The Act on the Amendments to the Competition Act was published in Official Gazette 41/2021 on 16 April 2021 and enters into force on 24 April 2021. In compliance with the rule against retroactivity, which prohibits the imposition of ex post facto laws (i.e., which would deprive the Croatian Competition Agency of the legal basis and thus render impossible any opening or running of the infringement proceeding against any undertaking that has committed a serious infringement of competition law before the entry into force of the amended act, for instance, with respect to participating in a cartel that constitutes a hard core restriction of competition law and usually takes three to five years to be detected, which would leave such infringements unprocessed and unsanctioned. Thus, instead of adopting a completely new Competition Act, Croatia decided to introduce the necessary revisions in the form of the Act on the Amendments to the Competition Act (hereinafter: Revised Competition Act 2021).
- Reasons for the adoption of the Revised Competition Act 2021
The Republic of Croatia was obliged to transpose the Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market OJ L 11, 14.1.2019 (ECN+ Directive).
The purpose of the ECN+ Directive is to put in place fundamental guarantees of independence of the national competition authorities (NCAs), adequate financial, human, technical and technological resources and minimum enforcement and fining powers including periodic penalty payments in order to ensure that NCAs apply Articles 101 and 102 of the Treaty on the Functioning of the European Union OJ C 115, 9.5.2008 uniformly and effectively (hereinafter: TFEU).
By the adoption of the Competition Act OG 79/09 and 80/13 (hereinafter: Competition Act) and eleven ancillary provisions (regulations) necessary for the proper application of the Competition Act, the legal framework in the area of competition law and policy has already been to the large extent brought into compliance with the EU acquis. Now, the Revised Competition Act 2021, by the transposition of the ECN+ Directive into the national legal system, means that the complete national legal framework in the area of competition law and policy has been fully harmonized with the EU acquis and put in place.
In addition, the ten-year-application of the Competition Act in practice has indicated the need for some fine tuning regarding certain provisions with the view to resolving any possible doubts in the interpretation thereof.
- Issues addressed by the Revised Competition Act 2021
The Revised Competition Act 2021 ensures a greater degree of independence of the CCA as a national competition authority in the Republic of Croatia and additional resources for the implementation of its powers. In line with the ECN+ Directive it also introduces some new powers of the CCA, such as the power to impose fines and periodical penalty payments for the infringements so as to ensure a uniform and effective application of Articles 101 and 102 TFEU.
The exercise of the above-mentioned powers regarding the infringements of the Competition Act and Articles 101 or 102 TFEU should be subject to appropriate safeguards which at least comply with the general principles of Union law and the Charter of Fundamental Rights of the European Union.
The Revised Competition Act 2021 establishes the CCA as a general, national regulatory authority in charge of competition in all markets. This brings into compliance the legal status of the CCA with the nature of the tasks that it actually performs. The legal status, the independence, the organization and the resources of the CCA have all been brought into compliance with the ECN+ Directive, which ensures the institutional, financial and operational independence of the CCA. At the same time, the CCA will be entered into the court register as a public institution. The Revised Competition Act 2021 provides that the Competition Council as the managing body of the CCA and the CCA expert staff exercise their powers stipulated by the Revised Competition Act 2021 autonomously, independent of any political or other influence and receiving no instructions from any public or private authority in carrying out of its tasks and powers, without prejudice of the power of the Government of the Republic of Croatia to, where necessary, adopt any general policy rules not associated with the sector inquires or the procedures falling within the powers of the CCA.
In compliance with the financial capacity of the State Budget of the Republic of Croatia the CCA will have sufficient resources in terms of qualified staff able to conduct proficient legal and economic assessments, financial means, technical and technological expertise and equipment, to ensure they are able to perform their tasks effectively.
The Revised Competition Act 2021 defines the frequently used terms, such as “cartel”, “secret cartel”, “leniency programme”, “leniency statement”, “applicant authority”, “requested authority”, whereas the definition of “undertaking” particularly explains the term “association of undertakings” and defines the notion “undertakings concerned” in merger assessment.
The Revised Competition Act 2021 stipulates that where the CCA finds that a prohibited agreement has been concluded it has the power to impose on the undertaking behavioural and/or structural remedies which are effective and proportionate to the infringement and deem necessary to remedy the infringement. Structural remedies can only be imposed either where there is no equally effective behavioural remedy or where any equally effective behavioural remedy would be more burdensome for the undertaking concerned than the structural remedy
Relating to the adoption of an interim measure by the CCA the Revised Competition Act 2021 stipulates that the interim measure, as a rule, cannot exceed 12 months whereas where the interim measure is imposed relating to infringement of competition rules in the sense of Article 101 and/or 102 TFEU the CCA should inform the European Competition Network (ECN) thereof.
The requests made to any party to the proceeding or other persons should be appropriate to scope and should not compel the parties to the proceeding or other legal and natural persons to admit that they have committed an infringement of the Competition Act and Article 101 and/or Article 102 TFEU.
The Revised Competition Act 2021 empowers the CCA, after having inspected its content, to dismiss any initiative for the initiation of the proceeding ex officio within the meaning of the Competition Act and Articles 101 and/or 102 TFEU on the grounds that it does not consider such a complaint to be an enforcement priority. As a rule, such a decision can be adopted by the CCA where it assesses that there is no significant impediment of competition at issue. Against such a decision of the CCA the complainant may also file a complaint for an administrative dispute.
In addition, the Revised Competition Act 2021 introduces new legal tools, such as: “interview”, “periodic penalty payment”, “uniform instrument”, “settlement in cartel cases”, and elaborates “access to leniency statements and settlement submissions”. It also specifies the imposition of fines where the infringement is committed by an association of undertakings.
For the purpose of the application of the Competition Act and Articles 101 and 102 TFEU in the course of the preliminary market investigation, in other words, before the initiation of the proceeding on its own initiative within the meaning of Article 39 of the Competition Act, with the view to defining whether there are sufficient indications of competition concerns on the basis of which it can initiate the proceeding on its own initiative, but also where the infringement proceeding has already been initiated, the new legal tool “interview” ensures that the CCA is empowered to summon any representative of an undertaking or association of undertakings, any representative of other legal persons, and any natural person, where such representative or person may possess information relevant for the application of the Competition Act and Articles 101 and 102 TFEU, to appear for an interview. Such requests must be proportionate and not compel the summoned persons to admit an infringement of the Competition Act and Articles 101 and 102 TFEU. The summoned persons must appear at the interview. As a rule, the CCA shall summon any representative of an undertaking or association of undertakings, any representative of other legal persons, that is to say, the responsible person in the undertaking or association of undertakings or legal persons, to appear in the interview, whereas natural persons, current or former directors, managers and other members of staff, shall be, as a rule, summoned to the interview in the already ongoing proceeding, particularly during the conduct of unannounced inspections.
The introduction of “periodic penalty payments” into the Revised Competition Act 2021 specifies the infringements for which undertakings or associations of undertakings shall be imposed periodic penalty payments and stipulates the criteria and methods for the imposition of periodic penalty payments. Concretely, periodic penalty payments shall be imposed if they fail to appear at an interview of fail to comply with an inspection, if they fail to comply with the decision of the CCA particularly in part where the CCA makes commitments offered by undertakings or associations of undertakings binding. The CCA may by decision impose effective, proportionate and dissuasive periodic penalty payments on undertakings and associations of undertakings, taking into account the gravity and the duration of the infringement, the consequences of the infringement on other undertakings in the market and consumers, in other words, in cases where the infringement lasted for a short period of time and the imposition of a periodic penalty payment is appropriate and has a deterrent effect. In such a case, the periodic penalty payment replaces the fine provided by the Competition Act for the same infringement.
Where an infringement is committed by an association of undertakings that is not solvent and where the CCA finds that a fine is imposed on an association of undertakings that is not solvent, the association is obliged to call for contributions from its members and/or additional payments to cover the amount of the fine.
The introduction of the legal tool “settlement in cartel cases” ensures the party to the proceeding to admit to the infringement referred to under Article 8 of the Revised Competition Act 2021 and/or Article 101 TFEU (this refers to the acknowledgement of participation in a prohibited horizontal agreement – cartel or secret cartel that constitutes hard core restriction of competition law) not later than 30 days from the receipt of the Statement of Objections, describing in writing the undertakings acknowledgement of the infringement and its renunciation to dispute. Given that the settlement submission, provided that it is approved by the CCA, contributes to the efficiency of the proceeding at an early stage of the proceeding, in return the CCA imposes a lower fine which may be from 10 % to 20% lower than the fine that the CCA would have imposed on the party in question had it not presented a settlement submission.
At the same time, the Revised Competition Act 2021 stipulates that immunity from fines shall be granted to a cartel or a secret cartel member that first comes forward and informs the CCA on the existence of the cartel or a secret cartel and submits information, facts and evidence that enable the CCA to initiate the proceeding and conduct an unannounced inspection, provided that the CCA at the time it receives the application does not have sufficient evidence for the initiation of the proceeding and for the conduct of the targeted unannounced inspection, or has not conducted the unannounced inspection yet, or, where it is the view of the CCA that these facts and evidence are sufficient to find an infringement covered by the leniency programme under Article 8 of the Competition Act and/or Article 101 TFEU, provided that the CCA did not yet have in its possession sufficient evidence to find such an infringement and that no other undertaking previously qualified for immunity from fines in relation to that secret cartel. The undertaking may apply for immunity in a full or short form.
The legal tool “access to leniency statements and settlement submissions” empowers the CCA to grant access to leniency statements of leniency applicants or to settlement submissions only to the parties subject to the relevant proceedings and only for the purposes of exercising their rights of defence in the proceeding concerned or in the administrative dispute before the High Administrative Court of the Republic of Croatia.
In addition, within the meaning of the ECN+ Directive the Revised Competition Act 2021 regulates that former directors, managers and other members of staff of applicants for immunity from fines under the leniency programme shall not be imposed a fine in the administrative proceeding and administrative dispute whereas the decision about the criminal prosecution against these persons shall be made by the State Attorney in line with the provisions of the criminal law of the Republic of Croatia. The State Attorney may decide not to press criminal charges or they can propose to the competent court to mitigate the sanctions depending on the outcome of weighing the interest in prosecuting and/or sanctioning the individual against the individual’s contribution to the detection and investigation of the cartel.
Furthermore, the Revised Competition Act 2021 elaborates in more detail the cooperation between the applicant authority – a national competition authority which makes a request for mutual assistance and the requested authority – a national competition authority which receives a request for mutual assistance. With respect to certain issues of mutual assistance the principles include the powers of these authorities and the applicable law in case of a dispute.
The requirements of the “uniform instrument” are also provided by the Revised Competition Act 2021 regulating the cooperation between the applicant authority that makes a request for mutual assistance and the requested authority that receives the request for mutual assistance. The application of the uniform instrument ensures the requested authority to enforce the fine or periodic penalty payment from undertakings that have infringed Articles 101 and 102 TFEU based on the final decision of the applicant authority.
In addition, the Revised Competition Act 2021 stipulates that disputes shall fall within the competence of the competent bodies of the Member State of the applicant authority, and shall be governed by the law of that Member State, where they concern the lawfulness of a decision of the applicant authority about which the CCA informs the undertaking in line with Article 66 paragraph 6 of the Revised Competition Act 2021 or the lawfulness of the decision of the applicant authority that should be enforced by the CCA in line with Article 70a of the Revised Competition Act 2021 and the lawfulness of the uniform instrument permitting enforcement in the Republic of Croatia. Disputes relating to the enforcement measures taken by the CCA or concerning the validity of a notification made by the CCA fall within the competence of the competent bodies of the Republic of Croatia and shall be governed by the law of the Republic of Croatia.
With the view to eliminating any doubts in the interpretation of the Competition Act, the Revised Competition Act 2021 ensures proper application of Article 9 of the Council Regulation (EC) No 139/2004 where the Commission may refer a notified concentration with EU dimension to the CCA. In such a case the CCA shall assess the compatibility of the concentration concerned within the meaning of the Competition Act regardless of the fact whether the parties to the referred concentration meet the criteria regarding the turnover thresholds within the meaning of the Competition Act or not, on the account of the fact that higher turnover thresholds defined under the Council Regulation (EC) no 139/2004 are fulfilled.
Furthermore, the proper application of Article 5 under the Council Regulation (EC) No 1/2003 regarding the application of Articles 101 and 102 shall be ensured.
Namely, the Council Regulation (EC) No 1/2003 empowers the competition authorities of the Member States for the parallel application of the EU competition law. In the cases initiated on the basis of the parallel or consecutive application of the national competition law (Croatian Competition Act) and the EU law, in other words, pursuant to Article 8 of the Competition Act (regulating prohibited agreements) and Article 101 TFEU or Article 13 of the Competition Act (regulating abuse of a dominant position) and Article 102 TFEU, in compliance with the EU acquis, a national competition authority of a Member State, in this particular case the CCA, cannot take a negative decision (a decision on non-infringement of competition rules) within the meaning of Articles 101 and 102 TFEU, but merely terminate the proceeding. The decision on the termination of the proceeding in the parallel powers system enables the Commission to subsequently open the proceeding and establish an infringement, which would not be possible if the CCA would have taken a decision on non-infringement deciding on the merits of the case due to the principle ne bis in idem.
At the same time, the “Statement of the facts of the case” is revoked. Taking into account that the parties to the proceeding receive the Statement of Objections (before the adoption of the final decision) that enables the parties to submit their comments in writing and present additional evidence and invite witnesses. In that respect, the delivery of a second Statement of the facts of the case showed inappropriate and unproductive and unnecessarily stalling the case. The right of defence is, on the other hand, indisputably ensured to the parties under the General Administrative Procedure Act throughout the course of the proceeding until the adoption of the final decision. This is in line with the case law of the national competition authorities of the Member States and the European Commission.
Besides, the Revised Competition Act 2021 regulates the rules on limitation periods for the imposition of fines and periodic penalty payments where Member States shall ensure that the limitation periods for the imposition of fines or periodic penalty payments by the national competition authorities shall be suspended or interrupted for the duration of enforcement proceedings before national competition authorities of other Member States or the Commission in respect of an infringement concerning the same behaviour of an undertaking or association of undertakings or other conduct prohibited by Article 101 or 102 TFEU.
For the purpose of harmonisation with the ECN+ Directive, in the proceedings dealing with serious infringements of competition rules under the Competition Act and Articles 101 or 102 TFEU, fines should be imposed where the infringement has been committed intentionally or negligently. The notions of intent and negligence should be interpreted in line with the case law of the Court of Justice of the European Union on the application of Articles 101 and 102 TFEU and not in line with the notions of intent and negligence in proceedings conducted by criminal authorities relating to criminal matters.
Additionally, the Revised Competition Act 2021 in the part relating to the proposals for the appointment of the president of the Competition Council and its members provides that the Government of the Republic of Croatia shall make a public call for the proposals of the candidates for the president of the Competition Council and its members to ensure transparency. The selected candidate from the public call shall be proposed by the Government of the Republic of Croatia to the Croatian Parliament that appoints them.
Finally, for the sake of harmonization of the national competition rules with the EU acquis, the Revised Competition Act 2021 repeals the Regulation on block exemption granted to insurance agreements OG 78/11 reflecting the fact that the Commission Regulation (EU) No 267/2010 of 24 March 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of agreements, decisions and concerted practices in the insurance sector, with which the Croatian provisions in that area had been harmonized, expired on 31 March 2017. For the purpose of convergence and the supremacy of the application of Articles 101 and 102 TFEU on agreements with cross-border effect in the internal market pursuant to Article 3 of the Council Regulation (EC) No 1/2003 the application of the above-mentioned regulation is not appropriate any more.