The Czech Office for the Protection of Competition (“Office”) has published a new guidance document on vertical agreements (“Guidelines”). The Guidelines analyse recent trends in the assessment of such agreements, summarise the Office’s decision-making practice, as well as its recent judicial review, outlining implications for businesses. We provide a few key takeaways below.

From Education to Sanctions: The Office’s Evolving Approach to RPM

A significant part of the Guidelines focuses on resale price maintenance (“RPM”) — agreements in which suppliers set fixed or minimum prices for their distributors. The Office describes a shift in its approach: while it previously relied on educational tools, these proved ineffective as companies in various sectors often relied on the Office’s benevolence and often provided misleading information. In response, the Office has increasingly resorted to investigations and sanctions — the number of inspections of competitors has increased more than fifteen-fold over the past seven years compared to the preceding period. The Office notes that the success of its recent inspections underlines how RPM agreements have grown enormously, covering goods across a wide range of industries. 

Strict Sanctions for RPM – also of their Recipients?

The Guidelines assert that RPM remains the key area of risk and the Office is likely to continue its hawkish approach to their sanctioning. Proceedings relating to RPM have so far only been carried out against those competitors who initiate and enforce RPM agreements – whether direct or informal. However, the Office warns that it may also sanction recipients of goods under RPM (e.g. distributors), if they clearly contribute to setting up and maintaining such RPM mechanisms, also influencing other competitors. Distributors should therefore also be careful about their own liability for RPM mechanisms not originally initiated by them. 

The Guidelines show that the Office remains committed to compliance enforcement, particularly against RPM agreements, and more sanctioning can be expected. Nevertheless, the Office also recognises cooperation of competitors under investigation, and this can reflect positively on the outcome of the proceedings. Making use of the leniency program or implementing an effective compliance mechanism can lead to substantial reductions in sanctions. See our previous articles on these topics here and here.

Judicial Oversight: Limits of the Office’s Powers

Despite a focus on enforcement, the Office’s actions are still subject to judicial review. The administrative courts have set several limits in recent years — including in relation to how inspections and dawn raids are conducted. In the HP Tronic Zlín case, the courts found that the Office had exceeded the scope of its authorisation during a dawn raid by using too generic keywords to search for documents. This led to the exclusion of several – not all – of the seized documents as evidence. See our article on this case here. In the ongoing Gorenje, the first instance court excluded seized documents dated before 2020, concluding that these fell outside of the time range indicated by the Office’s evidence prior to the dawn raid. The Office has appealed, and it will be interesting to see how the Supreme Administrative Court rules on this case. 

The Takeaway?

The message from the Office is clear: it will take an active enforcement approach towards vertical agreements, particularly through dawn raids. Competitors are therefore well-advised to review their distribution models and address possible non-compliance, which may even lead to sanction reductions in ongoing proceedings. Nevertheless, competitors should also not hesitate to challenge any investigative overreach in court. 

The Guidelines may be found here (in Czech only).

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

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