Czech Republic: Sanctions, Dawn Raids and Soft Law Mechanisms – What is on the 2023 Horizon for the Czech Competition Office?

The Czech Office for the Protection of Competition (“Office”) has recently published its annual report on its activity in 2022 (“Report”). In addition to reflecting on milestones such as a record number of dawn raids, the Report sets out the Office’s priorities for 2023. See the key takeaways from the Report below.

A Fine (& Dawn Raid) Year to Look Back on

Apart from additional activity brought by the Czech presidency of the Council of the EU in the second half of 2022, the Office maintained a high pace in its market monitoring and sanctioning agenda. At first instance, the Office has handed out a total of CZK 437 million (approx. EUR 18.5 million) in sanctions for anticompetitive behaviour throughout the year. This number significantly exceeds the totals in recent years. About 85% of the total amount relates to sanctions for cartel agreements, while the remainder mostly sanctioned vertical agreements and dawn raid obstruction. The highest single sanction was a fine of CZK 280 million (approx. EUR 11.9 million) handed down for a cartel agreement of meal voucher producers.

Dawn raids also represent a notable item in the Report, as the Office carried out its historically highest amount of dawn raids during 2022, having visited dozens of competitors. With this rise, the Office also notes a rise in dawn raid obstruction. In five cases, the Office has handed out stringent sanctions for dawn raid obstruction, which may reach up to 1% of the firm’s annual turnover or CZK 300,000 (approx. EUR 12,700), whichever is higher. The Office remains determined to sanction such obstruction heavily.

Competitive Priorities for 2023

The Office states that its focus for the upcoming year will remain on battling “hard core” cartel agreements, i.e., horizontal agreements on price, market division, production restriction or bid rigging, as well as tackling dominant position abuses. Within vertical agreements, the Office will focus on price setting and practices restricting the use of the internet as a distribution channel. However, the Office will focus its attention with regard to verticals on larger competitors with significant market power. Furthermore, the Office aims to investigate so-called no-poaching agreements, which address maximum wages or non-solicitation of employees.

In the area of merger control, the Office intends to consider applying Article 22 of the EU Merger Regulation in relevant cases. This allows the Office to request the European Commission to review a merger even if the turnover thresholds are not met. The requirements are that the merger affects trade between Member States and threatens to significantly affect competition.

The Office is keen to continue its support of preventative measures for competition protection. It further intends to regard the implementation of effective compliance programmes as a mitigating factor when issuing sanctions. It also aims to encourage private law damages claims arising from anticompetitive behaviour.

Food Industry Adapting to Regulatory Changes and Sector Investigation

Effective as of 1 January 2023, the Act on Significant Market Power (“Act”) has been amended and its scope of application extended to hundreds of additional firms. Newly, the regulatory obligations in the Act focus not only on consumer-facing competitors on the food market, but also on competitors throughout the supply chain up to the primary producers.

In anticipation of the market adapting to these changes, the Office aims to expand its activities in this area, primarily in raising awareness and prevention, but ultimately also in monitoring and sanctioning.

Following the recently published pharmaceutical sector investigation report (see our summary here), the Office is also conducting an accelerated sector investigation into the markets of several basic food products, largely owing to sharp price increases. Furthermore, the Office aims to launch another sector investigation during 2023.

Changing the Rules of the Game

Last but not least, the Office will also remain active on the regulatory front. The Czech Republic has not yet fully implemented the ECN+ Directive and is currently faced with sanctions proceedings for failing to meet its implementation deadline. As a result, passing the implementing act, a draft of which is currently in Parliament, remains a priority.

The Office also intends to revise its soft law mechanisms, namely in the area of sanctioning, its leniency programme, settlement options and alternative resolutions for competition issues. It remains prepared to discuss these changes with the professional public.

As indicated by the Report, the upcoming year promises to be ambitious for the Office and offers plenty for the industry to keep an eye out for.

The Office’s press release containing the annual report can be found here (in Czech only)

For more information, please contact Vojtěch Chloupek and Martin Taimr.

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