Croatian Hunting Association fined for predatory pricing and ordered remedies

The Croatian Competition Agency (CCA) found that the Croatian Hunting Association (CHA) from Zagreb abused its dominant position in the hunter training market in the territory of Croatia in the period from 1 January 2022 to 31 March 2024 by directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions.

In its decision of 23 December 2024 the CCA established that in the period concerned the CHA committed an infringement in the form of abuse of a dominant position within the meaning of Article 13 item 1 of the Competition Act, OG 79/09, 80/13, 41/21 and 155/23 for being engaged in predatory conduct, concretely, by charging then HRK 400 (now EUR 53.09) excluding VAT or HRK 500 (now EUR 66.36) including VAT, in other words, by lowering its price below the cost of the provision of hunter training services with the intention to eliminate or discipline rivals or prevent their entry and likely protect or strengthen its dominant position in the market concerned.

The CCA noted in its decision that a dominant position in the market is not in itself illegal. However, a dominant undertaking is under a special responsibility not to allow its conduct to impair undistorted competition, i.e., the position of economic strength enjoyed by the undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.

Predatory prices are the prices of a product or service that are set below the cost of its production or provision. They can be applied by the undertaking holding a dominant position that due to its significant financial resources or profits from another market where it operates, can sustain in the market while implementing such pricing.

In this context, if the undertaking that holds a dominant position in only one of several markets applies predatory pricing, predatory pricing can be at the same time applied in any of the relevant markets where the undertaking is active, including those where it does not hold a dominant position, provided that these are neighbouring markets that are economically linked in some way.

The results of the conducted proceedings indicated that the CHA holds a dominant position in a group of connected neighbouring markets where, based on specific rules, it is the sole provider of services in the market protected by legal monopoly. Furthermore, by using the profits gained in monopoly market, the CHA has cross-subsidized its activities in the relevant market for the provision of hunter training services in the territory of the Republic of Croatia, where it does not hold a dominant position, utilizing the funds or resources that do not align with standard competition rules and thereby threatening to eliminate effective competition in that other market.

Furthermore, since it was necessary to determine the price below which the service in question could not be provided, the CCA calculated that the cost of the hunter training program was not covered by the price of then HRK 400 excluding VAT (EUR 53.09) excluding VAT. Additionally, it found that the difference between this price and the actual cost of providing the service was cross-subsidized by the CHA using the funds from county associations and other members or its own resources obtained from a group of connected neighbouring markets where, based on specific rules, it is the sole provider of services protected by legal monopoly. While the dominant undertaking does not need to engage in predatory conduct to protect its dominant position in the market protected by legal monopoly, it may use the profits gained in the monopoly market to cross-subsidize its activities in another market and thereby threaten to eliminate effective competition in that other market.

For the infringement concerned the CCA fined the CHA 89,935 euro based on its turnover realized in the relevant market in 2023 and prohibited any further practices that raised competition concerns in this particular case.

Additionally, to remedy the negative effects of the CHA practices in the market, the undertaking was ordered to keep separate accounts regarding the activities concerned. This entails keeping separate accounts of the costs incurred in the provision of hunter training services and those incurred in markets where CHA is the sole provider of the services protected by legal monopoly. Furthermore, it is necessary to establish a requisite legal standard in the matters with its members who participate in any way in the implementation of the hunter training program, ensuring a transparent transfer pricing system for all individual services in actual quantities used in the programme supplied by its members. These transfer prices must correspond to competitive prices that would be charged to third parties, including the CHA competitors, or at least to the actual incremental cost of producing the respective services.

Failure to comply with this commitment may result in the imposition of periodic penalty payments in line with Article 63.a in conjunction with Article 14 paragraph 1 item 3 of the Competition Act.

The remedies to rectify the negative effects of the CHA practices must be implemented by the CHA within four months from the date of the receipt of the CCA decision.

The full version of the CCA decision in the Croatian language is available here