairman of the Competition Office containing
detailed identification of competitor and premises to be searched.

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• Respecting legal privilege – case of Billa/Meinl (based on

ECJ decision in Akzo Nobel/Ackros Chemicals
• Selfincrimination in proceedings before the Office – case
of Koninklijke Philips, case of CRT
• Access to file – access to leniency filings can be denied
until statement of objections sent to offenders. CRT case
• Limited access to file containing trade secrets (no copies)
• Amendment to Competition Act confirming case law

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• In certain cases, the Competition Office may accept commitments

offered by the alleged offenders in the course of the proceedings. The
proceedings end without decision on the merit.
• Prioritization – Amendment to Competition Act – Competition Office
may upon preliminary review of case decided not to continue with
prosecution – low impact on competition – no public interest to
prosecute (nature of offence, activity in question, importance of
relevant market and affected consumers)
• Otherwise, the Competition Office either determines that a violation
under the Competition Act occurred, renders a decision to this effect
and imposes a penalty and/or other remedial measures, and sets a
deadline for performance or declares in its decision that the
undertakings concerned did not violate the Competition Act.
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Remedies and Penalties

• The Competition Office may order the parties involved or

concerned to refrain from all prohibited activities under
such agreement.
• The Competition Office may impose remedial measures to
restore effective competition
• The Competition Office may impose upon each breaching
entity a fine up to CZK 10 million or 10 per cent of its net
turnover reached during the preceding accounting period.

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Merger Control

The mergers or “concentration of competitors” subject to

the Competition Act:
• Merger or amalgamation (consolidation) of two or more
competitors previously independently active on the market;
• Acquisition of an enterprise of another competitor or a
substantial part thereof on the basis of an agreement;
• Acquisition of control (directly or indirectly) over another
competitor either by acquisition of shares or ownership
interest of such other competitor;
• Foundation of a concentrative joint venture.

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Thresholds for approval of merger by the Competition Office:

• aggregate net turnover of undertakings concerned for the last
completed accounting period within the market of the Czech
Republic exceeds CZK 1.5 billion and the aggregate net turnover
of each of at least two of the merging entities for the last
completed accounting period within the market of the Czech
Republic exceeds CZK 250,000,000; or
• aggregate net turnover of (i) at least one competitor being a party
to the merger; (ii) an enterprise or its part being acquired (iii) a
competitor, over which the control is being acquired; or (iv) at
least one of the competitors creating a concentrative joint venture;
for the last completed accounting period within the market of the
Czech Republic exceeds CZK 1.5 billion and the aggregate
worldwide net turnover of the other merging entity for the last
completed accounting period exceeds CZK 1.5 billion;
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• The merger approval proceedings are initiated upon

delivery of a petition for approval to the Competition
Office together with all documents and information
required by the Competition Act.
• The Competition Office either decides that the
concentration in question is not subject to its consent or,
provided that the concentration does not substantially
interfere with economic competition, consents to the
concentration. Otherwise, the Competition Office does not
grant clearance.
• If the Office fails to decide on a filed petition within the
time limits stated in the Competition Act, after the
expiration of the time limits the concentration is deemed to
be approved.
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• The Competition Office may accept commitments offered

by the merging undertakings – to avoid negative clearance
by the Competition Office. Case of Merger fo Dr. Max and
Lloyds pharmacies
• Until the Competition Office renders its decision the
competitors concerned may not take any steps
implementing the merger, i.e. they cannot exercise control
they gained.

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Sanctions for Breach of Merger Control Rules

• Should the Competition Office find out that the

undertaking acquiring control exerciseed control prior to
its clearance, it may impose a fine up to the amount of
CZK 10 million or 10 % of the net turnover of the
pertinent competitor for the preceding year.
• Also, if the Competition Office discovers that competitors
implemented a concentration before the consent is granted
or without filing a petition for the Competition Office’s
consent, it may impose on such competitors the obligation
to “de-concentrate” or to take other measures which are
necessary to restore effective competition on the relevant
market.
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Private Antitrust Litigation
• No specific provisions expressly regulating private antitrust litigation
or even specific types of actions for illegal antitrust behavior.
• Available private remedies:
- general damages pursuant to the Commercial Code - liability for the
loss caused by the breach of their duty without regard to their
culpability;
- right to enforce fulfillment or performance of an agreement if
performance is illicitly refused;
- restitution of unjust enrichment obtain based due to the illicit
practice;
- with respect to prohibited agreements or agreements entered into as a
result of abuse of dominant position, the invalidation of the agreement
in question.
• The relevant tribunals are general civil courts, usually regional courts.
• One known case – Vodafone sued T-Mobile and O2 (formerly Eurotel) 34