Unfair competition is defined in the Commercial Code as competitive behaviour that is contrary to decent competitive practices and capable of disadvantaging other competitors or consumers.
Unfair competition is regulated under the Commercial Code.
Competition is regulated under the Protection of Competition Act. This act penalises violations of competition such as prohibited agreements or abuse of dominant position. The Office for the Protection of Competition monitors compliance with the Act.
The best known examples of prohibited agreements are direct price-fixing agreements. Market sharing agreements are no less serious. Cartel agreements are concluded by competitors with the aim of restricting competition and dividing and dominating the market.
It is precisely for these issues that anti-trust authorities created the so-called leniency programme. Companies have the possibility to inform the Office for the Protection of Competition about the existence of cartel agreements and if the information they provide is new, they have a good chance of escaping a penalty in subsequent administrative proceedings.
Concerted practice, for example, is also forbidden, as are information sharing agreements. Competitors must act independently of each other on the market and must not coordinate their actions.
Abuse of dominant position
Companies that have reached a dominant position on the market may not use their status to the detriment of other competitors or consumers. Mergers of competitors, which might substantially effect competition on the relevant market, especially through the creation or strengthening of the dominant position of the entity created by the merger, are prohibited.
In the Czech Republic there are markets with so-called natural monopolies. These mainly involve network industries. The situation on the market is then usually monitored and corrected, in addition to the anti-trust authority, by the relevant market regulator, which in the Czech Republic is the Energy Regulatory Office and also the Czech Telecommunications Office. The market regulators perform market supervision ex ante, in other words in advance or preventively, while the anti-trust authority performs retrospective or ex post supervision of these markets.
Types of unfair competition
Section 44 of the Commercial Code lists examples of unfair competition. These include:
- misleading advertisements,
- misleading labelling of goods and services,
- drawing attention to the dangers of substitution,
- free riding on the reputation of the company, products or services of a competitor,
- comparative advertising,
- breaches of commercial confidentiality,
- putting at risk the health of consumers and the environment.
The monitoring of legal regulations on the provision of state aid has the aim of minimising the preferential treatment of players competing on the market or in branches of industry at the expense of other players. There is a general prohibition on state aid, which is considered acceptable only in exceptional circumstances.
In the Czech Republic between 2000 and 2004 the Office for the Protection of Competition decided on the compatibility of state aid provided in the Czech Republic with Community law in general. Since 1.5.2004 this power has been transferred to the European Commission.
National competition authorities
The Office for the Protection of Competition promotes the development of fair competition. The Office also monitors the awarding of public contracts and significant market power within the meaning of the Act and is the coordinating, monitoring and advisory unit for state aid.
Strict provisions govern company mergers
The evaluation of mergers between competitors forms the third pillar of competition protection. Corporate mergers are a common occurrence in a competitive environment. The idea of protecting competition in the area of mergers is not to frustrate corporate business plans but to intervene only when the proposed merger may distort competition on the market.
Competitors who have agreed on a merger must contact the Office for the Protection of Competition if they fulfil the notification criteria established under the Act on the Protection of Competition.
A person whose rights have been violated due to unfair competition may file a complaint against the offending party. Together with the complaint, a proposal for precautionary measures may also be filed.
The means of defence against unfair competitive behaviour involve not just civil law but also public law.
Civil law sanctions
Under the provisions of Section 53 of the Commercial Code, persons whose rights have been violated or threatened by unfair competition may sue the violator,
- in order to put a stop such behaviour,
- to end a detrimental situation,
- to secure adequate compensation, which may be provided in cash,
- or reparation for damages,
- and the surrendering of undeserved enrichment.
Public law sanctions
Sanctions for unfair competition may also be imposed under the provisions of Section 248 of the Crime Act, which stipulates that anyone who concludes a price-fixing agreement, a market division agreement or another agreement violating competition, or who, contrary to other legislation on public procurement violates in a serious manner the binding regulations on the tendering procedure will be punished by up to three years' imprisonment or a financial penalty or the confiscation of items or other assets.
The following governmental and non-governmental institutions and web portals offer further information and useful services for the safeguarding of fair competition.