Criminal Sanctions for Anticompetitive Conduct in the Czech Republic

European Competition DayBrno, 13 May 2009

Martin Nedelka, Schönherr Prague/Brussels

2

Legal Framework

Current Criminal Act

• Sec. 127

• Penalises: “serious infringement to business conduct rules set forth by legal act committed with the aim to gain a considerable unjustified advantage”

New Criminal Act

• Sec. 248 (2)

• Penalises: “concluding an agreement on price-fixing, agreement on market sharing or other agreement disrupting competition with its competitor”

• Effective as of 1 January 2010

3

Current Criminal Act (1)

• Applies to: all infringements of competition rules –vertical and horizontal agreements, abuse of dominant position and the implementation of a concentration without prior approval

• Sanction: imprisonment of up to 5 years, disqualification or financial penalty

4

Current Criminal Act (2)

• General formulation

• Unclear responsibility of the offenders (= natural persons only)

• Never applied in practice

• No deterrent effect

5

New regulation adopted

6

Aims of New Regulation

• Penalise only the most serious anticompetitive conduct

• Emphasis on deterrent effect

• Clarify the criminal responsibility of the offenders

• Make a clear distinction between the responsibility of legal and natural persons

7

New Criminal Act (1)

• Applies to: horizontal agreements(?)

• Addressees: natural person “who enters in an agreement on price-fixing, agreement on market sharing or other agreement disrupting competition with its competitor”

• Sanction: imprisonment of up to 8 years, financial penalties, disqualification or expropriation

8

New Criminal Act (2)

Only Horizontal Agreements?

• Also applicable to vertical agreements? – “other agreements disrupting competition”

Addressees?

• Under Czech law, legal persons are not liable for criminal offences

• Natural persons usually are not parties to cartel agreements

9

New Criminal Act (3)

• Natural persons usually act only as members of an executive body of the respective legal person – they do not act for themselves

• Can a member of an executive body of a legal person “enter into a cartel agreement with its competitor”?

• Extensive interpretation of the provision so that it also covers the conduct of members of a legal person‘s executive body?

10

Further Problematic Issues of Criminal Prosecution

• Two proceedings/sanctions for one conduct (administrative and criminal)

• Low awareness of offenders about the criminal consequences of their anticompetitive conduct

• Insufficient practical experiences of police/state attorneys

• Jeopardises the leniency programme?

11

Conclusions

• The new Criminal Act aims at the most serious infringements only

• Problem of unclear responsibility not solved

• No substantial change in the current situation

The new Criminal Act does not provide a clear solution to “old problems”

12

Thank you.

13

Schönherr – a European firm

14

SRB-11000 Beograd, Francuska 27T: +381 11 320 26 00, F: +381 11 320 26 10, E: office@schoenherr.co.yu

Belgradein the market since:

2002

SI-1000 Ljubljana, Tomšičeva 3T: +386 1 200 09 80, F: +3861 426 07 11, E: office@schoenherr.si

Ljubljanain the market since: 2001

RO-010413 Bucureşti, Blvd. Dacia Nr. 30, Etaj 4, Sector 1 T: +40 21 319 67 90, F: +40 21 319 67 91, E:office@schoenherr.ro

Bucharestin the market since: 1996

B-1000 Bruxelles, Avenue de Cortenberg 52T: +32 2 743 40 40, F: +32 2 743 40 49, E: office@schoenherr.be

Brusselsin the market since: 1996

Zagrebin the market since: 2001

HR-10000 Zagreb, Ul. kneza Branimira 29 (Branimir Centar)T: +385 1 481 32 44, F: +385 1 481 30 73, E: office@schoenherr.hr

Sofiain the market since:2004

BG-1000 Sofia, Alabin 56T: +359 2 933 10 70, F: +359 2 986 11 05, E: office@schoenherr.bg

Viennain the market since: 1950

A-1010 Vienna, Tuchlauben 17T: +43 1 534 37 0, F: +43 1 534 37 6100, E: office@schoenherr.at

H-1024 Budapest, Buday László utca 12. T: +36 1 345 45 35, F: + 36 1 345 45 43, E:office@schoenherr.hu

Budapestin the market since: 2008

CZ-11000 Prague 1, nám. Republiky 1079/1aT: +420 225 996 500, F: +420 225 996 555, E: office@schoenherr.cz

Praguein the market since: 1992

SK-81106 Bratislava, 1. mája 18 (Park One) T: +421 252 622 950, F: +421 252 622 954, E:office@schoenherr.sk

Bratislavain the market since: 2009

UA-01033 Kyiv, 44 Shota Rustaveli, 3rd floorT: +38 044 220 10 46, F: +38 044 220 10 45, E: office@schoenherr.co.ua

Kyivin the market since:

2006

PL-00120 Warszawa, ul. Złota 59T: +48 22 222 42 00, F: +48 22 222 42 99, E: office@schoenherr.pl

Warszawain the market since:

2009