Following a proposal prepared by the Czech Office for the Protection of Competition (“Office”), the Czech Government is formulating a proposal to amend (“Proposal”) the Act no. 143/2001 Coll., on the protection of competition (“Act”). The Proposal’s chief aim is to expand the competences of the Office. The key novelties include powers to impose remedies in uncompetitive markets without requiring a finding of anticompetitive conduct, introducing a call-in model to expand merger control, and enabling the Office to sanction natural persons involved in cartels.

New Remedies for Uncompetitive Markets 

Current legislation enables the Office to conduct sector investigations into markets where competition seems to be lacking. Sector investigations may uncover anticompetitive conduct and be followed up with proceedings to sanction such conduct. A report is published after each sectoral investigation, in which the Office draws conclusions on the state of competition and possible causes for its deficit. If a market is found to be uncompetitive but no concrete anticompetitive conduct is identified, the Office can only propose non-binding remedies to be considered by the legislator and others.

The Proposal aims to enable the Office to impose concrete remedies in such situations. The Office would first have to carry out a sectoral investigation and conclude that competition on the market is “significantly distorted in the long term” and simultaneously that it does not seem likely that the situation would change in the foreseeable future. 

In such cases the Office could designate the market as “significantly distorted” and impose remedy measures on competitors even if no concrete anticompetitive conduct is identified. These would include requiring competitors to provide access to data or networks, adopting norms and standards, or amending their agreements with business partners, among others.

Alternatively, the Office could conclude that a further merger on the investigated market – even of smaller competitors who do not meet the merger notification criteria – could significantly distort competition. In such cases, the Proposal would enable the Office to introduce additional criteria under which mergers in that market require approval of the Office. These criteria could be in place for up to three years. 

Call-in Model for Merger Control

The Proposal also aims to expand the Office’s powers in assessing mergers which do not meet current merger notification criteria, but which nonetheless pose a potential risk to competition. The new competences would affect competitors who are planning to or have already merged and whose total net annual turnover in the Czech Republic for the previous accounting year exceeded CZK 1.5 billion (approx. EUR 60 million) and simultaneously, at least two of these competitors have each reached such a turnover exceeding CZK 100 million (approx. EUR 4 million).

Under the new “call-in model”, the Office would be permitted to request competitors meeting these new criteria to submit a merger notification. The subsequent approval proceedings would follow the same procedure as with standard merger control.

Executives Under Risk of Administrative Sanctions

At present, natural persons – such as managers or other executives active in legal person competitors – may be criminally liable for anticompetitive conduct. However, only one sentencing has ever taken place in the fifteen years of this provision’s legislative existence. 

The Proposal aims to shift this liability from criminal to administrative liability, and therefore into the Office’s competences. If the Proposal is passed, the Office would be able to sanction natural persons who took part in cartel agreements or concerted practices. The proposed sanctions are a ban on activity for up to 5 years and fines of up to CZK 10 million (approx. EUR 160,000).

The Proposal is currently under review by the Government, after being subject to the commenting process and before being proposed to Parliament. There has so far been heavy criticism of certain aspects of the Proposal by several ministries and other stakeholders. It is therefore possible that the provisions will change before the Proposal reaches Parliament, where further amendments may be proposed.

It will be interesting to see how the Government’s intention to further empower the Office will materialise during the legislative process. We will closely monitor the developments.

The preliminary version of the Proposal can be found here (in Czech only).

If you need more information or further guidance in this area, please contact Vojtěch Chloupek and Martin Taimr.

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