The forthcoming amendment to the competition act is set to significantly strengthen the powers of the Office for the Protection of Economic Competition (the “Office”) once again. Its final form is not yet certain, but we believe that some fundamental changes will find their way into the final text in one form or another. In this new series of articles, we will therefore highlight the biggest “spooks” that companies and their management should be aware of. We will show what they could mean for business, where the limits of the Office’s new powers lie, and how to prepare for them in good time.
What’s happening and why you should care
Imagine that the Office orders you to sell off part of the business you have spent years building up. Yet it will not prove that you have breached the competition rules. In the worst-case scenario, the powers to be granted to the Office under the proposed amendment could extend that far.
For business owners, this is a good reason to be on their guard. However, managers, employees and those involved in preparing acquisitions should also be on the alert – the proposed amendment may have a significant impact on their personal finances, careers or business plans.
With Halloween fast approaching, we’re therefore launching a seven-part series on the spookiest creatures lurking in the draft amendment. We’ll explain who might be affected by the various changes and how to prepare for them.
The Office no longer has to rely solely on its own findings
The amendment continues the long-standing trend of strengthening the Office’s powers. Previous amendments had already enabled the Office to use police wire-tap records and other information from criminal proceedings when uncovering secret agreements.
Besides, the Office has also been strengthening its cooperation with other public authorities, including the Czech Police, over the long term. This is a natural symbiosis – the police can draw on the Office’s expertise when investigating criminal offences relating to competition and public procurement, whilst the Office can draw on the findings obtained by the police during investigations into anti-competitive offences. It is important for companies and their management to bear in mind that entering into certain prohibited agreements may constitute a criminal offence. We expect that the number of criminal prosecutions relating to competition law may rise.
Furthermore, the amendment is intended to expand the Office’s access to information and data collected by other institutions. We’ll show you how these resources can be used and what this means for businesses.
Sale of a part of business without any proven breach of the law
Behind what is probably the most significant change lies a relatively simple line of reasoning: competition in the market may fail in the long term even in the absence of any anti-competitive conduct. These situations are to be addressed by NCT – the New Competition Tool.
Following a market investigation, the Office could impose measures to promote competition. In extreme cases, it could even order the compulsory sale of a part of the business.
It will be crucial for businesses to know under what conditions the Office is permitted to intervene in this way and how they can defend themselves against its actions. We are therefore devoting two instalments to the NCT: the first will explain when it can be used, whilst the second will outline specific measures and their limitations.
An individual may also be held liable for cartel activity
The draft envisages individual fines and a ban on carrying out professional activities for managers or employees who deliberately enter into a cartel agreement on behalf of the company or are involved in organising such an arrangement. They may therefore feel the consequences both in their own wallets and in their future careers.
We will explain what kind of behaviour could lead to them facing sanctions. We will also advise on what to include in internal policies and training plans to ensure that those responsible for sales are aware of these risks.
Even acquisitions below the turnover thresholds may not escape the Office’s attention
When preparing a transaction, verifying the turnover thresholds for mandatory notification is one of the standard steps. However, a transaction may now fall below these thresholds and still require authorisation from the Office.
What is known as call-in is intended to enable the Office to request notification of certain such concentrations, even after they have taken place. For both buyers and sellers, this represents a significant blow to legal certainty: even once a transaction has been completed, the matter of its review may not be closed. They will therefore have to address the risk of further intervention by the Office as early as the negotiation stage. We will explain when the Office can make use of a call-in and how to take this risk into account in both the transaction timetable and the contractual documentation.
We will also look separately at raising the turnover thresholds and extending the simplified procedure. These changes are intended to reduce the number of transactions subject to mandatory reporting and to simplify the authorisation process for some of the remaining transactions.
What will happen to the records seized during the on-site investigation?
The Office is to be given the power to complete investigations outside a company’s business premises. To this end, it could take copies of the documents and records away and continue to examine them at its own offices.
This represents a fundamental change for businesses. It is precisely from these records that the vast majority of the evidence originates, which the Office subsequently uses in administrative offence proceedings. In this series, we will explain how this process should be carried out and how to effectively defend the company’s rights throughout it.
Where and when to start preparing
The amendment may expose businesses to significant new risks. We’ll have to wait a little longer for its final form, but it’s already worth finding out which of the changes might be particularly significant for your company.
In subsequent instalments, we will therefore combine an explanation of the individual changes with specific recommendations: what to check, who within the company to involve, and how to adapt existing procedures where necessary. We will also look at your options for defence should the Office exercise its new powers against your company.
