The Czech Office for the Protection of Competition is the central body of state administration responsible for creating conditions that promote and protect market competition, overseeing public procurement, as well as advising and monitoring the allocation of state aids. The Office actively combats anti-competitive practices, with a particular focus on preventing bid-rigging in public procurement procedures, conducting sectoral investigations in the food supply chain, and promoting the leniency program and other preventive measures. On the occasion of a guest lecture by a representative from the Czech Office at seminars within the framework of the TSI project, the Croatian Competition Agency (AZTN) held discussions with the Deputy Head of the Czech Office, Mr. Kamil Nejezchleb, on challenges, strategies of the Office, combating prohibited agreements in public procurement procedures, inflation, and unfair trading practices in the food supply chain, as well as promoting knowledge of market competition.<\/p>\n
General Competition Enforcement & Policy<\/strong><\/p>\n The Czech Competition Authority has been very proactive in tackling anti-competitive practices. What key strategies have contributed to your success in enforcing competition laws, particularly compared to other EU regulators?<\/strong><\/p>\n In addition to standard competition strategies, the Office for the Protection of Competition in the Czech Republic also focuses on areas where we believe that they can contribute to the detection of breaches of competition rules. One such area is deepening cooperation with other institutions. In recent years, we have intensified our cooperation with several entities, especially law enforcement authorities, to ensure a comprehensive approach to detecting and prosecuting anti-competitive conduct. In particular, the cooperation aims at identifying cases and passing on valuable information on possible anti-competitive conduct that may be of interest to us.<\/p>\n We also perceive the importance of preventing anticompetitive behaviour, which is why we regularly organise educational events (training, seminars) on competition practices for various groups of entities, e.g. bid rigging, distortion of competition by public authorities, etc., and educate undertakings so that they are aware of the potential risks associated with possible anticompetitive behaviour. To this end, we have also created an e-learning on bid rigging and have successfully trained more than two hundred contracting authorities, which we consider to be one of the key elements in the prevention of bid rigging.<\/p>\n We try to constantly promote leniency programme, which encourages cartel participants to disclose cartels in exchange for a reduction or waiver of fines. In 2023, we have extended the leniency programme to vertical agreements and expect a greater success rate in detecting anticompetitive conduct, especially in resale price maintenance cases.<\/p>\n What are the biggest challenges your agency faces when investigating and prosecuting anti-competitive behaviour, particularly bid rigging? How do you overcome these challenges?<\/strong><\/p>\n We face several challenges in investigating and prosecuting anti-competitive conduct. In the case of cartel agreements such as bid rigging, anticompetitive practices are often hidden and difficult to prove. The primary objective of undertakings is to minimize the trails of their conduct, and proving such agreements is thus increasingly difficult, even in light of the rapid evolution of technology. As undertakings seek ever more sophisticated methods of concealing their conduct, we must be ever vigilant and strive to keep up with current trends.<\/p>\n However, it is clear that competition authorities will always face the limitations of evidence, especially direct evidence, in such cases. We are trying to overcome these challenges, for example by our proactive approach and our emphasis on prevention. As I have already outlined in my answer to the first question, we consider it important to cooperate effectively with other institutions, to use cartel detection tools such as the leniency programme and to engage in awareness-raising that contributes to the prevention of anticompetitive conduct and raises awareness of the consequences of anticompetitive practices.<\/p>\n What factors influence the level of fines in your decisions?<\/strong><\/p>\n Fines imposed by the Office for competition infringements are influenced by several factors. According to the Czech Competition Act, when determining the amount of the fine for undertakings and when imposing and determining the length of the ban on public contracts, the gravity of the offence, in particular the manner of its commission and its consequences, the circumstances under which the offence was committed, the conduct of the legal person or public authority during the proceedings before the Office, and the efforts of the legal person or public authority to eliminate the harmful consequences of the offence are taken into account.<\/p>\n Fines are generally higher for more serious infringements, such as cartel agreements or abuses of dominant positions, with a longer duration. Undertakings can then influence the final amount of the fine by cooperating with us through leniency programme and settlement procedure or by implementing compliance programmes.<\/p>\n We strive to ensure that the sanctions imposed are as effective as possible in fulfilling their functions. That is why last year we published a new fining methodology which, among other things, increases the fines for the most serious anti-competitive conduct, in particular for hardcore cartels on prices, market sharing, output limitation and bid rigging. We believe that this will not only strengthen the deterrent effect against closures, but also increase the attractiveness of using the leniency programme. However, we have not yet applied the new approach; it will apply to cases committed after the new methodology takes effect, i.e. after 1 January 2024.<\/p>\n Bid Rigging & Public Procurement<\/strong><\/p>\n Bid rigging in public procurement is a major issue across the EU. Could you share insights into recent cases your agency has handled, and what methods have proven most effective in detecting and proving bid-rigging agreements?<\/strong><\/p>\n We use various methods to detect bid rigging. For example, we compare bidders’ quotes to identify unusual patterns (e.g., indexing of item prices) or non-standard characteristics (e.g., identical metadata) that could indicate possible coordination between bidders. We analyse historical data, publicly available information on the participation of suppliers in previous public contracts, which could point to recurring patterns, pay attention to related submissions, and cooperate other institutions, such as law enforcement authorities. We also regularly train key persons from contracting authorities, who can be of great assistance in bid rigging detection during the procurement process itself.<\/p>\n Are there any industries or sectors in the Czech Republic that are particularly prone to bid rigging? If so, how do you prioritize enforcement actions in these areas?<\/strong><\/p>\n Certain sectors are more prone to bid rigging, in particular areas that are normally associated with characteristics such as the need for contracting authorities to spend money by the end of the year, fear of prolonged tendering procedures, objections or reviews, lack of control, especially by contracting authorities, and lack of knowledge of the relevant market, non-transparency, inexperience of the contracting authority, small number of tenderers, limited or no market entry, unchanging demand and supply, repeated bidding, presence of industry associations, identical or simple products, minimum or no alternatives, minimum or no technological change, etc.<\/p>\n Such sectors are, for example, construction or transport and infrastructure, where the value of the contracts is usually high and the number of specialised bidders is limited. In this type of area, we place all the more emphasis on prevention, regular monitoring, detection and the subsequent fair punishment of undertakings.<\/p>\n How has technology, including AI and big data analytics, been integrated into your agency’s approach to detecting collusion in public tenders?<\/strong><\/p>\n Going forward, we intend to integrate modern technologies such as AI into our investigative processes and continuously educate ourselves in these areas. In order to be able to analyse large amounts of data, a new Chief Economist’s Department has also been created from January 2025 to look more closely at this area.<\/p>\n We are currently learning about and testing various AI tools. We can expect to use AI tools more in the future, e.g. for predictive analytics, i.e. to predict possible cartel agreements based on historical data and to identify risk areas, or for process automation, e.g. in bid price analysis<\/p>\n Unfair Trading Practices in the Food Supply Chain<\/strong><\/p>\n Food price inflation has been a significant issue in many EU countries. How does the Czech Competition Authority ensure fair competition in the food supply chain, and what specific enforcement actions have you taken against unfair trading practices?<\/strong><\/p>\n High food prices can be considered a very socially sensitive issue, as food consumption is an essential need for every individual. In the Czech Republic, food prices began to rise unprecedentedly towards the end of 2022. In this context, there have been numerous discussions about who is responsible for such a sharp rise in food prices<\/strong> and whether it was really objectively necessary to make such a significant increase in the selling prices of products in the various links of the agricultural and food chain.<\/p>\n In response to the above, the Office decided to conduct a shortened sector inquiry of 5 selected products (raw cow milk, butter, chicken meat, chicken eggs and wheat flour) in order to quickly determine whether competition is being distorted on the markets or segments of the markets for selected agricultural and food products.<\/strong> The investigation in the markets for the commodities in question did not reveal a failure of competition or the existence of a market structure where a player would have a dominant position. It is important to note that the sectors that were studied were characterised by a strong oligopolistic structure. In view of the fact that this structure has not changed much over the period under review, and yet there has been a recent sharp increase in prices, it is more likely to be the result of external factors leading to a steep increase in costs than a\u00a0sudden failure of the markets as such. For example, commodity markets – currently cocoa beans, orange juice concentrate and, last but not least, the price of energy.<\/p>\n In the field of unfair trading practices<\/strong>, a sector inquiry was launched in the second half of 2023 to determine whether operators comply with the requirement for contracts to be in writing and with mandatory contractual clauses set out in the Czech UTP Act after the transposition of the UTP Directive. So far, the Office has initiated a total of 15 administrative proceedings for infringement of the Czech UTP Act, of which ten administrative proceedings have already been closed. In seven cases fines were imposed, in three cases commitments were accepted and the proceedings were terminated. The administrative proceedings were conducted with subjects across the whole agri-food chain. Among the most frequent infringements was late payment. The Office also found content deficiencies in contractual documentation in relation to the provision of related services such as marketing, promotion or intermediary services. For details, please see the attached summary of the sector inquiry.<\/p>\n Could you elaborate on any recent high-profile cases where your agency has intervened in the food supply chain to prevent abuses of market power or price-fixing?<\/strong><\/p>\n As already mentioned, late payment<\/strong> was the most frequent infringement among unfair trading practices. However, case Kosik.cz<\/strong>, full E-commerce grocery and near-food retailer, where the contract documents were lacking any provisions on the subject matter and scope of the services to be provided, price for that service (or how it is determined) and the cost estimate for that service. Ko\u0161\u00edk.cz negotiated with the suppliers the so-called “marketing trade support” and “marketing bonus”, which did not meet the requirement for their clear and unambiguous anchoring in the supply contract or in the subsequent contract between the supplier and the buyer. The amount of the sanction, approx. 73\u00a0000 EUR, reflects, among other circumstances, the dozens of affected suppliers. Ko\u0161\u00edk.cz was also ordered to take corrective measures to include the legal requirements in its contracts with its suppliers and to submit these changes for approval. For details, please see the attached summary of cases.<\/p>\n Some competition authorities focus on market studies and advocacy to prevent anti-competitive practices before they escalate. What role does competition advocacy play in your enforcement of fair trading practices in the food sector?<\/strong><\/p>\n Even if an infringement of the Czech UTP Act is found, the Office is entitled not to initiate an administrative proceeding and, after a preliminary investigation<\/strong>, to terminate the case by issuing a resolution. However, the prerequisite for such a procedure by the Office are facts indicating that, in view of the significance and extent of the infringement or threat to the protected interest affected by the conduct, the manner in which the conduct was carried out, its consequence, the circumstances in which the conduct was committed, or the suspect’s behaviour after the conduct, it is obvious that the objective that could have been achieved by conducting the infringement proceedings has been or can be achieved in another way ( Article 9(3) of the Act).<\/p>\n This may be the case where there has not yet been a violation of fairness in the buyer-supplier relationship, or where there has been a violation but to a very limited extent. In that case, there is no need to carry out extensive investigations and the entity in question can take measures leading to the prompt elimination of possible infringement. In such cases, the Office may apply this alternative procedure and not initiate the administrative proceedings.<\/p>\n Alternative tools as proposing commitments<\/strong> are also codified in the Czech UTP Act. The benefit of proposing commitment is the use of a less formal (and less administratively demanding) process than a fully administrative procedure culminating in a (possibly) final decision on a fine, especially in an effort to promptly eliminate the defective condition and remedy the situation in supplier-buyer relations.<\/p>\n Further Art. 8(6) of the Czech UTP Act provides for a so-called settlement procedure<\/strong>. The main purpose of the settlement procedure is to simplify the administrative procedure and to achieve related savings both on the side of the Office and on the side of the accused. In other words, the essence of the settlement is that the accused buyer admits to committing the offence (and in this context de facto waives certain rights that would otherwise be due to him under the standard procedure), which saves time and costs on the side of the Office, and the law (or the Office) therefore motivates the buyer to do so by reducing the fine by 20\u00a0%.<\/p>\n 3 out of the 10 UTP cases as stated in the answer to question 8 were closed with the acceptance of commitments and 7 cases were closed with the imposition of fines under the settlement procedure. As an example of advocacy, see the BILLA case in the attached summary of cases. This case took place under the legislation in force before the transposition of the UTP Directive.<\/p>\n The Czech Republic has been the only EU country where food prices have recently fallen. To what extent do you believe competition enforcement and regulation have contributed to this trend?<\/strong><\/p>\n As mentioned above, the sector inquiry of 5 selected products regarding the competition did not reveal any failure of competition and food prices are falling at a time when inflation in the country has regressed.<\/p>\n In particular, the analysis has shown that for the 5 selected basic commodities, the highest share of the consumer price is normally borne by the primary producer. But of course, the latter usually also incurs the highest costs associated with production, whether in terms of human labour, feed or fertiliser, farming equipment or fuel and energy. The commercial margins of processors and traders are at similar levels (expressed in absolute amounts), but generally slightly in favour of the traders’ margins. In the event of rising costs in the agri-food sector, the retail chain is the fastest and most flexible in responding by passing the increase on to consumers. Unlike producers, processors, and other parts of the chain, it is not bound by long-term contracts, allowing it to adjust prices quickly in line with current market conditions.<\/p>\n