One of the reasons for the adoption of Directive 2019/1 was weak or ineffective enforcement of competition law which has occurred in some Member States. The lack of guarantees of independence, resources, as well as enforcement and fining powers for national competition authorities to be able to apply Articles 101 and 102 TFEU effectively, means that undertakings engaging in anti-competitive practices might be subject to ineffective enforcement.
This may be the case of Slovakia. Slovak competition law enforcement is realised through administrative law sanctions. The Slovak legal system provides also both criminal sanctions and private enforcement, but these possibilities are quite ineffective, mostly due to the time of the proceedings of competition enforcement.
For example, the Slovak Criminal Code42 in Article 250 recognises as
a crime ‘Abuse of the participation on competition’ (‘To the imprisonment up to three years will be sentenced anyone who abuses the participation on competition by action conflicting with Competition law resulting in the qualified harm /at least 26 600 €/ caused to other competitor or jeopardize the running of other competitor’s business’). However, no one was ever sentenced for this crime. The reasons for that can be found in the preconditions of criminal responsibility: (1) final judgement on the abuse of participation on competition and (2) final judgement on damages of amount at least 26 600 €. In Slovakia this means a process spanning many years. Competition proceedings often last, from their beginning until the final judgement, for 5 years43 and sometimes even
10 years44 or more45. After establishing the responsibility of an undertaking
for ‘abusing the participation on competition’, then another, at least 4-years proceedings (on damages) need to be successfully completed and, of course, such proceedings require the action of the victim. Only after having the relevant evidence (the final judgement on the breach of competition law and the final judgement on the damages), has the criminal proceeding against a particular natural person (not undertaking), whose responsibility for the breach of competition law and the suffered harm needs to be proven, the potential to finish with the declaration of someone’s guilt. But this part also can last years until the final judgement. Without any deeper research, considering
42 Act No. 300/2005 Coll Criminal Code.
43 E.g. AKCENTA/VÚB case No. 2 Sžhpu/3/2011, Slovak Telecom case No 3Sžhpu/1/2012. 44 E.g AKCENTA/ČSOB case No. 3Sžh/1/2016 of 23.11.2017, ECLI:SK:NSSR:2017:1014200849.1. 45 E.g. Diaľničný kartel case No 5Sžh/2/2015 of 2.11.2016 Diaľničný kartel, ECLI:SK:
that no one was ever sentenced for this crime, it can be said, that criminal enforcement of competition law in Slovakia is almost ‘mission impossible’.
Administrative sanctions therefore remain the main way of effective enforcement of competition law. Although the Slovak rules for imposing fines follow those of the European Union46, some disparities and problems still
remain.
For example, the Slovak Competition Act provides a slightly different definition of the term ‘undertaking’. Under the current Article 3(2) of the Competition Act, the term ‘undertaking’ (‘podnik’ within the EU definition and ‘podnikateľ’ in Slovakia) signifies an entrepreneur within the meaning of Article 2 of the Act No 513/1991 Coll Commercial Code47, as well as
natural persons and legal persons, their associations and associations of these associations, with respect to their activities and conduct that are, or may be, related to competition, regardless of whether or not these activities and acts are aimed at making a profit. According to Slovak law, this term covers also undertakings when considering concentrations. Following the definition provided by the CJEU (any entity engaged in an economic activity, irrespective of its legal status and the way in which it is financed48), we can
see the differences.
When considering these differences, the author agrees with Blažo (2016), that the divergence between the concepts of undertaking in European and Slovak law can lead to obstacles to effective application or to illogical ‘fallback’ solutions when the AMO tries to punish competition infringements, particularly cartels. These hurdles can appear not only during the parallel application of European and Slovak law, when the discrepancies are evident, but also within the application of Slovak competition law. A narrower delineation of the concept of an undertaking in Slovak competition law obliges the AMO to identify liability of every natural or legal person separately and impose sanctions on every natural or legal person separately, even in case where several persons belong to a single economic unit and, therefore, are considered one unit under EU Law. In particular, this issue is evident in the case of cartels that last for a longer period of time when the persons, representatives or legal subjectivity of the companies change during that time.49
46 See the Methodical guideline of the AMO available at: https://www.antimon.gov.sk/data/
files/963_metodicky-pokyn-o-postupe-pri-urcovani-pokut_1-9-2018.pdf (access 11.06.2019).
47 I.e. entity registered in the Business register, person providing business activity under
a trade license, person providing business activity under a license other than trade license, natural person providing agricultural production which is registered in a special register.
48 Judgement of the Court of 14.03.2019, Case C-724/17 Skanska and others, ECLI:EU:C:
2019:204, para. 36.
49 E.g., in the GIS cartel, the AMO in decision of 14.08.2009, No. 2009/KH/R/2/035 imposed
Legal definition of the term ‘undertaking’ provided in Article 2(1).10 of Directive 2019/150 and its transposition to national law will be therefore a step
forward in the right direction.
Other problematic issue of enforcement might be the possibility for undertakings to escape liability for fines by way of restructuring. In Slovakia, it is not rare for formerly rich and stable companies, after falling into troubles with state (mostly financial or tax) administration that impose huge fines on them, to became empty and insolvent during the administrative process (which together with judicial review may last 10 years). A typical scenario of such scheme is, that management during that time established in parallel a new company, often with a similar name, to which directly, or through secretly related subjects, transfer property and other valuables from the ‘problematic’ undertaking. The way how they provide these transfers are usually highly sophisticated, with the purpose not to fall to the competition concept of economic continuity, but be safe from any action from the potential bankruptcy trustee or any creditor contesting these transfers51. Such undertakings (or
persons behind them) also ensure control for themselves over the bankruptcy procedure through the voting of ‘friendly’ creditors. According the Section 36 of the Bankruptcy Act, a bankruptcy trustee, who was established independently through a random choice of the electronic system provided by the court, can be revoked and altered by the majority of voting creditors on the first meeting of creditors to another (and ‘right’) one. This process might be connected even with bribery of the voting creditors. As this action is not considered to be a crime and the revoked bankruptcy trustee does not have the right to challenge such decision of the creditors to the judicial review, it represents an elegant way of escaping liability.
Another problem of enforcement relates to the extreme length of the procedure. Proceedings in Diaľničný kartel52 lasted 12 years (from the inspection
in 2004 until final judgement in 2016). The ineffectiveness of enforcement in this case is stressed by the fact, that this cartel had the form of bid rigging in public procurement. Despite the fact, that the former (2005) public procurement legislation and the current competition legislation recognise as a sanction for cartelists a ban on the participation in public tenders, public
50 ‘Undertaking’ as referred to in Articles 101 and 102 TFEU, means any entity engaged in
an economic activity, regardless of its legal status and the way in which it is financed.
51 According the Article 60 of the Bankruptcy Act, a bankruptcy trustee is entitled to contest
any legal actions, by which the debtor stints its creditors, as long as the same are taken with the intention of the debtor to stint its creditors and such intentions was or must have been known to the other party. It shall only be possible to contest those penalizing actions by law, which were taken during five years prior to the passing of the bankruptcy order.
52 Judgement of the SCSR of 02.11.2016 No 5Sžh/2/2015 Diaľničný kartel,ECLI:SK:NSSR:
authorities were not able to apply the ban in this case. As previous legislation stipulated, that tenderer is banned from public procurement for the period of 5 years after concluding the cartel (which in this case expired in 2009), which has to be confirmed by a final judgement, the recent legislation requires the imposition of the ban to the decision of the AMO (which is not the case, as the decision of the AMO was adopted in 2006 and the court cannot change the sanction to the disadvantage of the party if he is a claimant). During the whole process and also after the process, members of the cartels have been continuing to participate in tenders. To that regard, the Commission is likely to start an inquiry on an abuse of European Structural Funds, as the Slovak Republic did not prevent the participation of members of this cartel in various public procurements for construction works financed by European Funds.53
As the Directive explains and requires the necessity of the adoption of adequate guarantees on the imposition of effective, proportionate and dissuasive fines on undertakings and associations of undertakings which infringe competition law, the above-mentioned issues shall be the subject of legislative changes.
Firstly, the application of compatible terminology is inevitable. An unification of the term ‘undertaking’ will have an impact not only to effective imposition of fines but also on effective private enforcement, especially when regarding the concept of economic unit in the light of the above mentioned SKANSKA.
Secondly, with the aim to prevent the possibility of an undertaking escaping easily through the bankruptcy and recovery system, it might be useful to establish personal responsibility of the owner or acting managers of the undertaking breaching competition law, if the imposed fines are not enforceable. Strengthening the position of bankruptcy trustees and reprobating the bribery of creditors in bankruptcy proceeding, can also help to better enforce competition law.
Thirdly, both the Administrative Code and Administrative Judicial Code require proceedings to conclude in reasonable time. Such legislation therefore follows the goals set up in Directive 2019/1. Effective enforcement therefore fails on human factors – overloading of the courts and obstructions of the parties. As administrative courts deal with the whole packet of administrative law (even social security law, construction law, tax law, environmental law, etc.), an effective way how to reduce the length of the judicial process might be found in the creation of specialised competition senates.
53 https://www.aktuality.sk/clanok/691446/opat-sa-vynoril-davny-dialnicny-kartel-siahnu-na
V. Conclusions
This analysis is not an exhaustive comparison of all aspects of Slovak Competition Law with Directive 2019/1 as, generally, the Slovak system of competition procedure tends to be in line with the practice of the European Commission. The AMO and Slovak courts regularly rely on European case-law and the soft-law instruments of the European Commission even in purely national cases. We can therefore say that the practice at European level shapes the application of national level (Blažo, 2016).
However, this short analysis of particular issues proved that incompatible, problematic or at least weak parts of Slovak competition law still remain, which need legislative improvements to achieve the EU standard of enforcement.
Safeguards predicted in Article 3 of the Directive 2019/1 present the slightest problem. Right to defence, right to be heard, legal professional privilege, right to access the file, right to exclude private data from the file, right for an oral hearing, right to present evidence and make suggestions, principle against self-incrimination, presumption of innocence, right to good administration or right to an effective remedy before a tribunal – all of these principles can be found in Slovak legislation, relevant case law of the CJEU and ECtHR and recognised principles applicable in the Slovak legal system. Absence of relevant Slovak case law in this relation therefore might mean that the AMO properly applies these safeguards to its proceedings.
Regarding the requirement of Directive 2019/1 to effectively prevent conflict of interest, it has to be admitted that Slovakia’s current legislation does not meet the set goal. Current provision on conflict of interest was formulated in 1976 and is easily avoidable. It neither provides any effective preventive measures for AMO employees (positive measures in the form of a sufficiently high salary and deterrent measures in the form of sanctions, such as an immediate termination of the employment contract). More precise regulation together with the AMO’s guidance or code of conduct on identifying and processing the conflict of interests therefore might ensure transparency and (after all) the effectiveness of the enforcement process too.
As it can be deducted from the text above, the effective enforcement of competition law by the Slovak competition authorities might be considered to be the most problematic part of the analysed issues. Lack of compliance in terminology and the great length of proceedings are not the only, but simply the most serious issues to be solved. Obsolete provisions of the Criminal Code and a leaky system of bankruptcy rules also do not comply with the requirements of Directive 2019/1
Even if Directive 2019/1 shined a light on the (in)effectiveness of the enforcement of competition law by the national competition authorities and,
therefore, with regard to future legislation amendments, it certainly represents another brick in empowering the Slovak market regulator.
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