A particularity of the Czech Competition Act (No. 43/2001 Coll.) is that, in addition to addressing agreements distorting competition, the abuse of dominance, and concentrations of undertakings, it also contains a section concerning the distortion of competition by public authorities.
Section 19 of the Competition Act requires public authorities not to distort competition in the exercise of their powers without justifiable reasons, in particular by (i) favouring a certain undertaking or a group of undertakings; (ii) eliminating a certain undertaking or a group of undertakings from competition; or (iii) eliminating competition from the relevant market. The Czech Office for the Protection of Competition supervises public authorities and enforces the above rules, except where the distortion constitutes state aid or results from a decision or other act under the Administrative Procedure Code and the Tax Code.
Although the number of infringements of Section 19 by public authorities handled by the Office for the Protection of Competition is considerably lower than the number of cases involving private undertakings, it issues important decisions from time to time that provide useful guidance to public authorities.
A recent example is decision No. R0086/2019 of the Chairman of the Office for the Protection of Competition, issued on 1 October 2019 in an appeal procedure confirming the Office’s first instance decision concerning a breach of Section 19 by the municipality of Krupka in the Ore Mountains.
In 2013 the municipality of Krupka adopted a decree limiting the locations in its territory where betting, lotteries and games of chance could be offered with effect of 1 January 2014. Following an investigation, the Office for the Protection of Competition found that the four specific addresses included in the decree had not been selected based on objective and non-discriminatory criteria that had been determined in advance. The Office concluded that by favouring four undertakings that were allowed to continue their activities without justifiable reasons the decree had distorted competition on the market for the offering of betting, lotteries and games of chance in the municipality of Krupka from 1 January 2014 until the date of the first instance decision. According to the Office, competition had also been distorted during this period on the market for commercial premises in which betting, lotteries and games of chance could be offered.
Although the Chairman agreed on appeal with the assertion submitted by the municipality that the decree served a perfectly legitimate objective, he pointed out that it had not achieved such objective in a manner compliant with the competition rules. In the course of the Office’s investigation the municipality had failed to present reasons and objective criteria for the selection of four specific locations at which betting, lotteries and games of chance would be permitted.
The Chairman further dismissed a claim that the Office’s decision constituted an unlawful interference with local government. Indeed, the Office’s decision did not render the municipal decree invalid, but merely imposed a fine, which in itself had no effect on the validity or binding nature of the decree.
In light of the above, the Chairman confirmed the Office’s first instance decision