We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
14 September 2017
On September 1 2017 the new Act on Damages in the Field of Competition (Damages Act)(1) came into force. The Czech Republic has thus finally joined the list of EU countries that have implemented the EU Damages Directive,(2) which establishes common EU rights for cartel victims seeking damages.(3) The Damages Act introduces many novelties into national law, which aim to improve the procedural status of citizens and businesses that claim compensation before the national courts for damages caused by an infringement of EU or national antitrust rules.
In the past, private competition law enforcement – that is, compensation claims before national courts for damages caused by an infringement of the EU and national antitrust rules (eg, cartels or abuse of a dominant position on the market) – was unpopular and unsuccessful.(4) This was mainly due to the unfavourable procedural status of the victims of antitrust violations (eg, infringers' direct and indirect customers and infringers' competitors and their customers), which had difficulty accessing the evidence necessary to prove the damage incurred and had very little time to make their claims. The most important aspects and novelties introduced by the Damages Act, aimed to facilitate and improve the procedural status of potential claimants harmed by competition law infringements, are highlighted below.
The Damages Act specifically regulates the disclosure of evidence and attempts to bridge the information asymmetry, which in practice significantly impedes the private enforcement of competition law. Before a claim for damages is brought, the claimant can demand that the court order the infringer or any third party to disclose evidence necessary to prove the claimant's claim. However, the claimant must lodge a security of Kc100,000 (approximately €3,800) to secure any compensation for damages or other harm caused by the disclosure of such evidence. At the same time, the court may impose a fine of up to Kc10,000,000 (approximately €380,000) or 1% of the net turnover achieved in the last accounting period on the violating party, rendering it impossible or significantly hindering the disclosure obligation imposed by the court. Although this obligation also applies to documents collected by the competition authority, it is significantly limited in relation to those documents. In particular, documents submitted by cartel participants under the leniency programme are excluded from disclosure.
The Damages Act introduces the rebuttable presumption that a restriction of competition in the form of a cartel (ie, horizontal agreements or concerted practices) causes harm. Thus, the burden of proof in such damages actions is transferred from the victim (the claimant) to the infringer (the defendant). Therefore, the cartel members must prove that there was no harm caused by the cartel. Further, the Damages Act provides that in the event of a restriction of competition by joint action of more than one infringer (which is typical for cartels), the infringers will compensate the harm jointly and severally, with a narrow exception for immunity applicants and small and medium-sized companies.
The Damages Act sets out the right of any claimant harmed by a competition law infringement to claim and receive full compensation for the harm suffered. Therefore, compensation in full includes the right to compensation for actual loss and loss of earnings as well as the payment of interest. To protect the claimant, the courts cannot decrease damages (eg, due to circumstances worth particular consideration claimed by the infringer, such as the financial standing of the infringer or the manner in which the harm was caused), as opposed to general civil procedure rules. In addition, the Damages Act allows damages to be awarded even if the amount cannot be precisely determined (quantified). In such a case, the amount will be determined by the court based on the individual circumstances of the case. However, compensation for damages must not lead to excessive compensation.
The limitation period is five years from the time that the infringement ceased and the claimant became aware of or can reasonably be expected to have known about the harm and identity of the infringer and the competition law infringement.
In line with the Damages Directive, the Damages Act also stipulates that indirect customers can claim damages. Defendants can also argue the passing-on defence against the claimant, if they can prove that the claimant passed on the whole or the overcharge resulting from the competition law infringement. In addition, the Damages Act states that the decisions of other courts, the European Commission and the competition authority finding a competition law infringement are binding on the courts. One of the exceptions to the civil procedure rules contained in the Damages Act is that, at first instance, the regional courts should be responsible for antitrust damages actions.
The Damages Act can be seen as an opportunity for more effective recovery of damages caused by a breach of competition law. At the same time, a number of problematic issues are likely to arise in practice – for example, the extent to which evidence from the files of competition authorities is to be made available versus information covered by the leniency application or treated as confidential information. Further, an assessment where the amount of damage cannot be accurately determined and should be evaluated by the court will be unchartered territory for the courts. In addition, judges of competent regional courts generally do not have competition law expertise,(5) which might also become burdensome for claimants and infringers. Claimants should also bear in mind that applicable court fees must be paid.(6)
For further information on this topic please contact Jitka Linhartová or Claudia Bock at Schoenherr by telephone (+420 225 996 500) or email (email@example.com or firstname.lastname@example.org). The Schoenherr website can be accessed at www.schoenherr.eu.
(1) Act 262/2017 Coll, on Damages in the Field of Competition and on the Amendment of Act 143/2001 Coll, on the Protection of Competition and on the Amendment of Certain Acts (Act on the Protection of Competition), as amended (Law on Damages in the Field of Competition).
(2) EU Directive 2014/104 of the European Parliament and of the Council of November 26 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the member states and of the European Union.
(4) For further details about an unsuccessful damages action brought by private railway passenger carrier LEO Express against publicly owned national incumbent České dráhy, please see "Future of private competition law enforcement".
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.