ÚOHS poprvé zohlednil compliance program

The Office for the first time took into account the compliance programme

A few days ago, the Office for the Protection of Competition ("the Office") adopted a decision in which it fined a distributor of luxury candles nearly CZK 18 million. The latter had committed an infringement of competition law by entering into prohibited agreements with its customers for a number of years to directly determine the resale price for the goods distributed by it. In the proceedings, the Office found that the distributor also carried out checks on compliance with the resale prices set and, on the basis of those checks, invited customers to increase their prices to the set level. Where customers wanted to sell below the set prices, he threatened them with sanctions in the form of termination of supply or cooperation, which he did in several cases. By this conduct, the distributor has thus kept the price of the goods it distributes to end-customers higher than it would have been in a properly competitive environment.

In the administrative proceedings before the Office, the distributor made use of the so-called settlement option (which is an alternative to the better known leniency programme). It admitted to the anti-competitive conduct and thus obtained a 20 % reduction of the fine. Crucially, however, for the first time in its decision-making practice, the Office took into account that the distributor had implemented a so-called compliance programme, i.e. a set of internal preventive and control measures aimed primarily at preventing breaches of the law or ethical standards by its employees and management (as well as other representatives) in the operation of the business plant and the conduct of its business. The final amount of the fine was thus further reduced as a result of the introduction of the compliance programme.

The Office's stated aim was to take into account the competitors' desire to prevent, on their own initiative, possible distortions of competition. At the same time, the Office outlined the conditions under which the compliance programme could be taken into account as a mitigating circumstance in the context of a particular proceeding. These conditions are:

• the sufficiency of the compliance programme itself in relation to the size and market power of the competitor concerned and the type of market on which it operates,
• the successful use of the settlement procedure and/or the Office's leniency programme in the proceedings before the Office; and
• the fact that, in the case of an already established compliance programme, the anticompetitive conduct took place without the knowledge of the statutory bodies or management of the competitor concerned.

Thus, it follows that if a competitor establishes sufficiently high quality and functional internal compliance rules in an appropriate manner, which are effectively monitored at all levels of its activities, it can mitigate any negative consequences associated with a breach of competition rules. It remains for the Office to assess how much benefit the compliance programme will bring, i.e. how much the threat of a sanction will be mitigated. The Office will also always take into account the degree and timeliness of the competitor's cooperation with the Authority and the quality of the individual measures proposed. The Office also intends to place more emphasis on compliance programmes already in place before introducing them only in response to the Office's investigation. It is logical that a formally implemented compliance programme that only works 'on paper' will not stand up to the above criteria.

The competitors can clearly welcome the decision described above. A number of them have already spent considerable financial and time costs to develop and implement their own compliance programme. Many competitors are currently considering its implementation. So far, the most widely touted benefits and advantages of introducing internal compliance rules have been the streamlining of internal decision-making and control mechanisms and, in particular, the possibility of escaping criminal liability. Now the positive effects associated with the adoption of these rules have been explicitly confirmed also in the competition law area.

If you are interested in more detailed information, please also contact the authors of the article or other members of EY Law or the EY team with whom you work.

Authors:

Vladimír Petráček

Klára Hurychová