Private enforcement of competition law made easier
The new Act on Compensation of Damage in the Area of Competition has successfully passed through the legislative process. It should make it easier to claim civil damages for the infringement of competition laws through cartels or abuse of dominant position. The act was published in the Collection of Laws under No. 262/2017 Coll. and is effective from 1 September 2017.
The act transposes Directive 2014/104/EU, which aims to strengthen the position of those who suffered harm from an infringement of competition law and unify their status in proceedings across the EU. The changes it brings to the Czech law certainly deserve some attention. Unlike the general regulation of the scope and manner of damage compensation, the act stipulates that damage be compensated in full; this means that the discretionary power of a judge to reduce/mitigate damages shall not be admissible here. If damage has been caused by several entities acting jointly, as is typical for cartels, all of them shall be liable jointly and severally; this means that the court cannot decide that an infringer shall pay damages only in the amount corresponding to their involvement.
The plaintiff’s (claimant’s) position in the proceedings concerning cartels has been strengthened significantly: the law stipulates a rebuttable presumption that infringement of competition in form of a cartel results in harm; the burden of proof is thus transferred on to the defendant who has to prove that the infringement did not cause damage. A special regulation as to the limitation has also been introduced: a longer limitation period of five years is stipulated, which shall start to run on the day when the claimant knows, or at least could and should have known, of the damage, the identity of the person liable for the damage, and the infringement. The limitation period shall not begin to run before the infringement of the competition ceases.
The act also aims to further improve the position of the injured party (the claimant) and to remedy the information asymmetry that makes claiming damages difficult: it introduces a special procedure to provide the injured party with access to evidence. Even before initiating the proceedings for damages, the claimant may propose that the court order those who have control of any evidentiary documents to disclose these to the claimant. The penalty for the failure or refusal to comply can be up to CZK 10 000 000 or 1% of net turnover. To secure any damage that may arise from such a disclosure, the claimant has to make a security deposit of CZK 100 000 or more, if so requested by the court and depending on the circumstances of the case.
The new act should make actions for damages from the infringement of competition law easier. Only practice will show to what extent damages will actually be claimed by injured parties.