In 2013, the company ARMEX Oil acquired an ownership interest in the company TRANSCARGO without notifying the Competition Protection Office ("Office") and awaiting its approval. Two years later, the company ARMEX Oil realized that the notification to the Office had been required and notified the Office, providing full cooperation. In 2017, the Office imposed a final fine of CZK 4.9 million (approx. EUR 185,000) on ARMEX Oil for having made the acquisition without the Office’s prior approval. When imposing the fine, the Office took into account that ARMEX Oil had itself notified the Office of a possible administrative offence and had tried to remedy the infringement by cooperating fully in the proceedings. In June 2019, the Regional Court in Brno decided that the fine was disproportionate and inconsistent with the general idea of the adequacy and fairness of sanctions and reduced it to CZK 1,000,000. The Office filed an appeal against that ruling.

The Supreme Court concluded in its ruling of 14 September 2020 that the fine was imposed within the statutory limits (up to CZK 10 million or up to 10% of the net turnover achieved by the competitor in the last completed accounting period - in this particular case, CZK 1.3 billion (approx. EUR 50 million). The legal regulation does not regulate the lower limit of a fine. Previous case law suggests that a fine of around 4% of the upper limit or less should not be deemed a clearly disproportionate fine, although this does not apply in all cases.

The Supreme Court found that the fine had been imposed at a level of 0.3% of the maximum possible amount, and that the Regional Court had completely ignored that fines in the area of competition are based on the criterion of turnover, i.e. the economic strength of the competitor - a very important aspect of the proportionality and fairness of a fine. Moreover, even if the fine imposed on the competitor would ideally have been less than CZK 4.9 million, this does not make the fine clearly disproportionate, and therefore the Regional Court was not entitled to reduce it.

Moreover, in this particular case the Office did not intend to impose a lower or symbolic fine, which the competitor proposed in its appeal (max. CZK 1 million). The Office pointed out, inter alia, that the competitor - as a professional business operator in the Czech Republic for many years and with the financial means to pay for legal services - had infringed an important legal obligation to notify the acquisition, and that such failures to notify had repeatedly been part of the Company’s decision-making practice. This, therefore, was definitely not a case of a simple oversight or a practice which, because of its "novelty", it would be appropriate to impose a fine that was merely symbolic.

The Supreme Court further stated that each fine must have a preventive effect, i.e. it should discourage the offender and others from committing similar offenses, as well as a repressive effect; i.e. it should interfere in a certain reasonable way with the offender's situation.

At the same time, it should be emphasized that the competitor infringed the notification obligation not for objective reasons, but purely subjectively, through an omission for which it must logically be held liable, even taking into account all the mitigating circumstances. The Supreme Court thus established two basic criteria to be taken into account when imposing a fine: (i) the gravity of the offender's actions, and (ii) how cooperative the offender is during the proceedings.

For more information contact Vojtech Chloupek or Jiri Svejda. 

[1] Decision of the Supreme Administrative Court, file no. 5 As 204/2019 – 62, dated on 14 September 2020.