Czech Republic: Council Regulation (EC) No.1/2003 on the Implementation of the Rules on Competition Laid Down in Articles 81 and 82 of the Treaty

On 1 May 2004 the Czech Republic becomes together with nine other accessing countries a member of the European Union. On the same day the new Council Regulation of the European Union No.1/2003 on the implementation of the rules of competition laid down in Articles 81 and 82 of the Treaty shall become effective. This regulation shall replace the Council Regulation No 17 of 6 February 1962 valid so far, which implemented these articles of the Treaty for the first time. The regulation shall have direct effect in all Member States of the European Union including new Member States.

Pursuant to Art.81 of the Treaty, all agreements between undertakings, decisions by associations of undertakings and concerted practices, which may affect trade between Member States and the object of which is to restrict the competition within the common market, shall be prohibited. This applies mainly to agreements, which directly or indirectly fix purchase or selling prices or other trading conditions, limit or control production, markets, technical development or investment, share markets or sources of supply, apply dissimilar conditions to equivalent transactions with other trading parties, make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which have no connection with the subject of such contracts. These prohibited agreements and decisions shall be void.However, provided that the above- mentioned conduct contributes to improving the production or distribution of goods or to promoting technical or economic progress pursuant to Art.81 para.3 of the Treaty while allowing consumers a fair share of the resulting, the prohibition does not apply to the agreements in question.

The Treaty further prohibits any abuse of the dominant position within the common market or in a substantial part of it in Article 82 in so far as it may affect trade between Member States. The most important amendment established by the Council Regulation No.1/2003 shall be the cancellation of the system of obligatory notifications of all new agreements, decisions and concerted practices to the Commission with respect to the fact that the enlargement of the European Union by ten new members would lead to excessive increase and consequently to overloading of the Commission with this agenda. Therefore, the new legal regulation changes this system and gives undertakings more freedom in entering into agreements and accepting concerted practices but it also delegates more responsibility to them for their conduct. This means that undertakings shall not notify new agreements or concerted practices but in cases that the Commission or a national competition authority, on its own initiative or on a complaint, finds an infringement of competition rules laid down by the Treaty, proceedings against undertakings or associations of undertakings shall be initiated. The Commission or the national competition authority may require within their powers that an infringement be brought to an end, order interim measure, accept commitments or impose a fine or periodic penalty payments. An important fact is that in the proceedings the burden of proof shall rest on the party alleging the infringement, however,if the undertaking or association of undertakings invokes the fulfilment of conditions for the application of Art.81 para.3 of the Treaty, the burden of proof shall bear on it.

The Commission together with national competition authorities shall form a network of public authorities applying Community competition rules in a close cooperation. For that purpose they shall exchange information and provide consultations to each other. As a part of the cooperation national courts having jurisdiction over disputes concerning competition shall forward to the Commission copies of written judgments applying Articles 81 and 82 of the Treaty. The Commission and national competition authorities of Member States may submit written observations to the national court or take part in aproceedings but only upon the previous permission of the affected national court. However, it is necessary to emphasize here that national courts shall not take decisions contrary to the present decision practice of the Commission for the purpose of maintenance of the uniform application of Community competition law. The decision of a national court shall not be contrary also to the decision contemplated by the Commission. In such case the national court may assess the suspension of the proceedings.

The Commission may initiate a procedure in case of the infringement of provisions concerning the application for information within three years and in case of the other infringements within five years. In principle, the term begins to run on a day on which the infringement is committed. A term of five years was fixed for the enforcement of the decisions of the Commission, by which fines or periodic penalty payments were imposed. All decisions of the Commission imposing fines or periodic penalty payments may be reviewed by the Court of Justice which may cancel, reduce or increase the fine or the periodic penalty payment imposed. As from January 1,2004,this notification obligation has been cancelled for all individuals. Only in specific cases, the Czech National Bank can call upon individuals to notify such purchase on its special request. The notification obligation has also been cancelled for deposits in foreign banks. All of this is related to individuals. The notification obligation has remained in force for purchase of foreign securities as well as deposits in foreign banks abroad for any transaction above 1 mil.CZK if such transaction is done by legal entities. Smaller transactions are not subject to any notification at all.