Antitrust
Cartel agreements
The best known examples of prohibited agreements are those concerning direct price fixing. In these cases, the citizen is denied the possibility of buying at competitive prices. There is usually an increase in prices that would be lower in a normally functioning competitive environment. Agreements to divide the market are no less significant. The companies do not compete naturally, the market does not evolve but remains stagnant. New entrants find it very difficult to establish themselves in the market. The parties entering a cartel agreement do so in order to limit the competition, divide the market, and dominate it. This is done in hopes of securing a steady profit, without the risk of seeing a newcomer in the market whose activities and offer of superior services would jeopardize their position. However, given the fact that such agreements typically restrict incentives for innovation or reduction of costs, they tend to become a straight jacket for the further growth and development of individual cartel members. It is precisely for these situations that the antimonopoly authorities came up with what is called a leniency program. A firm has the option of informing the Office that a cartel agreement exists, and if the information is hitherto unknown, there is a good chance of escaping the penalty in the ensuing administrative procedure. The first company to take full advantage of this program in the Czech Republic was one of the energy drink manufacturers, when faced with a penalty of up to twenty million Czech crowns for an illegal exclusive sales agreement. The agreements about market shares or price fixing are of course not the only prohibited agreements. Cartel agreements are very sophisticated and the cases of the Office employees obtaining the actual document bearing the participants’ signatures are extremely rare. Also prohibited is for example acting in collusion or entering into an information exchange agreement. Open market requires the competitors to act independently of each other and refrain from coordinating their actions. This law was broken in the past, for example, by the gasoline distributors who coordinated the Natural 95 price increases, or the six building and loan associations that regularly exchanged sensitive information.
Abuse of dominant position
The Czech Republic, just like any other country, has markets with the so-called natural monopolies. These are primarily network systems. It is obviously not profitable to have two parallel networks supplying homes with gas, heat, or electricity. The companies with a dominant or even monopoly position on the market are in such a strong position that allows them to act substantially independently of the competitors, as well as the customers and suppliers. The market situation is usually monitored and corrected as necessary by the appropriate sector regulator, in conjunction with the antimonopoly office. The Office mission is to safeguard competition as a phenomenon. The Act on the Protection of Competition is stricter on the competitors in a dominant position than on those in a marginal position. They are not permitted to behave in a manner that would be perfectly acceptable in a small firm. If it were the other way around, the dominant player would most likely proceed to solidify its position and subsequently raise prices of its products, thus affecting both competition and consumer pricing in a negative way. A case in point is the natural gas market situation in the Czech Republic, where in practicality only one supplier of this strategic comodity exists. Consequently, the supplier’s behaviour in the market, which only now begins to open up, has been the subject of keen scrutiny by the Office. It is certainly not the first time that the natural gas industry is being investigated. In 2000, the Office stated that one of the regional gas distributors had abused its dominant position when it improperly charged a gas meter installation fee. The company was fined, and eventually forced to correct the situation and return the wrongly collected money. It also apologized to its customers. Very common are infractions of the law on the part of dominant telecommunication operators, who may resort to unlawful means in order to maintain their dominant position in the liberalized market. An example is the distribution of service packages containing free minutes without the customer knowing when they have been used up, so that he tends to keep calling through the dominant operator, even though a competitor could handle these calls at a better price. Likewise prohibited are the so-called loyalty discounts, in which a dominant competitor gives a preferential treatment to one group of clients over another. In the final analysis, those holding the less advantageous contracts suffer a loss in consequence of the dominant’s actions, as they have a greater monetary outlay for the same volume of service.