In response to the implementation of EU Directive 2019/1 (ECN+), Slovakia has adopted a completely new Slovak Competition Act (the Act) effective from June 2021. Although at first glance the Act is merely the routine implementation of ECN+, in reality it introduces some notable changes to the business environment in Slovakia, especially regarding penalties for non-compliance and anti-competitive behaviour, and the definition of “undertaking”, which is central to competition law.
In this article we outline the key changes under the Act.
Definition of “Undertaking”
Previously, the definition of the subject of competition rules was linked to the concept of legal personality. The Act introduces the definition of “undertaking” with the EU law meaning of this concept as “an entity engaged in economic activity”, regardless of its specific legal form or the existence of a legal personality. The concept of “undertaking” can now include several companies that jointly and severally share liability.
As a result, competition law infringements will no longer be calculated as a percentage of the turnover of the legal entity acting as a party to the proceedings, but of the turnover of all entities found liable for the infringement.
Furthermore, the new definition of “undertaking” allows for the principle of economic continuity, meaning that liability for infringements passes to the economic successor that is continuing its predecessor’s commercial activity.
Calculation of penalties
Imposing fines relating to anti-competitive behaviour has changed. The Slovak Competition Authority will be able to impose fines of up to 10% of the turnover of the entity in breach and its member companies active in the market affected by the infringement, not just the entity itself. Furthermore, should the entity be unable to pay the fine, it now has to request contributions from its members.
The Act reduces the number of transactions that will be subject to merger control proceedings by removing separate notification criteria for joint ventures. This eliminates cases when a merger is subject to control by the Slovak Competition Authority, even if the joint venture is not active in Slovakia but the turnover criteria is met by the parent or an associated entity. Previously, foreign-to-foreign transactions where the joint venture founders had what was considered a sufficient turnover in Slovakia were often caught by this.
Enhanced powers and independence
The Act enhances the powers of the Slovak Competition Authority to ensure it can better enforce competition law by imposing obligations in addition to financial penalties. These include interim measures, which can be imposed before the completion of proceedings to the extent necessary if there is a reasonable assumption (i.e. prima facie) of the existence of a cartel or abuse of a dominant position and the risk of serious or irreparable distortion of competition. There is a similar option in relation to merger controls to ensure effective competition and due and undistorted proceedings in cases of the premature implementation of a concentration.
The Authority can now also impose special measures, such as temporary structural and behavioural remedies or the appointment of an independent trustee in proceedings involving cartels or the abuse of a dominant position
Under the Act, the Competition Authority must issue its decision within three years of the beginning of any proceedings unless otherwise specifically stated. This is significantly longer than the previous period of six months with the ability to extend for 24 months. The leadership body of the Authority, the Council, must decide within three months from the date of the delivery of the administrative file on an appeal against an interim measure.
Additionally, the limitation period for the Authority imposing fines and other penalties has been extended to ten years as of the date of the infringement rather than the previous eight.
For more information on how this Act could affect your Slovakia-based business, contact your CMS client partner or local CMS experts.