• Scope of Application
• Restriction of Competition
  • Agreements
    • Prohibited Behaviour
    • Exemptions
  • Abuse of Dominant Position
  • Concentration
    • Merger and Amalgamation
    • Joint Venture
    • Exeptions
    • Threshold Values
    • Notification and Decision of the Office
    • Publication of the Decision
  
  
• Penalty Provivions

New Act on Protection of Economic Competition

(Act No. 136/2001 Coll. on Protection of Economic Competition and change and amendment to the Act of the Slovak National Council No. 347/1990 on Organisation of Ministries and Other Central State Authorities, as amended)

The new act on protection of economic competition fully replaces the (a currently valid) act No. 188/1994 Coll., as amended, on protection of economic competition, with effect from 1 May 2001. The main purpose of the Act is to protect economic competition on markets of products, works and services against its restriction. The Act also introduces a complex regulation of powers and authorisations of the Antimonopoly Office of the Slovak Republic.

Scope of Application

The Act applies to entrepreneurs, i.e. to

1. persons defined as entrepreneurs in Section 2 of the Commercial Code, as well as individuals, legal entities and their associations in case of their activities which relate or might relate to competition, regardless of the fact whether their intention is to make profit or not, and
2. governmental authorities and municipalities.

The Act applies to all activities of the entrepreneurs which restrict or might restrict competition. In contrast with the currently valid act, the Act also applies to entrepreneurs which provide services in a public interest under special regulations, apart from those cases when application of the Act would, either practically or legally, negatively affect their goals under the special regulations. As for the territorial application of the Act, the Act also applies to the activities performed abroad, if they lead or might lead to a restriction of competition on Slovak markets.

The Act introduces definitions of several legally important terms, such as relevant market, relevant market of Goods, interchangeable Goods and territorial relevant market.

Restriction of Competition

In its second part, the Act regulates non-permitted forms of restriction of competition, i.e. agreement restricting competition, abuse of the dominant position on a relevant market and concentration.

Agreements

Prohibited Behaviour

The Act defines the agreements restricting competition as agreements, harmonised actions, or decisions of associations of entrepreneurs, which effect is, or which cause or may cause, a restriction of economic competition (the"Agreement restricting competition" or the"Agreement"). The "agreement" is any oral, written or other approving manifestation of will based on actions of entrepreneurs. The term"harmonised action of entrepreneurs" includes co-ordination of behaviour of entrepreneurs which does not satisfy the definition of the agreement and which cannot be considered as a natural copying of behaviour of another entrepreneur. The Act understands under the ``decision of an association of entrepreneurs'' a legal act of a body of the association which binds its members, or a recommendation of a body of the association to its members.

The Agreement restricting competition is prohibited by law. Like the currently valid act, the Act contains an exemplary list of the Agreements restricting competition, involving in particular:

1. a direct or indirect price fixing, or fixing of other commercial conditions,
2. a commitment to restrict or control manufacture, demand, technical development or investments,
3. a division of market, or sources of supply,
4. a commitment of participants asserting different commercial conditions for the same subject matter of individual entrepreneurs, which disadvantages some of them in competition,
5. conclusion of contracts subject to the condition of acceptance of other supplementary obligations, which are not related to the subject of the contracts, either by their nature, or according to their commercial usage.

The Act states, as a new example of the Agreement restricting competition, an agreement which has features of collusive behaviour and causes that entrepreneurs co-ordinate their offers in public procurement processes.

The prohibition also relates to agreements on transfer of rights and provision of rights/licenses to intellectual property, trademarks, business names, works and performances under the Copyright Act and to know-how not protected under special laws, save for those agreements in case of which the restriction of competition applicable to the acquirer is necessary for protection of such rights.

In case that the reason for prohibition applies only to a part of the Agreement restricting competition, only such part is prohibited, provided that it can be separated from other parts of the agreement.

Exemptions

The Section 6 of the Act contains so called ``de minimis rule'', i.e. a general exemption from prohibition of the Agreements restricting competition for those Agreements which meet certain quantitative criteria and therefore do not have a significant impact on competition. The prohibition does not apply to the Agreement restricting competition, if a joint share of its participants, or a share of any of its participants, does not exceed 10% of total share of Goods on the relevant Slovak market (the currently valid act allows such exemption only in case of the joint share not exceeding 5%).

However, the exemption shall not apply in case of so called ``heavy cartels'', i.e. the Agreements restricting competition containing restrictions mentioned under 1.-3. above, or in case of restricting competition by cumulative effects of more Agreements restricting competition which contain similar type of restriction of competition and lead to similar effects on a relevant market, provided that a joint share of their participants exceeds 10% of total share on the relevant market. The joint share includes shares of the participants of such an Agreement restricting competition, entrepreneurs controlling the participants, as well as entrepreneurs being controlled by the participants or controlled by entrepreneurs controlling the participants.

The new Act stipulates the same right of entrepreneurs as the currently valid act: the right to ask the Office to issue a decision that their activities do not establish the Agreement restricting competition, or that their Agreement restricting competition satisfies conditions of ``de minimis rule'' (this decision is known as so called ``negative clearance test'' in the currently valid act).

In case of an Agreement restricting competition which is prohibited by the Act, its participants have the right to ask the Office to grant an individual exemption, i.e. to issue a decision that the prohibition does not apply to their Agreement restricting competition for a limited period of time stated by the decision, provided that the Agreement restricting competition complies simultaneously with the following conditions:

1. the Agreement improves production or distribution of the Goods, or supports technical or economic progress,
2. the Agreement provides consumers with an appropriate share on benefits from such Agreement,
3. the Agreement does not impose on its parties restrictions which are not necessary for achievement of the above mentioned aims, and
4. the Agreement does not allow its parties to exclude competition in relation to a substantial part of involved Goods.

Entrepreneurs are also authorised to ask the Office to issue a statement whether their draft Agreement restricting competition is not contrary to the provisions of the Act (the currently valid act does not regulate such a right).

Abuse of Dominant Position

Another non-permitted form of behaviour regulated by the Act is an abuse of the dominant position. The dominant position on the relevant market is considered as the position of entrepreneur or several entrepreneurs which do not have other competitors, or do not face any substantial competition, or which can act independently due to their economic power. Any abuse of the dominant position is prohibited by law. The Act states an exemplary list of typical abuses of the dominant position on the relevant market, including:

1. a direct or indirect enforcement of inappropriate commercial conditions,
2. a restrain, or threat of restrain, of manufacture, demand or technical development of Goods prejudicing consumers,
3. an application of different conditions in identical or interchangeable fulfilment in respect to other entrepreneurs, i.e. discrimination of them,
4. a conditioning of conclusion of an agreement by a counterparty's obligation to take-over also other deliveries (supplies) non-related to the demanded subject of the agreement.

In addition to the above examples stated also by the currently valid act, the Act adds some new examples of the abuse of the dominant position on the relevant market:

1. a temporary abuse of economic power with the aim to eliminate competition (e.g. an entrepreneur with economic power decreases prices for a limited period with the aim to liquidate its competitors), and
2. an owner or administrator of so called ``unique equipment'' refuses, under conditions stated by the Act, to procure access to such equipment to other entrepreneurs. The ``unique equipment'' is an equipment, infrastructure or its part, place or right which construction or acquisition by other entrepreneurs is not objectively possible, and without access to which, or without use of which, competition on the relevant market is, or could be restricted.

Concentration

Another form of behaviour which is not directly prohibited by the Act, however which is subject to the Office's control, if certain conditions are met, is a concentration. The Act defines the concentration as a process of economic combining of entrepreneurs through:

• a merger or amalgamation of two or more previously independent entrepreneurs, or
• an acquisition of direct or indirect control by one or more entrepreneurs over an enterprise (or its part) of another entrepreneur or entrepreneurs.

Merger and Amalgamation

The Act introduces definitions of several relevant terms. The merger and amalgamation is not only the merger and amalgamation as defined in Section 69 of the Commercial Code, however also the economic merger and amalgamation, i.e. the case when a legal independence remains unchanged (mainly cases of joint economic management). The control is understood as a chance of decisive influence on activities of another entrepreneur, mainly through:

• ownership or other rights to an enterprise or its part,
• rights, agreements or on the basis of other facts which enable to perform decisive influence on constitution, voting or decision-making of bodies of an entrepreneur.

For purposes of the Act, a part of an enterprise means not only a separate organisational part of the enterprise, however also assets on the basis of which it is possible to make profit.

Joint Venture

The concentration also means the establishment of a joint venture controlled by two or more entrepreneurs which permanently carries on functions of an independent economic subject (so called ``concentration type of joint venture'').

Unlike the establishment of the concentration type of joint venture, the Act stipulates a different regime of control in case of the concentration created by establishment of the ``co-operation type of joint venture'', i.e. the joint venture whose purpose or effect is a co-ordination of competitive behaviour of entrepreneurs which control the joint venture, while the entrepreneurs still substantially act on the same relevant market as the joint venture, or on a very similar relevant market, or a similar supply or sales market. Provided that such concentration is subject to the Office's control, the Office shall consider the concentration pursuant to Sections 4 to 6 of the Act (i.e. pursuant to the provisions of the Act regulating individual exemptions for the Agreements restricting competition).

Exeptions

The Act introduces specification of situations which are not considered to be a concentration:

1. a temporary acquisition of control by banks, insurance companies or other financial institutions under conditions stated by laws on the basis of a temporary acquisition of securities for purpose of their further sale,
2. a temporary acquisition of control above an enterprise of another entrepreneur or its part on the basis of special regulations (e.g. activities of bailiffs, bankruptcy administrators, etc.),
3. an economic alliance among legally independent entrepreneurs belonging to the same economic group based on control relations.

Threshold Values

A concentration is subject to control of the Office, if:

1. the combined turnover of participants of the concentration is at least SKK 500 mil. and at least two of the participants of the concentration achieved turnovers of SKK 150 mil. for the closed accounting period preceding the concentration, or
2. the combined share of the participants of the concentration, or the share of at least one of them, exceeds 25 per cent of the total turnover of Goods on the relevant market of the Slovak Republic.

Combined Turnover

The combined turnover or the combined share shall be the sum of turnovers or shares of participants of the concentration, entrepreneurs which control the participants, entrepreneurs controlled by the participants or by entrepreneurs which control the participants.

Turnover

The turnover is understood as a sum of incomes, sales and revenues from sales of Goods plus a financial support which affects price of the Goods and which was provided to the entrepreneur by public or other institutions named by the Act. The Act furthermore introduces rules for calculation of turnover and refers to a special regulation of the Office which should regulate these rules in more details (not published yet).

Notification and Decision of the Office

The concentration which is subject to the Office's control must be notified to it within 30 days from: (i) the conclusion of a relevant agreement, (ii) the announcement of acceptance of offer in public tender, (iii) the delivery of a resolution of a governmental body to a state enterprise, or (iv) the date of acquisition of control over an enterprise (or its part) of another entrepreneur by other means, whereas the earlier of the above events is the triggering event in respect of the notification.

The Act specifies the persons which have the notification duty and details of such notification in more details than it is done by the currently valid act. This information shall form a part of a special regulation of the Office (not published yet).

The Act stipulates that participants of a concentration are not allowed to perform any rights and obligations arising from the concentration until the decision of the Office on the concentration becomes effective. The Act also states exemptions from this prohibition.

On the basis of the notification of concentration, the Office shall pass a decision on the concentration within 60 days from the day on which the notification was delivered to the Office. In complicated cases, a chairman of the Office can reasonably prolong this period, however by not more than 90 days. The period shall commence from the day on which the complete notification, containing all the information required by the Act, is delivered to the Office, or from the day on which an incomplete notification is duly amended. However, the period shall commence not later than after one year following the notification of concentration.

The Office shall permit a concentration, if the concentration does not create or strengthen the dominant position on the market, effects of which cause material obstacles for effective competition on the relevant market. The consent with a concentration can be conditioned by the decision of the Office. A purpose of such conditions should be to eliminate the material obstacles of effective competition caused by the concentration. A concentration which creates or strengthens the dominant position, effects of which cause material obstacles for effective competition, shall be prohibited by the Office.

In connection with the decision-making in case of the concentration which is subject to the control of the Office (including a concentration not duly and timely notified), or in connection with the granting a consent with the concentration which is conditioned by satisfaction of certain conditions leading to the elimination of material obstacles of effective competition, the Office is authorised to decide on a duty of improvement, including separation of an enterprise of participants of concentration.

The same rule applies as in case of the Agreement restricting competition; the Office, upon its own discretion, shall change or abolish its decision on the concentration provided that:

1. the decision is based on untrue or incomplete data of entrepreneurs, or
2. the decision has been obtained by a fraud, or
3. the concentration have been created in a different way than it was notified, or
4. participants of the concentration act contrary to the conditions stated by the decision.

An entrepreneur can ask the Office to issue a statement in connection with an intended concentration, i.e. before the concentration is created or realised. (This right, as well as a similar right in connection with the Agreements restricting competition, is not contained in the currently valid act.) The notification duty is not affected by the statement.

Publication of the Decision

The Act introduces a duty of the Office to publish enforceable decisions of the Office, notified concentrations and commencements of proceedings in any other matters regulated by the Act. The Office is liable to secure that the right of entrepreneurs for protection of their business secret and confidential information is guaranteed in case of publishing the above information. The duty to publish the information is satisfied by an announcement of the information in internet/web the Commercial Bulletin, on the official internet web pages of the Office (http://www.antimon.gov.sk) and by access to the enforceable decisions in the Office's library.

Penalty Provivions

The Act stipulates that in case of breach of duties stipulated by the Act, the Office shall impose penalties up to 10% of the turnover for a closed previous accounting period and in case that the turnover did not reach SKK 10000, or there was no turnover, or the turnover cannot be calculated, the penalty up to SKK 10 mil. can be imposed. In case that an entrepreneur does not provide the Office with required information/documents in a given period of time, or provides untrue or incomplete information/documents, or does not allow verification of information/documents, the Office shall impose a penalty up to SKK 1 mil. In case that an entrepreneur does not attend a hearing at the Office without a serious reason, or makes proceedings difficult in any other way, a penalty up to SKK 100000 can be imposed. Penalties can be imposed repeatedly. Penalties can be imposed only within 4 years following the commencement of proceedings, however not later that within 8 years following the breach of the Act.

This Act becomes effective as of 1 May 2001.

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