Fuels distribution - 313 million CZK fine

Chairman of the Office for the Protection of Competition, in his second stage decision of 31 May 2004, confirmed the highest fine ever imposed by the Office in its history.

 Sanction amounting in total to 313 million CZK was imposed on undertakings Agip Praha, a.s. (20 mil.), Aral ČR, a.s. (40 mil.), BENZINA a.s. (98 mil.), ConocoPhillips Czech Republic s.r.o. (22 mil.), OMV Česká republika, s.r.o. (68 mil.) and Shell Czech Republic a.s. (65 mil.).

The mentioned undertakings provably violated the Act on Protection of Competition by entering into concerted practices aimed at fixing sale price for car petrol Natural 95 sold by their petrol stations in the period beginning on 28 May 2001 and ending on 30 November 2001. This practice was aimed at restricting competition on the market of the car petrol delivered to consumers.

Concerted practice means a certain form of co-operation or coordination of competitors‘ activities, which replaces their independent behaviour. The coordination has the object of preventive removing any doubts related to competitors’ future behaviour and trying to replace risks resulting from competition by illegal concerted practices. The substance of this prohibited conduct consists in a horizontal price agreement that constitutes one of the most serious anticompetitive offences (so called hard core cartel) because it leads to increase in prices above competitive level and consequently to decrease in competitive pressure on enhanced cost efficiency and innovation.

In the period from 28 May to 31 May the participants to the proceeding agreed on considerable increase in sale prices for petrol Natural 95 by almost the same amount of 1 CZK per litre practically at all their petrol stations. However, there was no factual reason for this rise in Natural 95 sale prices on the market, as cost of purchases of this product had been showing descending tendency since approximately 16 May 2001. The participants to the proceeding were keeping the high level of Natural 95 sale price until the end of November 2001 despite the continuing trend of a considerable decrease in purchasing prices. For the practices of the participants to the proceeding in the given period there is no other justification than their previous mutual influencing on the basis of their direct or indirect contacts which the Office managed to prove within the Czech Association of Petrol Industry and Trade (ČAPPO) and by means of their press statements regarding their plans of intended adjustments to fuels sale prices.

As regards the gravity of violation of the Act, the fact that concerted practices between undertakings on horizontal level related to prices belong to the most serious violation of the Act seems to be fundamental for setting the amount of the fine. The damage was caused especially to consumers as they were not able to buy petrol Natural 95 from the participants to the proceeding at competitive price in the period beginning on 28 May and ending on 30 November 2001. The mentioned undertakings had no objective justification for increasing their prices because the petrol purchase prices were permanently decreasing in the period starting in May 2001. Despite this fact, at the end of May the distributors increased suddenly the price by practically the same amount of 1 CZK, which was maintained until the end of November.

It is not possible to pass on the fine imposed on the participants to the proceedings into the cost for setting sale price. According to the Income Tax Act it is not possible to recognise administration sanctions for tax purposes as cost spent on achievement, arrangement and maintenance of incomes.

Press and Information Department