Competition Protection Grants Forgiveness to Repentants

The alignment of the Competition Protection Act with European standards has enabled the Competition Protection Agency to impose administrative-penal measures, as well as to search apartments and business premises and seize documentation during investigations.

Written by Kata Pranić
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The new Competition Protection Act, which has been in effect since the beginning of October this year, has been amended to establish a more effective system for protecting competition in Croatia and grants greater powers to the Competition Protection Agency in proceedings against entrepreneurs who violate the rules of market competition. At the proposal of the Council of the Competition Protection Agency, the Government of the Republic of Croatia has adopted eight new regulations necessary for the proper application of the provisions of the Competition Protection Act. This has, among other things, enabled the Agency to impose administrative-penal measures for violations of competition protection regulations, which it could not do before. The new legal provisions will increase the effectiveness of the competition protection system in Croatia.  

Market competition is a constant rivalry between competitors offering products and services and their struggle to attract as many consumers as possible to increase profits and capture a larger market share. It is not something negative because a free market improves quality, increases supply, offers innovations, more acceptable prices, develops technology, and unites many social spheres. However, market competition must be within legal frameworks to prevent the establishment of a monopoly.

Equal Rights
The protection of market competition does not mean limiting freedom or anyone’s democratic rights, nor does it jeopardize economic development, but rather introduces order to the market. Without such laws, large companies could obliterate any attempt at new entrepreneurship in their field.
The Competition Protection Act grants equal rights to everyone in the market, which means access and survival, while everything else depends on individual capabilities. Such a law has existed in capitalist countries for a hundred years. The foundation of competition law or market competition law means protection against the conclusion of prohibited agreements by entrepreneurs. This prevents the formation of cartels (monopolies) and their operation, the abuse of a dominant position in the market, and the control of concentrations of entrepreneurs. The Competition Act ensures equal business conditions for all and establishes rules that determine permissible means for mutual competition. Ultimately, it also considers the consumer who has the right to choose a product that meets his quality and price requirements. The new Croatian Competition Protection Act is aligned with EU laws.  What greater powers has the Competition Protection Agency received under the new law and how will this affect market competition, explained Ms. Olgica Spevec, President of the Council of the Competition Protection Agency of the Republic of Croatia.
– The purpose of adopting the new Competition Protection Act is to create the necessary conditions for a more efficient and effective system of competition protection in Croatia. This is primarily achieved by granting the Competition Protection Agency the authority to simultaneously impose a penalty for violations of the provisions of this law when it establishes a violation – explains Spevec.

Appropriate Penalty
– Under the old law, the Agency would submit a proposal for the imposition of penalties to the misdemeanor courts competent according to the seat of the offender. If a penalty was imposed, the person to whom it related could appeal to the High Commercial Court. With the new solution, since the body that makes the decision on the violation of the law simultaneously makes a decision on the amount of the penalty, an appropriate penalty will be ensured. An entrepreneur who violates the law will be able to initiate an administrative dispute before the Administrative Court of the Republic of Croatia, both against the Agency’s decision on the merits and against the penalty – emphasizes Spevec.

– This reduces the number of courts involved in these proceedings and speeds up the entire process, while simultaneously reducing the costs for entrepreneurs related to these proceedings, increasing their legal certainty, and achieving a simpler and more transparent system. The law allows entrepreneurs who, at an early stage of the proceedings before the Agency, admit that they have acted contrary to the law to change their behavior and reach a settlement with the Agency, which thereafter does not issue a decision on the violation and does not penalize such an entrepreneur. It also introduces the possibility of complete or partial exemption from penalties for entrepreneurs who disclose the existence of prohibited agreements (cartels) to the Agency, and a shortened procedure for approving concentrations, etc.

News and Application
The goal of the new law is to establish more efficient protection of market competition, increase the preventive effect of the Agency’s decisions, and encourage entrepreneurs to pay more attention to understanding the regulations on competition protection and to cooperate with the Agency so that they do not find themselves in a situation where they, knowingly or unknowingly, violate the law.
In Croatia, there have been several reports of violations of competition rules. The powerful telecommunications company Hrvatski Telekom was opposed by B.net, the leading provider of cable distribution services. B.net, in addition to cable television and the internet, offers telephone services for private and business users. B.net’s complaint concerned pricing policy, accusing HT of behaving predatory in providing the service of transmitting television programs (MAXtv) by offering the service to users at a price lower than its costs. B.net also complained about the high rental price of EK lines owned by HT for program transmission. However, the Agency determined that there was no violation of competition rules. The news in the Competition Protection Act (NN, number 79/2009) can be summarized in several points. In addition to the fact that under the new law the Agency imposes administrative-penal measures, the jurisdiction of the Administrative Court of the Republic of Croatia has been expanded in controlling the Agency’s decisions so that the Administrative Court simultaneously controls the legality of its decision. Among other things, under the new powers, the Agency conducts ‘repentance programs’ for entrepreneurs who disclose cartels. Thus, the repentant receives forgiveness or a reduction of the penalty for the offense.  The Government of the Republic of Croatia, at the proposal of the Agency, will adopt all necessary implementing regulations within three months of the entry into force of the new Competition Protection Act. The drafting of the proposed regulations primarily concerns those that have not been known in Croatian competition law so far. These include the Regulation on the criteria for imposing administrative-penal measures, the Regulation on the criteria for exemption or reduction of administrative-penal measures, as well as the Regulation on the group exemption of agreements in the transport sector, and the Regulation on the method of application and criteria for assessing concentrations of entrepreneurs, which is significantly changing.