Projev předsedy ÚOHS Petra Mlsny na konferenci ICC Czech the Antitrust

Předseda Úřadu pro ochranu hospodářské soutěže Petr Mlsna přednesl keynote speech na konferenci Czech The Antitrust pořádané 13. 6. 2024 v Praze Mezinárodní obchodní komorou ČR. Projev přinášíme v původní anglické verzi.

New competition tools for the Czech Office for the Protection of Competition

 

Dear Ladies and Gentlemen,

Last year in the Czech Republic we were confronted with an unprecedentedly high level of inflation and rising food prices. This situation led to a turbulent public and political debate about whether the Czech National Competition Authority (NCA) lacked the right tools to intervene in certain markets, especially those prone to so-called tacit collusion.

In response to the government's request, the Czech NCA introduced a list of possible legal tools that could help it to be a more effective authority. Namely in detecting and proving cartel agreements, and also by giving it a completely new power to intervene in markets where there is no obvious anti-competitive behavior, but where competition is not functioning properly. After a political debate, the government worked on an amendment to the Competition Act containing several of the legal instruments on the basis of the list suggested by the Czech NCA. The current legislative status of this amendment is that on the 31 May it was submitted to the so-called inter-ministerial consultation procedure for possible comments by ministries.

 

Now, I would like to say a little bit more and present to you three specific new powers suggested by an amendment which, if adopted, will, in my opinion, be a real game changer for the protection of competition in the Czech Republic.

These are: 

• a new competition tool,
• a notification model for mergers, and
• administrative liability of natural persons for participating in the conclusion of anti-competitive agreements.

The new competition tool would give the Czech NCA the power to intervene actively also in markets where competition is not functioning properly, although there is no harm from illegal behavior. Such markets could be mainly oligopolistic markets that are prone to tacit collusion or markets where their structure, barriers to entry or expansion or dynamics give one or more companies a huge market power that is extremely difficult to counter.

This instrument would enable the Czech NCA to adopt a so-called general administrative measure after the sectoral inquiry and to define markets in which (i) even relatively small mergers not meeting the standard notification criteria could significantly impede competition, and set other stricter notification criteria for merging undertakings; or (ii) markets where competition has been significantly impeded for a long period of time and this situation is unlikely to change in the near future. In such markets defined by this general administrative measure, the Czech NCA may also, by decision, impose specific behavioral remedies on undertakings with a view to restoring or enhancing competition on those markets.

The duration of these general administrative measures is set at 3 years and this period may be extended. There is also another restriction. In order to clearly avoid conflicts of jurisdiction, this new power cannot be applied to markets regulated by the Czech Telecommunications Office, the Czech National Bank or the Energy Regulatory Office.

Indeed, if accepted, this instrument would turn the Czech NCA into a regulator sui generis, with the possibility not only to fight anti-competitive behavior of undertakings but also to stimulate competition as such on markets where competition is weak and ineffective. 

The second proposed instrument I would like to talk about is the call-in notification model for mergers. At present, the Czech NCA's authority to review mergers depends on the cumulative fulfilment of two basic notification criteria, i) the nature of the transaction between the companies and ii) the size of the merging companies.

As only mergers between undertakings whose participants reach the minimum turnover threshold set by law are subject to clearance by the Czech NCA, it has no power to review mergers which do not reach this threshold. In order to fill this gap, the amendment introduces a so-called call-in model for merger control.

It would allow the Czech NCA to potentially catch mergers of undertakings which, although they do not meet the current turnover criteria, may nevertheless give rise to suspicions of a potential significant impediment of effective competition. Especially because of the nature of the merging undertakings and/or the relevant markets concerned. These could be for example dynamic markets characterized by a high level of innovation, such as digital markets, pharmaceutical markets, etc. 

With this new tool, if adopted as proposed, the Czech NCA could require the merging companies to submit a proposal for clearance of the merger up to 6 months from the date of the merger if the total net turnover of the merging companies exceeds 1.5 billion CZK and at least two of the merging companies each achieved a net turnover of more than 100 million CZK in the last completed accounting period in the Czech market.There is also a possibility for merging parties to voluntarily notify a merger that meets these criteria, in order to ensure that it does not raise competition law issues at a later stage.

This new tool would enable the Czech NCA to more effectively control mergers in markets that are prone to killer or especially serial acquisitions, as well as in local markets that may be highly concentrated and where even undertakings with lower turnover may have significant market power.

Finally, I would like to comment on the proposed administrative liability of natural persons for participation in cartel agreements. Secret cartels one of the most serious forms of distortion of competition. These agreements are almost always secret, hidden and very difficult to detect. Although undertakings are the subjects that conclude cartels according to the Czech Competition Act, in reality there are always specific individuals, people of flesh and bone, behind such agreements. People who conspired, directed, organized or facilitated their conclusion, people who know about it. Such people should be also held responsible and face the negative consequences.

I am fully aware that we have criminal liability for individuals who enter into cartel agreements, but there are almost no cases of successful prosecution. Therefore, it is obvious that criminal prosecution of cartels in the Czech Republic is not very successful and its effectiveness and deterrent effect is at least questionable.

In such a situation, the proposed amendment giving the Czech NCA the power to impose an administrative disqualification orders of up to five years and fines of up to 10 million CZK on individuals involved in an anticompetitive by object agreement, typically company executive officers and directors, appears to be a useful additional tool for fighting cartels in our system. We expect that this tool will also contribute to a greater use of the leniency program and to obtaining more information on cartels because according to the amendment, individuals would also be able to apply individually for leniency and receive immunity or a reduction of sanctions, regardless of the existence of a corporate leniency application.

Ladies and gentlemen, I believe that the proposed legislative changes to the Czech Competition Act, which I have described here today and which will be discussed in detail later at this conference, will lead to an increase in the effectiveness of the Czech NCA. In particular, by detecting and punishing cartel agreements and by enabling the Czech NCA to adopt measures aimed at developing or restoring effective competition in markets where it has not functioned properly for a long time, in order to make these markets work for the benefit of the people and to increase consumer welfare.

Thank you for your attention.

Petr Mlsna

Chairman of the Office for the Protection of Competition