The aim of the protection of market competition is primarily to create benefits for consumers and equal conditions for all entrepreneurs on the market, who, acting in accordance with the existing rules and competing on the market with the quality, price and innovation of their products and services, contribute to the overall development of the economy.
Setting the chargeable man hour rate exclusively as time needed for the provision of a service is allowed in the sense of competition rules
Considering permanent queries made by associations of undertakings and professional chambers relating to setting chargeable man hour rates, the Croatian Competition Agency informs the undertakings and associations of undertakings that any methodology, software program solutions or norm setting in the sense of time needed for the provision of a service does not raise competition concerns as long as it is set by technical and professional guidelines provided by a professional association.
However, the CCA wants to specify that any chargeable man hour rate defined as time needed for the provision of a service cannot be expressed in monetary units. That is to say, the chargeable men hour rate cannot be set so as to define the price of the service and cannot equal the cost (cash value) of the service. Instead, so calculated chargeable man hour rate must be understood as a time unit needed on average for the provision of a service.
Namely, in line with Article 8 paragraphs 1 and 2 of the Competition Act, OG 79/09, 80/13 and 41/21 there shall be prohibited all agreements between two or more independent undertakings, decisions by associations of undertakings and concerted practices, which have as their object or effect the distortion of competition in the relevant market, and in particular those which directly or indirectly fix purchase or selling prices or any other trading conditions.
Agreements particularly refer to contracts, particular provisions thereof, implicit oral contracts or explicitly written arrangements between undertakings, concerted practices resulting from such arrangements, decisions by undertakings or associations of undertakings, general terms of business and other acts of undertakings which are or may constitute a part of these agreements and similar, regardless of the fact whether these agreements are concluded between undertakings operating at the same level of the production or distribution chain (horizontal agreements) or between undertakings who do not operate at the same level of the production or distribution chain (vertical agreements).
In short, any price arrangement between independent undertakings is prohibited in the sense of competition rules. Therefore, fixing the chargeable man hour rates for the provision of a service so that it indirectly means price fixing for the provision of the service concerned produces anticompetitive effects.
On the other hand, setting salaries or hourly pay rates as cash rewards for the performance falls under the labour law and is outside the scope of the CCA and competition rules.