The investigation of anticompetitive conduct is a demanding and complex discipline, often requiring extensive examination of the functioning of the markets concerned and the interactions between market participants. Securing evidence can be complicated. It can also be time-consuming to analyse. But is it so different from the investigation of other administrative or criminal offences as to justify such significant departures from the general principles of administrative punishment, let alone criminal proceedings? Judge for yourself.
The second episode of the series "Amendment to the Czech Competition Act in a Nutshell" is devoted to new developments concerning the conduct of proceedings and the taking of evidence by the Office for the Protection of Competition (OPC). As we have already mentioned in the previous episode, some of the amendments are transpositions of the ECN+ Directive into the Czech Competition Act (CCA), some are purely from the pen of the Czech legislator, or of the OPC. Most of the amendments listed below were not demanded by EU law, but were adopted on the initiative of the OPC.
When will I find out what specific act the OPC is accusing me of?
In both criminal and administrative punishment proceedings, the rule is that the person under investigation is informed of the description of the act it is suspected to have committed at the outset of the proceedings. According to the established case law, both of the Supreme Court in criminal cases and of the Supreme Administrative Court in cases of administrative punishment, the description of the act is an essential part of the decision to initiate proceedings (in criminal proceedings, it is a statement of charges). The absence of a sufficient description of the act is perceived as an unacceptable interference with the rights of the defence and the right to a fair trial (the party to the proceedings does not know, in principle, what charge to defend against).
Even for the OPC, the obligation to define the subject matter of the proceedings in the notice of initiation of proceedings by describing the act of which the party is suspected was still in force. It was based on Section 78(3) of the Act on Liability for Misdemeanours. However, the amendment to the CCA now explicitly excludes the application of this provision. In the explanatory memorandum, the OPC only dryly states that "the accused is informed in detail about the factual and legal qualification of the act in the statement of objections." This completely ignores the fact that the communication of objections to the "accused" in the proceedings for anti-competitive conduct occurs only at the very end of the proceedings, i.e. (just) before the decision is issued.
It should be noted that administrative proceedings in competition cases normally last for a year or more in the first instance, during which time the OPC actively collects information and supporting documents. In contrast, a party to the proceedings will now typically have only four weeks from the statement of the “charges” (objections) to prepare an effective defence. This is the normal time limit for commenting on the documents on which the decision shall be based.
The OPC refers to Section 46(1) of the Administrative Procedure Code, which generally obliges administrative authorities to state the subject matter of the proceedings in the decision initiating the proceedings. However, it no longer specifies how the subject matter of the proceedings should be stated, and the OPC itself declares that “in many cases it is necessary to formulate the subject matter of the proceedings in somewhat more general terms.” The reason given by the OPC is that it has only "partial knowledge" of the anticompetitive conduct when it initiates proceedings. It is clear from the wording of the adopted amendment and the text of the explanatory memorandum that, unlike Section 78(3) of the Act on Liability for Misdemeanours, the OPC does not perceive Section 46(1) of the Administrative Procedure Code as too restrictive.
While it is true that describing anticompetitive conduct is more difficult than describing leaving a car in a no-parking zone, even in competition cases a party has the right to know what act it is being charged of. The definition of the act in the notice of initiation of proceedings by the OPC has been reviewed by the administrative courts in the past and has led to the annulment of several decisions of the OPC.
The purpose of a sufficient definition of the act is not only to inform the party to the proceedings of what it has to defend, but also of the extent to which it is obliged to cooperate with the OPC. If it does not know the scope of the charges, how can it tell whether the request for information from the OPC has not yet exceeded the boundaries of the proceedings in question or whether, on the contrary, it is not appropriate to invoke the prohibition on self-incrimination? For fear of incurring a heavy fine, it may then submit more information than the OPC is entitled to.
We are curious to see how the OPC will deal with this change in the regulation of the initiation of proceedings in practice and how the administrative courts will subsequently treat the statutory regulation and its interpretation. We would expect that they will continue – despite the change in the statutory regulation – to require that the OPC describe the alleged act with sufficient specificity in the notice of initiation of proceedings.
A complaint to the OCC as a continuation of a competition struggle?
Another important change in the procedural rules is the possibility to conceal the identity of the complainant.
The OPC may learn about possible anticompetitive conduct from various sources. It may become aware of it through its own monitoring and analysis of markets (e.g. sector inquiries), it may be informed by other public authorities (e.g. law enforcement authorities) or, in the case of cartels, through a leniency application by the cartel member itself.
However, persons affected by the anticompetitive conduct are also an effective source of information. In addition to competitors, these are mainly suppliers or customers. However, they may sometimes fear that they will be subject to retaliation by the investigated entity in the event of a complaint to the OPC. The OPC will not learn of the anticompetitive conduct at all. This may then continue and exacerbate existing distortions of competition in the relevant market.
Therefore, the possibility of submitting a complaint to the OPC in such a way that the investigated entity does not learn of the identity of the complainant is introduced. Of course, there is still the possibility to send a complaint to the OPC anonymously. However, such a procedure has one major limitation for a successful investigation of possible anticompetitive conduct: the OPC has no possibility to contact the complainant and ask him to explain or provide more detailed information.
The regulation brought about by the amendment to the CCA has a rational basis. However, the adopted rules do not further regulate the form and extent of the confidentiality of the complainant's identity or the conditions for the complainant's knowledge of the content of the complaint. Concealment of identity may, in certain circumstances, constitute a significant interference with a party's rights of defence. The manner of concealment (e.g. by keeping the complaint outside the file, redacting out information identifying the complainant in documents, etc.) corresponds to the intensity of the interference with the rights of the defence.
We consider, for example, that if the OPC had conducted an unannounced onsite investigation (dawn raid) on the basis of a complaint, the party to the proceedings should have had the opportunity to acquaint itself with the complaint. Only in this way can it assess whether the OPC actually had sufficient suspicions to justify a dawn raid. In extreme situations, however, the identity of the complainant, or at least its position vis-à-vis the entity being investigated, may also be relevant to the context of the whole case.
Indeed, we know from practice that a complaint can sometimes be used in the context of a competition struggle. In such cases, if the subject of the investigation were aware of this information, it could very quickly explain the circumstances of the complaint, which the OPC may not be aware of at all. The impossibility of such a procedure may lead to long investigations of cases that have no real basis and only waste the resources of the OPC.
We can only wait to see how the OPC will proceed in concealing identities in specific situations.
When the OPC doesn't know where to actually go on a dawn raid...
If the OPC wanted to conduct a dawn raid under the existing regulation, it had to specify in the mandate the specific premises of the investigated undertaking within which it was to take place. The amendment to the CCA relieves it of this obligation. In its explanatory memorandum, the OPC justifies this by stating that in most cases it is unrealistic to specifically identify all the premises of the intended investigation in advance. In the past, it has happened that the OPC came to conduct a dawn raid at a specific address and only on the spot found out that the persons or documents it wanted to investigate were located in other premises of the undertaking. Here too, therefore, such a regulation seems justified.
However, it should be borne in mind that a dawn raid constitutes a significant interference not only with the right to privacy but also with the very operations of the undertaking (it may paralyse a significant part of its business activities for a considerable period of time). It is not only undertakings suspected of serious anticompetitive conduct that may be investigated. The OPC may also conduct dawn raids on potential victims of anticompetitive conduct, as part of a sector inquiry or merger control.
It is therefore appropriate to require the scope of the dawn raid to be defined as specifically as possible. We see no reason how the OPC should be constrained in practice by the requirement to define the location of the dawn raid. Indeed, the existence of reasonable suspicion as a condition for a dawn raid is directly linked to the idea of where the documents and information for the dawn raid may be located. Conversely, the discretion as to “where to go” necessarily tempts the use of this tool to search for what the undertaking being investigated might actually be accused of (fishing expeditions). It is therefore legitimate to demand that the OPC do its homework before conducting a dawn raid.
We assume that in most cases, the OPC will do so as well. However, one should be prepared for the possibility that the OPC will, for example, arrive at an undertaking’s headquarters in the morning, discover on the spot that it is actually interested in persons located at one of the branches, and move to that branch without further ado (or that it will anticipate such movement in advance). We are convinced that if the OPC were to overuse this possibility, it would be contrary to the principles of good administration.
I will no longer hide from the OPC abroad
Any decision or other procedural act of a competition authority is effective against its addressee only upon its delivery. However, the fact that an undertaking does not have its registered office or branch in the Czech Republic will not save it from the OPC.
Based on the ECN+ Directive, the amendment regulates international cooperation between the competition authorities of EU Member States. Thus, if the OPC issues a decision, a statement of objections or wishes to send a request for information to an undertaking, it can now use a simple system of international cooperation between the competition authorities of EU Member States. The competition authority of the Member State in whose territory the undertaking concerned is established will deliver the relevant document on its behalf.
The above-mentioned changes brought about by the amendment appear to be mostly minor revisions (in numbers, words, short provisions). However, as you can see from our comments, they represent a major interference with long-established processes - not only on the part of the OPC, but also on the part of undertakings and their counsels. It will depend primarily on specific practice, or how the OPC interprets and uses these rules in its procedure. We can already state, for the second time in this series: The amendment to the CCA unties the OPC's hands and complicates the procedural situation of the investigated undertakings. And you can guess whether this statement will be made in the next two episodes or not.