Prohibited Agreements and Abuse of Dominant Position

Prohibited Agreements

Cartel agreements constitute a significant distortion of economic environment and cause the related decrease in consumer welfare.. The most notorious and the most dangerous example of prohibited agreements is direct price fixing. In such case, the citizen does not have the possibility to buy goods or services for a competitive price, but only for a price fixed by a cartel agreement, which is usually higher.

No less significant are also agreements on market division. Naturally, there is no competition in such a market, the market is not developing and it stagnates. Due to this action the undertakings retain their position in the market and prevent other competitors from entering the market. The customer is restricted in the possibility to choose a seller. Restricted competition in the market also results in higher prices of the offered goods or services.

Cartel agreements are concluded with the aim to restrict competition, divide the market and gain control over the market. These agreements should ensure its participants regular profit without risks and uncertainties resulting from competition and without the need to invest in further innovations. Such agreements also ensure its participants a position in the market and an advantage towards competitors that could enter the market.

However, not only hardcore cartels (agreements on market division or price fixing) are prohibited. All agreements which have as their object or effect distortion of competition in the market are prohibited, with the exception of agreements of minor importance that do not significantly restrict competition. 

The antitrust authorities have created an effective tool for fighting cartels – the Leniency Programme. A cartel participant has the possibility to inform the Office about the existence of a cartel agreement. In case it provides the Office with new information enabling the Office to start administrative proceedings and to prove a cartel, it has a good chance of going unpunished. In the Czech Republic this programme was efficiently used for the first time in the case of a producer of energy drinks, who faced a fine of up to CZK 20 million. The present Leniency programme is focused only on prohibited agreements concluded among mutual competitors in the market.

Abuse of Dominant Position

The Office pursues the protection of competition as a phenomenon. Nevertheless, the Act on the Protection of Competition is stricter with undertakings in dominant positions than with undertakings in marginal positions in the market.

Thus abuse of a dominant position in the relevant market to the detriment of other competitors or consumers (cf. Article 11 (1) of the Act) is prohibited. The basic condition of the merits of the abuse is to prove that the dominant position of an undertaking does exist. A legal definition of a dominant position is stated in Article 10 of the Act. According to this article, an undertaking or more undertakings together (joint dominance) have a dominant position in the relevant market, if their market power enables them to behave to a certain degree independently of other competitors or consumers.  It is deemed that an undertaking or undertakings with joint dominance do not have a dominant position under the condition that their market share does not exceed 40 % in the period under examination, if it is not proven to the contrary by means of Article 10(2) (e.g. according to economic and financial strength, legal or other impediments preventing other competitors from entering the market).

Also in case a certain undertaking or more undertakings have a dominant position in the relevant market, they have the right to advocate their position in the market, i.e. to behave in a competitive manner in the market, provided a condition is fulfilled which states that such behaviour is evidently not inadequate with regard to the specific circumstances. In the case of  justifiable reasons for the action of a dominant, it is not possible to regard its behaviour, which would otherwise fulfil signs of abuse, as prohibited by law.

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