A historical first internal compliance program leads to reduced fine by Czech Competition Office

At the end of September, the Czech Office for the Protection of Competition (“Office”) concluded proceedings against Z - Trade s.r.o. (“Z - Trade”), a luxury candle distributor who was found to have breached Czech and EU competition law by vertically setting prices of its products. Z - Trade received a fine of close to CZK 18 million CZK (approx. EUR 730,000). Notably however, for the first time ever the Office took into account the existence of an internal compliance program and decided to reduce the fine.

The investigation into Z - Trade found that the company had over a period of at least seven years been entering into agreements with subsequent distributors to set minimum retail prices for candles and “aroma products” which it supplies to them. Cooperation with Z - Trade was made conditional upon accepting these agreements and the minimum prices were regularly monitored by the company. In several cases, Z - Trade had terminated cooperation with its business partners when the minimum end prices were not maintained. 

During the proceedings, Z - Trade made use of the so-called “settlement” option and admitted to its wrongdoings, which led to a 20% decrease of the amount to be paid in fines. In addition, the Office also decided to take into account the fact that Z - Trade had set up a compliance program aimed at preventing breach of regulation by its employees, management and representatives. This led to a further decrease in the fine delivered, marking the first time in the Office’s history that a compliance program factored into such a decision. 

The Office emphasised its intention to recognise the effort of businesses setting up internal prevention rules for compliance with competition law and it aims to reflect this in its fines awarded. According to its Compliance Program Consideration Policy, the Office will take such programs into account if:

• the compliance program already exists or, alternatively, the company has implemented it following the Office’s investigation;
• the compliance program seems sufficient, reflecting the size and market power of the company, as well as the type of market it operates in;
• the company successfully made use of the leniency program and/or settlement option within the proceedings at the Office; and
• the breach of competition regulation occurred without the knowledge of the management or corporate agents of the company.

It should be noted that the Office will evaluate the quality and effectiveness of the compliance programs and will give greater weight to existing programs over programs installed in reaction to its investigation. Compliance programs “on paper” are therefore unlikely to play a role. Timely cooperation with the Office also remains a significant factor in affecting the sanction, partly since consideration of a compliance program is made conditional upon opting into leniency or settlement programs. 

The decision is undoubtedly welcomed as it provides an additional incentive for companies to implement effective compliance programs and underlines the Office’s intention consider them in their decision-making process.

The Office’s press release regarding the decision can be found here (in English) and the Compliance Program Consideration Policy can be found here (in Czech).

For more information, please contact Vojtěch Chloupek or Martin Taimr and visit our Competition & EU homepage.