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Amendment of the Czech Competition Act – novelties

Amendment of the Czech Competition Act – novelties. Act No. 360/2012 Coll. Of 19 September 2012. Main News and Changes. Supervision of public authorities Mergers Prioritization Procedural changes Sanctions Leniency Settlements Technical changes. Supervision of public authorities.

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Amendment of the Czech Competition Act – novelties

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  1. Amendment of the Czech Competition Act – novelties Act No. 360/2012 Coll. Of 19 September 2012

  2. Main News and Changes • Supervision of public authorities • Mergers • Prioritization • Procedural changes • Sanctions • Leniency • Settlements • Technical changes

  3. Supervision of public authorities • Extension of the protection of competition by adding protection against its distortion by exercise of state administration by Article 1.1.d. of the Competition Act. Article 1 This Act regulates the protection of competition in the market of products and services (hereinafter referred to as “goods”) against its elimination, restriction, other distortion, or imperilment (hereinafter referred to as “distortion”) by… …state administration authorities in the exercise of state administration, local government authorities in the exercise of self-government and the transferred state administration and self-governance authorities in the exercise of transferred state administration.

  4. Supervision of public authorities New power of the Office regarding supervision of public authorities. Article 19a: • Distortion of competition by providing aid favoring particular undertaking, or by other means, shall be prohibited to public authorities. • If the Office finds, within the framework of proceedings concerning the matters pursuant to Paragraph 1, that the distortion of competition has been committed, it shall declare such fact in a decision. • Should the local government authority commit the distortion of competition in the exercise of self-governance or the transferred state administration, the Office shall send to the body relevant to perform supervision pursuant to special regulation19a) the decision in force pursuant to the Paragraph 2 and shall assign the administrative file if requested thereto. 19a)he Act No. 128/2000 Coll. on Municipalities (the Municipal Order), as amended. The Act No. 129/200 Coll. on Regions (Establishment of Regions), as amended. The Act No. 131/2000 Coll. on the Capital City of Prague, as amended.

  5. Supervision of public authorities • New sanction for administrative offences by public authorities Article 22aa (1) Public authority commits an administrative offence if it distorts competition in violation of Article 19a(1). (2) For administrative offence pursuant to paragraph 1 a fine up to CZK 10 000 000 shall be imposed.

  6. Supervision of public authorities NEWS SUMMARY: • Power against distortion of competition by public authorities exercising state administration • Limited fine up to 10 mil CZK • New power, no experience, no cases • Possible question arising • Which subjects could by considered as a public authority? • Is the Office able to conduct dawn raid in the premises of the public authority? • Could be „bis in idem“ in some cases with public procurement?

  7. Mergers • Interplay between sanctions and measures adopted to restore competition has been solved by Article 18 (5) - Suspension of implementation of concentrations. • It has been made clear that: …Imposition of measures to restore competition shall not exclude parallel imposition of a fine pursuant to Article 22(1d), (1e) or (1f) or Article 22a (1d), (1e) or (1f).

  8. Prioritization • The Office has a new possibility to prioritize some case according to given conditions by not initiating the investigation. Article 21.2 - Initiation of proceedings The Office may decide not to initiate a proceeding ex officio after a preliminary consideration of the case pursuant to Article 20(1a), unless there is the public interest in its proceeding in respect of low level of detrimental effect on competition; the Office shall consider particularly the nature of the behaviour and the manner of its execution, significance of the relevant market and the number of affected consumers. The Office shall make a written record of not initiating the proceeding where it shall state why the proceeding was not initiated.

  9. Prioritization • Condition for prioritization is • low level of detrimental effect on competition • The level of effect on competition is considered particlarly with respect to • nature of the behaviour • the manner of its execution, • significance of the relevant market • the number of affected consumers

  10. Procedural changes • The scope of the Statement of objections (SO) has been extended by imposing a new obligation to the Office to inform within SO about the amount of fines. Article 21b - Statement of objections In the statement of objections, the Office shall inform the parties to the proceeding on the amount of the fine which intends to impose on them.

  11. Procedural changes • There is a new procedural rules regarding Leniency application – all materials relating to leniency application are kept outside of the file till the Statement of Objections (SO) is issued. • Materials relating to leniency application are excluded from access to file according the Administrative Code. The Competition Act allows only parties to proceedings after SO is issued. Article 21c - Special provisions on documentation and its inspection (3) The request for refraining from imposing a fine and reduction of a fine pursuant to Article 22ba(5) as well as other documents and information that were submitted to the Office in relation to them are kept separately from the documentation until the statement of objections. (4) The parts of the documentation that contain the request for refraining from imposing a fine and request for reduction of a fine pursuant to Article 22ba(5) as well as other documents and information that were submitted to the Office in relation to them shall be also excluded from the inspection of documentation; such parts of the documentation can be inspected in accordance with the conditions stated in paragraph 1 only by the parties to the proceeding or their representatives. Provisions of the Article 38(4) of the Civil Code will not be applied. • Materials relating to Settlements materials are accessible in a „normal“ regime. SO

  12. Procedural changes • Explicit extension of the duty to provide information to the Office also to persons who are not undertakings Article 21e - Provision of information • (3) The obligation to provide the Office on its request with written documents and information at their disposal free of charge shall also apply to public authorities and legal and natural persons who are not undertakings. Documents and information obtained by the public authorities, including criminal law enforcement authorities, may be used as a basis for the decision of the Office. In the request for information, the Office shall be obliged to stipulate provisions of the law which the requested scope of information is based upon and the objective which the given information is requested for. INFO

  13. Procedural changes Amendment introduces new prerequistie for dawn raids which is written authrization issued by chairman of the Office or other by internal measures authorised person. Internally authorised will be probably vice-chairmen or their deputies. The authorization has to contain specific, by the Amendment set, information about raid and inspectors. Article 21f - Investigation on business premises (5) The investigation shall be conducted based on the written authorization issued by the Chairman of the Office or any other authorized person according to internal regulations of the Office. The authorization shall contain mainly a name, or names, surname, function and signature of the person authorized to its issue, a date of production and an official stamp, legal provision under which the investigation shall be conducted, identification of the business premises of the undertaking where the investigation shall be conducted, a subject of the investigation and a date of its initiation as well as name, or names and surnames of the Office’s employees, or other persons authorized by the Office who shall conduct the investigation.

  14. Mergers, Prioritization, procedural changes NEWS SUMMARY: • Measures to restore competition and fines can be imposed countemporaneusly • The Office is now able to prioritize case based on specific conditions • SO has to contain info about fines • Special rules for access to leniency materials • Extension of obligation to provide information to the Office for „non-undertakings“ • New procedural condition for conducting dawn raids – written authorisation

  15. Sanctions • New sanction designed for the fight against bid rigging which is applicable only in case that infringement of the Competition Act regards public contracting through procurement. • The office shall impose a ban to participate in public procurement or concessions for the period of three years. • The office shall inform the Ministry for Regional Development about every decision imposing on sanctioned undertakings ban to participate in public procurements or concessions . Article 22a - Administrative offences by legal persons and natural persons-entrepreneurs (4) For an administrative offence pursuant to paragraph 1(b) committed in relation to award procedure or conclusion of a contract for execution of the subject-matter of a small-scale public contract, the ban to execute public contracts for the period of three years shall be imposed together with a fine pursuant to paragraph 2, unless otherwise specified. The period of time for which the ban to execute public contracts shall be imposed, shall start running from the date when the decision by way of which the ban to execute public contracts has been imposed came into legal force. (5) For an administrative offence pursuant to paragraph 1(b) committed in relation to concession procedure, the ban to execute concession contract for the period of three years shall be imposed together with a fine pursuant to paragraph 2, unless otherwise specified. The period of time for which the ban to execute concession contract shall be imposed, shall start running from the date when the decision by way of which the ban to execute concession contract has been imposed came into legal force. (6) The Office shall be informed by the Ministry for Regional Development about entry into legal force of the decision by way of which the ban to execute public contracts pursuant to paragraph 4 or the ban to execute concession contract pursuant to paragraph 5 has been imposed.20 20Article 144 of the Act No. 137/2006 Coll., on Public Contracts, as amended. Article 31a of the Act No. 139/2006 Coll., on Concession Contracts and Concession Procedure (the Concession Act), as amended by the Act No. 417/2009 Coll.

  16. Sanctions • Newly the Office considers, when calculating fines also the cooperation of the undertaking during the proceeding and also its effort to restore negative effects on competition caused by the infringement. • The amendment clearly sets up that legal successors are responsible for the anticompetitive conduct of their predecessors. In case of finig successor the Office considers benefits and advantages passed to the successor from the predecessor that commited an infringement of the Competition Act. Article 22b - General provisions for administrative offences (2) …The conduct of a legal person or a public authority in the course of proceeding before the Office shall be also considered as well as their effort to eliminate detrimental consequences of the administrative offence. (6) The responsibility for an administrative offence of a legal person, which was dissolved, shall pass on to a legal successor of this person. Provided the dissolved legal person shall have more legal successors, each of them is responsible for the administrative offence. When setting a fine, the extent in which incomes, benefits and other advantages from the committed administrative offence passed on to the legal successor shall also be considered, as well as whether any of the legal successors continue in the activity within the performance of which the administrative offence was committed .

  17. Leniency • Basic principles of Leniency program have been incorporated into the competition Act • Available only for horizontal agreements (object only or also effect based?) • Complete immunity from fines available only for one undertaking per case • Applicant must be the first who • Submits information enabling the Office to conduct dawn raid or • to prove the existance of such agreement Article 22ba - Refraining from imposing a fine and reduction of a fine If the Office finds the undertaking guilty of an administrative offence pursuant to Article 22(1b) or Article 22a(1b) it shall refrain from imposing a fine, if the undertaking • as the first of all undertakings submits to the Office information and documents about restricted horizontal agreement that have not been available to the Office so far and that justify the conduct of investigation on premises pursuant to Article 21f or Article 21g or prove the existence of such agreement pursuant to this Act,

  18. Leniency • If immunity is not available there is still possibility for fine reduction • Applicant must provide siggnificant added value (SAV) to evidence already in the Office´s possession • Several bands with maximum reduction up to 50 % (bands are specified within the Leniency program – soft Law) • Race – who is the first who brings the SAV receives the highest reduction Article 22ba - Refraining from imposing a fine and reduction of a fine If the Office finds the undertaking guilty of an administrative offence pursuant to Article 22(1b) or Article 22a(1b) (b) it shall reduce a fine of which amount the Office notified parties to the proceedings in the statement of objections by up to 50 %, if the undertaking submits to the Office information and documents about restricted horizontal agreement which have significant added value in relation to probative value of documents and information obtained by the Office so far, and fulfils presumptions pursuant to paragraph 1a, letters 2 – 4; the Office shall consider the order of undertakings at the time when they submit information and documents about restricted horizontal agreement to the Office and consider the extent to which information and documents strengthen due to their nature or details the possibility of the Office to prove the restricted horizontal agreement.

  19. Leniency - common conditions • There are common conditions for immunity from fines or fines reduction in the Competition Act • These conditions are cumulative and based on continuous basis Article 22ba - Refraining from imposing a fine and reduction of a fine (1a par. 2-4) • confesses the participation in the agreement • does not pressure other undertakings to participate in the agreement, and • actively helps to clarify the case in course of the administrative proceeding, in particular it provides the Office with all documents and information about the agreement available to them

  20. Leniency • Successful applicant for leniency can not be sanctioned by a ban to participate in public procurement or concessions. • Leniency application is voluntary • Application for immunity must be submitted before SO has been delivered to parties to proceedings • Application for reduction must be submitted at latest 15 days after SO has been delivered to parties to proceedings • Extension of given periods is possible only under special circumstances • Withdrawal is possible in a period of 15 days after the deadline of their submission Article 22ba - Refraining from imposing a fine and reduction of a fine (3) If the Office refrains from imposing a fine pursuant to paragraph 1a or reduces a fine pursuant to paragraph 1b or paragraph 2, it is not possible to impose the ban to execute public contracts or the ban to execute concession contract on the same undertaking. (4) To refrain from imposing a fine pursuant to paragraph 1a or to reduce a fine pursuant to paragraph 1b or paragraph 2 is only possible on request submitted by the undertaking. (5) The request for refraining from imposing a fine pursuant to paragraph 1a shall be submitted no later than a day when the statement of objections was delivered to the undertaking pursuant to Article 21b. The request for reduction of fine pursuant to paragraph 1b shall be submitted within 15 days at the latest from the day when the statement of objections was delivered to the undertaking pursuant to Article 21b. The requests may be withdrawn within 15 days from the deadline of their submission. The request which was withdrawn as well as enclosed documents and information shall not be considered in course of proceeding. (7) The request which was submitted later than specified in paragraphs 5 and 6 shall be considered by the Office only in cases which deserve a special treatment.

  21. Leniency and Amendment of the Criminal Act • Criminal liability for natural persons for breach of competition Law – Artcile 248 of the Crimminal Act • Amendment solves interplay with leniency by „effective repentance“ • If undertaking is successful with leniency natural persons who helped with its application shall not be criminally sanctioned. Article 248a - Special provisions on effective repentance Liability to punishment for criminal offence of breaching of the competition rules pursuant to Article 248(2) subparagraph 1 ceases to exist if offender fulfils conditions pursuant to another legal regulation on protection of competition for refraining from fine or reduction of fine imposed for participation in price-fixing agreement, market division agreement or other agreement distorting competition concluded with a competitor.

  22. Settlements • Basic principles of Settlemens have been incorporated into the competition Act • Rigid reduction 20 % from fines • Available only for horizontal agreements • Its alaways up to the Office to consider if settlement procedure is suitable for the given case Article 22ba - Refraining from imposing a fine and reduction of a fine (2) If the Office finds the undertaking guilty of an administrative offence pursuant to Article 22(1b), (1c) or (1d) or pursuant to Article 22a (1b), (1c) or (1d), it shall reduce a fine of which amount the Office notified parties to the proceedings in the statement of objections 20 %, if the undertaking confessed to commit the administrative offence and if the Office considers such sanction as sufficient with respect to nature and seriousness of the administrative offence.

  23. Settlements • Time period for Settlement is 15 days after SO has been delivered to parties to proceedings • Extension of given period is possible only under special circumstances • Withdrawal is impossible Article 22ba - Refraining from imposing a fine and reduction of a fine (6) The request for reduction of a fine pursuant to paragraph 2 shall be submitted within 15 days at the latest from a day when the statement of objections was delivered to the undertaking pursuant to Article 21b. (7) The request which was submitted later than specified in paragraphs 5 and 6 shall be considered by the Office only in cases which deserve a special treatment.

  24. Leniency, Settlement NEWS SUMMARY: • Leniency and settlment directly in that Competition Act • Immpossible to forbid participation in public procurement and concessions in case of successful leniency or settlement • New time periods • Interplay between Leniency and criminal liability of natural persons • Settlements reduction rigid 20 %

  25. „Technical“ changes • In the whole text of the Act the references has been changed from Articles 81 and 82 of the Treaty establishing the European Community to Articles 101 and 102 of the Treaty on Functioning of the European Union (TFEU)

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