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The Slovak Parliament adopts the Act on Protection of Competition which implements the provisions of the ECN+ Directive

The implementation of the Directive 2019/1 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market (ECN+ Directive) is a topic that resonates in competition law circles all over the EU. In Slovakia, the legislator has used this opportunity to adopt the entirely new Act on Protection of Competition, replacing the piece of legislation originally adopted in 2001, and amended nine times since. The legislative procedure sparked massive interest, with over 350 comments submitted on the proposed draft, often going far beyond transposition of the ECN+ Directive. The resulting legislation is a compromise that implements the provisions of the directive and addresses several practical problems. However, it leaves other controversial topics such as inspections, and the investigative powers before initiation of formal proceedings, unchanged.

In this article, we will briefly summarise the most important changes under the new Competition Act in general, and in the antitrust field. Changes in the merger control area will be explored in a separate article.

The concept of “undertaking”: Finally harmonised?

The concept of “undertaking” as developed by EU competition law has been strange to Slovak law. In line with the concept known to Slovak law, an “undertaking” has been defined as an entrepreneur as understood by the Commercial Code, and an individual, a legal entity, their associations, and associations of these associations, in connection with their activities and actions that concern or may concern competition, regardless of whether these activities and actions are aimed at achieving profit. The definition of “undertaking” was, therefore, linked to a legal person. As a result, legal entities were acting in antitrust proceedings as separate undertakings, with a fine calculated from their respective individual turnovers.

The new Competition Act adopts the new “European” definition of an undertaking – an entity performing economic activity, or, in connection with its activity or actions that concern or may concern competition, regardless of legal form, existence of a legal personality, method of financing, and whether or not its activity is aimed at achieving profit.

Nevertheless, only a legal entity may act as a party to the proceedings. Under the new Competition Act, in antitrust proceedings concerning agreements that restrict competition or abuse the entity’s dominant position, the party to the proceedings shall be a person liable for participation in an agreement that restricts competition, or for an activity or action that constitutes an abuse of a dominant position; and may include more than one entity belonging to an undertaking. Fines will, however, no longer be calculated from the individual turnovers of the legal entities, but from the worldwide turnover of the entire undertaking. The Slovak competition authority – the Antimonopoly Office of the Slovak Republic (AMO) – is empowered to hold several legal entities, belonging to a single undertaking, jointly and severally liable to pay the fine. As a result, the arguments based on attribution of liability for competition law infringement, and parental liability, will gain importance.

Further, the new Competition Act includes the provisions on economic succession, on the basis of which the liability for infringement shall pass on to the economic successor that continues the economic activity of its predecessor, if the predecessor ceased to legally or factually perform its economic activity. Even though the concept is not new to Slovak competition law practice, this is the first time it will expressly be included in the legislation.

New powers of the Antimonopoly Office

The new Competition Act grants the AMO several new powers, mostly adopted from the ECN+ Directive. First of all, the competition authority will be able to impose three new types of measures:

  • interim measures in case of prima facie infringement, or when needed to secure due and uninterrupted course of proceedings;
  • structural and behavioural remedies in antitrust matters; and
  • measures for restoration or preservation of effective competition in merger control cases.

Interim measures may be imposed in cases of prima facie infringements and to the extent necessary in ongoing proceedings for infringement of prohibition of agreements restricting competition or abuse of dominant position, where there is a serious risk of irreparable damage to competition, or in cases where it is necessary to secure due and uninterrupted course of the proceedings. In an interim measure, the AMO may impose on the undertaking an obligation to perform, refrain from, to permit certain action, or to secure evidence. An interim measure may only be addressed and directed towards an undertaking, and not a witness or a third party. A decision on an interim measure is subject to appeal, and subsequently to court review, and each remedy must be decided in three months, respectively. An appeal and court action, do not, however, suspend the applicability of the interim measure.

Structural and behavioural remedies (titled “measures” in the new Competition Act) may be imposed by the AMO adjudicating matters of anti-competitive agreements or abuse of dominance, if such a remedy is necessary for effective termination of the infringement. Remedies can include behavioural measures, such as an obligation to perform, refrain from, to permit certain action, or structural measures, in particular an obligation to abandon certain rights or assets. With the power to impose structural and behavioural remedies in antitrust cases, the AMO also has the power to appoint an independent monitoring trustee at the cost of the undertaking. It will be interesting to observe how this power will materialise in the future: whether the role of monitoring trustees will be adopted by local lawyers or auditors, or whether specialised foreign companies will be engaged.

The new Competition Act will also expressly address the ongoing prioritisation policy by the AMO. The AMO will expressly gain the power to reject complaints on anti-competitive conduct that are outside its current enforcement priorities.

In line with the ECN+ Directive, the AMO will have the power to summon any representative of an undertaking or association of undertakings, any representative of other legal persons, and any natural person, where such person may possess relevant information, to appear for an interview. The accompanying report to the new Competition Act stresses that the interview is not a witness statement in administrative proceedings. It will be interesting to see how the AMO will approach the principle of no self-incrimination when summoning persons for interviews, since these persons will not formally benefit from guarantees for witnesses or parties to the proceedings.

Last but not least, the legislator is also addressing the relatively common practice of hiring AMO personnel in private practice. For one year after termination of employment with the AMO, any person who, as an employee of the AMO, prepared a decision in case of an anti-competitive agreement, abuse of dominance, or imposition of sanction, participated in assessment of a concentration, or in decision making, shall be prohibited from representing, or advising (providing consultations to) an undertaking in the same matter.

Sanctions

In addition to the changes already mentioned above in connection with redefinition of the concept of an undertaking, important changes are also being introduced to the sanctions system. The time limit for deciding antitrust cases will be three years, compared to the current six months extendable by additional 24 months. The objective limitation period for imposition of sanction (fine or periodic penalty payment) is being extended to ten years from the end of the infringement, from the current eight years.

A fine of up to 10% of the worldwide turnover of the undertaking shall be imposed for “each” infringement of prohibition of anti-competitive agreements, abuse of dominance, failure to notify a concentration, gun jumping, failure to fulfil an AMO decision, and infringement of disqualification from public procurement (imposed for three years in bid rigging cases, in addition to a fine). The accompanying report to the new Competition Act interprets addition of the word “each” as the power to sanction each individual infringement in cases where an undertaking commits several infringements. It remains to be seen whether this provision will indeed result in cumulative fines for several infringements covered by one decision.

Special rules have been introduced for sanctioning infringements of associations of undertakings. If fined for an infringement concerning the activity of its members, an association will be fined up to 10% of the turnover of all its members that were active in the market affected by the infringement. If such an association is not able to pay the fine, it will be obliged to call for contributions from its members. Where these contributions have not been fully made in the time limit determined by the AMO, the authority may require the payment of the fine directly from any of the undertakings whose representatives were members of the decision-making bodies of the association. Where necessary to secure full payment of the fine, after the AMO has required payment from such undertakings, it may also require the payment of the outstanding amount of the fine by any of the members of the association which were active on the market on which the infringement occurred. The only exemption is granted to undertakings that show they did not implement the infringing decision of the association, and either were not aware of its existence, or have actively distanced themselves from it before the investigation started.

Periodic penalty payments, required by the ECN+ Directive, is a new concept under Slovak competition law. Based on implementation of the relevant provisions of the directive, the AMO shall (this may be interpreted as an obligation, not discretion) impose periodic penalty payments not exceeding 5% of the average daily worldwide turnover of an undertaking for each day of delay, to secure fulfilment of any AMO decision, or for fulfilment of obligations relating to an inspection; and periodic penalty payments not exceeding 3% of the average daily worldwide turnover of an undertaking for each day of delay to secure appearance at an interview or the fulfilment of an information request. If an undertaking fails to fulfil an obligation secured by periodic penalty payments, the AMO may decide to impose an obligation to pay periodic penalty payment in an aggregate sum for the time of non-fulfilment. Periodic penalty payment cannot, however, be combined with fine. The AMO will, therefore, have discretion on whether to sanction non-fulfilment of an obligation by a one-shot fine or by periodic penalty payments.

Entry into force and impact of COVID-19

The new Competition Act shall come into force on 1 June 2021. Any ongoing proceedings will be continued under the new rules.

One of the first tasks to be tackled when the new legislation comes into force will be the impact of the COVID-19 pandemic. The AMO will gain the power to interrupt any proceedings and any time limits (including the limitation period for imposition of fine) if the circumstances related to the extraordinary situation or state of emergency prevent it from duly considering and adjudicating a case. The maximum duration of the interruption is one month after the end of the extraordinary situation or state of emergency.

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Authors

  • Čechová & Partners (Bratislava)
  • Čechová & Partners (Bratislava)

Quotation

Marek Holka, Tomas Maretta, The Slovak Parliament adopts the Act on Protection of Competition which implements the provisions of the ECN+ Directive, 11 May 2021, e-Competitions March 2021, Art. N° 100775

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