Guidelines of the Office for the Protection of Competition on the method of setting fines
The purpose of the Guidelines is to openly state how the Office for the Protection of Competition should proceed when setting fines on undertakings – parties to the proceeding – in proceedings conducted pursuant to Act No. 143/2001 Coll. on the Protection of Competition. The Office should follow the Guidelines in the case of all initiated administrative proceedings in which a fine will be imposed, starting on the day following the publication of the Guidelines. Publication of the Guidelines on the method of setting fines should provide the undertakings with at least an estimation of the amount of financial sanction they may face if they violate the law. This is a step forward in improving the transparency of the Office’s application activity.
The Guidelines refer only to the procedure of the Office when setting fines imposed for infringements of restrictions provided by the law. The Guidelines do not in anyway refer to the imposition of procedural fines, or to the imposition of fines for actions contrary to enforceable decision including the default of measures imposed pursuant to the Act; or to the imposition of fines for administrative offences pursuant to Act No. 137/2006 Coll. on Public Procurement.
Guidelines of the Office for the Protection of Competition on the method of setting fines imposed pursuant to art. 22 par. 2 of the Act No. 143/2001 Coll. on the Protection of Competition as amended
I. Introduction
1. The purpose of the guidelines is to declare publicly the method how the Office for the Protection of Competition (hereinafter referred to as “the Office”) will proceed during the setting fines on undertakings – parties to the proceeding – in proceedings conducted pursuant to Act No. 143/2001 Coll. on the Protection of Competition and on amendments to certain Acts (Act on the Protection of Competition) as amended (hereinafter referred to as “the Act”).
2. The sections below set out the principles which will guide the Office during all the administrative proceedings where the fine is to be imposed, initiated after the day of issuing this material.
3. Publication of the guidelines on the method of setting fines will provide the undertakings with at least estimation of the amount of financial sanction which may inflict them if they infringed the Act. It is the step made towards improvement of transparency of the Office’s application activity.
4. The guidelines refer only to the procedure of the Office while setting fines imposed for the infringements of restrictions provided by the Act (art. 22 par. 2 of the Act). The guidelines in no manner refer to imposition of procedural fines [art. 22 par. 1 (a) and (b) of the Act] neither to imposition of fines for the action contrary to enforceable decision, including the default of disposals imposed pursuant to the Act (art. 22 par. 2 and 3 of the Act); guidelines also do not refer to imposition of fines for administrative offences pursuant to the Act No. 137/2006 Coll. on Public Procurement.
II. General provisions
5. Pursuant to art. 22 par. 2 of the Act the Office can impose a fine upon undertakings which intentionally or unintentionally offended against the prohibitions set out
- In art. 3 par. 1 of the Act – prohibition of conclusion and fulfilment of agreements distorting competition,
- In art. 11 par. 1 of the Act – prohibition of abuse of dominant position,
- In art. 18 par. 1 of the Act – prohibition of merger implementation before the merger approval comes into force
Or in case of non-fulfilment of the measures imposed
- Pursuant to art. 7 par. 2 of the Act or art. 11 par. 4 of the Act, which enable alternative closing of an administrative proceeding without issuing the decision on administrative offence committed.
- Or pursuant to art. 18 par. 5 of the Act (measures indispensable to re-establishing effective competition imposed in case of implementation of concentration of undertakings contrary to the decision in force).
The Office is, in accordance with the same regulation, also in authority to impose fines on undertaking which infringe Article 81 or 82 of the EC Treaty (restriction of agreements distorting competition and abuse of dominant position) if the administrative proceeding contain community element (art. 21(a) par. 5 of the Act).
6. The fine shall be imposed at a level of up to CZK 10,000,000 or up to 10 % of the total turnover achieved by the undertaking during the last full financial period depending on which of the amounts would be higher. That means, that in case of imposition of fine higher than CZK 10,000,000 the amount of the fine shall not exceed 10 % of the total turnover of undertaking participating in the infringement, respectively – if the amount of the fine exceeds 10 % of the total turnover, it shall not exceed the total amount of CZK 10,000,000.
7. In fixing the amount of the particular fine the Office shall have regard especially to the gravity of the infringement, eventual repetition and duration of the infringement.
8. In addition, in order to fix the amount of the fine the Office shall have regard to subjective aspects of the infringement, that means the fact whether the infringement has been committed intentionally or negligently.
9. Imposition of fines for anticompetitive conduct is accomplished through the wide discretionary mandate of the Office. Within the scope of administrative justice, parties to the proceeding are provided with protection against the excess of abuse of this mandate. To prevent such situations the Office have to take into account all the criteria for imposition of fine as provided by law, and also all the relevant facts, both separately and in the mutual context .
10. During the imposition of fines pursuant to art. 22 par. 2 of the Act, the Office results from the principles set up in current guidelines of setting fines adopted by the European Commission [1]. At the same time, the Office takes into account specificity of the Czech legal environment and the level of the competitive culture in the Czech Republic. Within the scope of decision-making process the Office fully respects present practice of the administrative courts in the area of administrative sanctioning of anticompetitive behavior along with existing decision-making practice of the Office. Respect to these principal sources ensures that the Office will follow consistent rules, thus act predictably, whether the intrastate competition rules or the European law were applied. Given system will also ensure that infringements of the Articles 81 and 82 of the EC Treaty will be penalized according to the same rules no matter whether the administrative proceeding is conducted by the Commission or the Office.
11. It is possible that the application of undermentioned guidelines will lead to imposition of higher fines in particular cases. Till now, the Office has imposed fines within the lower half of the scale provided by law also in cases of the most serious anticompetitive infringements. It is necessary in the future to more differentiate and use the whole scale in order to distinguish adequately sanctioning of less serious infringements on the one hand and infringements with the most serious impacts on economy and consumers on the other. The most serious infringements of breaching the competition rules consisting of long duration, relevant to important market and having strong negative or irreparable impact on consumers shall be penalized with administrative sanctions which should be at the higher end of the scale as provided by law.
12. The trend indicated in previous paragraph does not collide with the obligation to ensure adequacy and predictability of imposed fines. The requirement for having regard to the amount of the sanctions imposed during the previous proceedings should not be understood as a requirement for setting the same amount of fine like in previous cases solved by the Office. As resulting from the practice of the European courts, which also can be regarded, the amount of the imposed fines can be modified by the competition authority if the effective application of the competition law requires so. Higher amount of the fine imposed compared to the previous practice, even in similar cases, shall not be deemed as procedure contrary to law per se, or more precisely, as procedure which might be contrary to the principle of sanctioning only pursuant to the Act [2].
13. Abovementioned facts indicate that practical competition policy has been changed also in the Czech Republic. The Office, as results from frequent public announcements of the Office’s representatives along with its ongoing practice, increasingly insists on prevention of anticompetitive conduct. In case of minor anticompetitive conduct which implications can be restored, the competitors are given the possibility to change their behaviour or accept pro-competitive commitments, which will dispatch the detrimental situation, in order to avoid initiation of the administrative proceeding for competition law infringement, eventually issuing of the sanctioning decision. On the other side, having proved anticompetitive conduct where the deflection from the sanctioning proceeding is not possible or suitable, it is necessary to use other tools at the Office’s disposal for serving its assignment, which is protection of competition from its distortion, thus especially fines and remedial measures.
14. Undermentioned Guidelines shall not be applied by the Office in special cases which insist on specific aspects and scale of difference that can be clearly defined and where such different procedure is required by the principals of adequacy and fairness.
15. Undermentioned guidelines do not afflict the application of leniency rules for imposing fines on prohibited agreements distorting competition, which can implicate non-imposition of a fine or a reduction of a fine on condition that requirements for leniency programme are fulfilled (so-called Leniency programme).
III. Basic method of setting fines
16. In determining the amount of the fine in every particular case it will happen that different amount of the fine will be imposed on different competitors for the infringement of equal gravity (i. e. different absolute figure), for only reasonable individualization of the fine imposed on particular competitor will correspond with the principle of equal and rightful punishment. Such procedure fully complies with judicial practice of Czech and European courts. Imposition of fines of different amounts on particular competitors for the same or similar anticompetitive conduct respects the principle when the economic efficiency of each competitor must be reflected during the setting of fines in order to ensure sufficient deterring effect [3].
17. The Office will use the following two-step methodology when setting the fine to be imposed pursuant to art. 22 par. 2 of the Act – first, the Office will determine a basic amount of the fine for each undertaking involved in the anticompetitive conduct. Second, the Office will examine mitigating and aggravating circumstances which, relating to particular competitors, may adjust the basic amount of the fine upwards or downwards.
18. Setting of the basic amount of the fine will be proceeded separately for each particular competitor involved in the anticompetitive conduct. The basic amount of the fine shall reflect the particular competitor’s sales of goods to which the infringement directly or indirectly relates in the relevant geographic market (hereinafter referred to as “value of sales”), characteristic gravity of the anticompetitive conduct and the duration of the anticompetitive conduct.
19. In determining the value of sales by an undertaking, the Office will take that undertaking’s best available figures and information which are of the highest indicative value. Where the figures made available by an undertaking are incomplete, evidently incorrect or not reliable, the Office may determine the value of its sales on the basis of the partial figures it has obtained and/or any other information it regards as relevant and appropriate (e. g. survey made by an expert from relevant area).
20. The Office will determine gravity of the infringement case by case for all types of anticompetitive conduct, because during the determination of gravity of the infringement the Office has to have regard to considerable number of facts, which character and importance varies according to different types of conduct and its different circumstances. Especially impacts on competition and on consumers shall be taken into account.
21. As actual decision practice, not appealed by the administrative courts, indicates there can be distinguished three basic categories of anticompetitive conduct, possibly punishable pursuant to art. 22 par. 2 of the Act, varying in characteristic threat for the competition.
22. The category of the most serious infringements consists mainly of price fixing horizontal agreements, agreements on division of market or output-restriction agreements, abuse of dominant position of undertakings with significant impact on broader group of consumers, implementation of mergers contrary to legitimate approval of the Office and non fulfilment of the measures imposed by the Office pursuant to art. 18. par. 5 of the Act.
23. The Office considers other horizontal agreements, vertical price fixing agreements relating to resale of goods, vertical agreements on division of market, other particular abuse of dominant position or infringements of the prohibition of mergers implementation pursuant to art.18 par.1 in cases different from those stated in article 22 above, as serious infringements,.
24. The Office considers other vertical agreements of lesser importance with limited impact on consumers, which have afflicted only small proportion of the market, and other less serious distortions of the competition, as less serious infringements.
25. The Office, in accordance with the Commission´s guidelines on the method of setting the fines, when setting amount of fine has so far distinguished three categories of administrative infringements according to the duration of the anticompetitive conduct, namely, short-period anticompetitive conduct (from 0 up to 1 year), medium-period (from 1 up to 10 years) and long-period (longer than 10 years).
26. Aforementioned distinction seems to be insufficient, regarding the wide spectre of model situations which can occur – from anticompetitive conduct consisted in one-time action to decades-lasting infringement, hence up to now used distinction has no longer relevant reflection to relate the duration of anticompetitive conduct and particular amount of the fine.
27. The Office, in accordance with the Commission’s procedure, will henceforth focus on more precise assessment of duration of the anticompetitive conduct and will project particular period of duration of participation in anticompetitive conduct rounded to one year.
28. The basic amount of fine shall be set as share of the value of sales (so-called basic share) multiplied by the time coefficient.
29. Basic share shall be set depending on the degree of gravity of the illegal conduct, generally
- Up to 3 % of the value of sales on the most serious infringements
- Up to 1 % of the value of sales on serious infringements , and
- Up to 0.5 % of the value of sales on less serious infringements.
30. While determining the basic share for fine the Office will have to have regard especially to common market share of all participating undertakings, the geographical scope of the infringement and whether or not the infringement has been implemented; this should not be applied if abovementioned circumstances have already been taken into account when assessing gravity of the infringement.
31. Time coefficient shall be set proportionally to number of years of infringement duration, whereas periods of less than one year will be counted as one and periods longer than ten years will be counted as three.
32. Having determined the basic amount of fine, the Office will examine aggravating and mitigating circumstances that, relating to particular competitors, might result in an increase or decrease in the basic amount of fine. All aggravating and mitigating circumstances should be examined both separately and in the mutual context.
33. The basic amount of the fine may be increased if there are aggravating circumstances, such as:
a) The participant had a leading role or initiated the infringement in relation to other undertakings;
b) The participant committed infringement intentionally;
c) The participant took steps to coerce other undertakings to participate in the infringement distorting the competition;
d) The participant has, by legitimate decision, already committed anticompetitive conduct distorting the competition; particularly identical conduct committed in the past should be considered as especially aggravating (e. g. repeated conclusion of agreement on division of market);
e) The participant introduced retaliatory measures against other undertakings with a view to enforce the practices constituting the infringement.
Having considered all the aggravating circumstances the Office can increase the basic amount of fine by up to 50 %
34. The basic amount of fine may be additionally reduced where the Office finds that mitigating circumstances proved during the proceeding toexist, such as:
a) The participant has been in passive or “following” role in relation to other participants concerned;
b) Where the participant has effectively cooperated with the Office and evidence provided by the participant contributed to investigation of the case; Leniency programme application is not afflicted;
c) The participant terminated its participation in anticompetitive conduct before initiating of the Office’s investigation or as soon as the first step had been taken by the Office during the investigation or after the Office’s inspection; this should not be applied in case of secret anticompetitive conduct;
d) The participant committed infringement as a result of negligence;
e) Where the undertaking demonstrates that its involvement in the anticompetitive conduct was limited (applicable especially if the undertaking provides evidence that, during the period in which it was party to the agreement distorting the competition, it actually avoided applying it by adopting its own competitive conduct in the market).
Having considered all the mitigating circumstances the Office can decrease the basic amount of fine by up to 50 %
35. The Office will not consider as mitigating circumstance the fact that the participant’s involvement in the infringement was shorter than others´, for this circumstance is taken into account during the setting of basic amount of fine. In cases of intentional anticompetitive conduct the Office shall not consider as mitigating circumstance the fact that the party to the proceeding conducted single-shot, or more precisely unrepeated infringement.
IV. Specific situations
36. The fine imposed is able to fulfil its basic principal, i. e. repressive and preventive function, only when significant in such way, that who have acted in breach of the law will not consider such conduct as profitable. If the competitor gained a profit while involved in anticompetitive conduct, eventually caused harm to other competitor and/or competitors through this conduct, the fine, in order to fulfil all the abovementioned functions, should be higher than gained profit or caused harm. In cases where the unjustified profit, gained as a result of anticompetitive conduct, or harm caused can be adequately estimated, the Office will increase the amount of fine in order to exceed the amount of profits or caused harms.
37. If the application of abovementioned principles does not lead to the imposition of fine which constitutes, in relation to particular competitor, adequate deterrent effect, to that end the Office will increase the fine to be imposed on undertakings which have a particularly large turnover from the sales of other goods or services than to which the infringement relates.
38. In certain cases, where suitable and appropriate, the Office may impose only a symbolic fine, regardless the amount of the fine which may have been imposed pursuant to these guidelines. This can be the situation of infringements which consist of minor threat, committed as a result of negligence, infringements not having negative impact on market, infringements without aim of distorting the competition, and especially of such merits of the case that have not yet been the object of the Office’s decision-making practice.
39. In exceptional cases, the Office may, while setting the fine, take account of the undertaking’s long-term inability to pay, if provided with objective evidence, proving that imposition of the fine according to these guidelines would irretrievably jeopardize the economic viability of the undertaking concerned. On the contrary, no reduction of fine will be granted on the mere finding of an adverse or loss-making economic situation.
[1] Guidelines on the method of setting the fines imposed pursuant to Article 23 (2) (a) of Regulation No 1/2003.
[2] See CFI Case T-279/02 from 6. 4. 2006, Degussa v Commission.
[3] See CFI Case T-33/02 from 29. 11. 2005, Brittania Alloys & Chemicals v Commission.
[4] CFI Case T-279/02 from 6. 4. 2006, Degussa v Commission.
