The Czech NCA affirms its recognition of compliance programs in a recent decision

At the end of July, the Czech Office for the Protection of Competition (the "Office") published its decision in the Tescoma case,¹ thereby confirming its commitment to recognize undertakings' internal compliance programs² as a mitigating factor when imposing fines, even in cases of serious competition law breaches.

The Office imposed a fine of nearly CZK 64 million for the anticompetitive conduct of Tescoma, a Czech maker of kitchen utensils and other household goods. As found, between 2015 and 2021, the undertaking had engaged in prohibited vertical agreements though the practice of resale price maintenance. In particular, Tescoma would impose minimum retail prices on its dealers and enforce them vigorously so that any lowering of the prices by dealers had to be corrected. The Office concluded that such conduct amounted to a hardcore restriction (i.e., a serious restriction of competition which should in most cases be prohibited because of the harm that it causes to consumers), breaching both the Czech and European Union competition law.³

The significance of this decision lies mainly in the Office's deployment of mitigating factors, including notably the compliance program. The Office has started to reflect undertakings' compliance programs in its fines relatively recently, with first such case occurring in 2022.⁴ In its statement on compliance programs,⁵ the Office declares that it will only accept compliance programs of sufficient quality, taking into account the undertaking's size, market share and the relevant market. It is thus crucial that the compliance program is always "tailor-made" for the undertaking in question to qualify for a fine reduction.

In the Tescoma case, the pre-reduction fine of almost CZK 200 million was reduced by 60% by the Office recognizing several mitigation factors:⁶

• The undertaking confessed to the alleged conduct and strengthened the Office's evidentiary position (despite this being a settlement case with a lower evidentiary bar and despite the Office presumably having a strong evidentiary base already);
• The undertaking voluntarily terminated its anticompetitive conduct (even though this occurred only after the Office's dawn raid);⁷
• The undertaking informed its dealers of the non-binding nature of its recommended prices; and
• The undertaking adopted an effective compliance program (considering the relevant market, characteristics and type of goods, and the undertaking's size and business model).

Additionally, a further reduction of 20% was made due to settlement, taking the fine down to the final sum of approx. CZK 64 million. Since the decision, settlement provisions have been amended, substituting the mandatory blanket fine reduction of 20% with a 10-20% discretional reduction, and further refining the settlement rules (in this regard, please see the Office's notice published as of 31 July 2023).⁸

Although it is difficult to ascertain the exact role of the compliance program in this case, the overall fine reduction is substantial, especially given the severity and length of the anticompetitive conduct in question. The fact that the Office's maximum fine reduction due to mitigating factors is capped at 70% of the original fine⁹ only affirms the amplitude of the present case's reduction, which in turn highlights how important undertakings' due cooperation with the Office is for the final fine determination.

It may be concluded that in line with its proposition, the Office recognises undertakings' efforts to ensure compliance in the form of compliance programs (existing/adopted during the proceedings) as a mitigating factor. A seen, this may result in substantial fine reductions even if the competition law breaches are relatively serious and prolonged.

_{1 Decision of the Czech Office for the Protection of Competition, Ref. No. ÚOHS-S0262/2021/KD (the "Decision").
2 Compliance programs are internal documents containing rules to ensure compliance with competition law. 
3 Namely, Section 3(1) of the Czech Act on the Protection of Competition and Article 101(1) TFEU.
4 Decision of the Czech Office for the Protection of Competition, Ref. No. ÚOHS-S0365/2020/KD.
5 The Office's Compliance Program Consideration Policy is available here in Czech.
6 Para 88 of the Decision.
7 Para 3.27 of the Office's document Procedure of Setting Fines Imposed Pursuant to the Act on the Protection of Competition.
8 The Office's notice is available to download here.
9 Para 3.26 of the Office's document referenced in footnote No. 7.}

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

_{© 2023 White & Case LLP}