Changes to Czech competition law not approved by Czech Parliament

Czech Republic

Why did Senate reject the draft amendment?

The Senate wishes to incorporate a provision allowing undertakings, which prior to EU Accession obtained Czech merger clearance subject to conditions, to request those conditions be modified. Under this provision, the Czech Competition Office would amend such conditions where it finds that the competitive environment has substantially changed due to EU accession. Any such request would have to be submitted within 6 months from the effective day of the draft amendment.

What else is being changed?

If approved by Czech Parliament, the draft amendment shall bring into effect changes including:

1. Changes in national merger control regime

Merger control – new modified thresholds will be introduced, with the aim of ensuring that the Czech regulator reviews only mergers, which relate to or affect the Czech market. The current thresholds, introduced in 2001 were too broad and as a result, undertakings were often forced to notify concentrations which did not have any relevance on the Czech market. This was because the Czech thresholds related only to the worldwide turnover of the parties triggered Czech merger notification.

           

The new thresholds will refer to Czech domestic turnover as well as worldwide turnover. Czech merger notification will be required where, either:

(i) the combined turnover of the parties in the Czech Republic  exceeds CZK 1.5 billion; and

(ii) each of at least two of the parties has turnover in the Czech Republic exceeding CZK 250 million.

Or:

(i) at least one of the parties has turnover in the Czech Republic exceeding CZK 1.5 billion; and

(ii) the worldwide turnover of any other party exceeds CZK 1.5 billion.

When to notify – Under the current regime, a merger notification must be submitted within 7 days of the conclusion of the agreement establishing the concentration or at any time before. The draft amendment proposes the abolition of the 7 day period. There will be no deadline set for submission of merger notifications although they should be submitted without undue delay after conclusion of the agreement establishing the concentration or at any time before, as under the new regime it will not be possible to implement without clearance.

Commencement of review period – under the new regime, the Office will commence its review of a transaction only after the complete merger notification containing all required information is submitted. It will no longer be possible to submit a "blank" notification in order to start the review period running. In cases where an incomplete merger notification is submitted, which often happens if the parties submit the notification prior to signature of the legally binding documentation, the Office will respond in writing as to whether full notification is required and whether it is necessary to amend the notification.

Treatment of JVs – these rules are being modified. Under the new regime, JVs will have to be notified where they fulfil on a lasting basis the functions of an autonomous economic entity. Non-concentrative JVs will not fall within the merger regime and will be subject to the provisions of Czech competition law which deal with restrictive agreements.

Modernisation

If approved, the draft amendment will introduce the required national legal environment to allow application of Regulation 1/2003. However, this will not occur by 1 May 2004, the deadline for introduction of this new legal environment. The draft amendment will abolish the Czech notification and exemption system in respect of restrictive agreements. Parties and their advisors will therefore need to make their own assessment of the compatibility of their agreements with competition law. Also, new rules in respect of the interface between the Commission and Czech Competition and their competences will be clarified.

The most debated parts of the draft amendment in the Parliament were the provisions allowing the Competition Office, as well as the Commission, to raid and investigate private premises of directors or employees, including their homes. The draft amendment introduces a regime under which such investigation will be possible with consent of the Czech court. Nevertheless, the new powers of regulators in this respect are unprecedented in the Czech Republic and no doubt a debate and potential court cases may arise as to whether such rights are not in breach of Czech constitutional rights.

For further details on the above legislation, please contact Michal Smrek on +44 207 367 2707 or at michal.smrek@cms-cmck.com ; or Miloslav Mastny at +420 22109 8888 or at: miloslav.mastny@cms-cmck.com.