On August 26, 29.03.2016. amendments to the Cabinet of Ministers regulation No. 179 " Procedures for Determining a Fine for the Infringements Provided for in Section 11, Paragraph One, Sections 13 and 14.1 of the Competition Law and Sections 5, 6, 7, and 8 of the Unfair Retail Trade Practices Prohibition Law" (hereinafter - Regulations). Changes to the Regulations have been made in order to fully incorporate the requirements of Directive 2019/1/EU into the national legal system regarding the imposition of a fine and exemption from it. Amendments to the Regulations provide for changes in fines applicable to market participants, determining the procedure by which the Competition Council (hereinafter – the CC) applies fines for violations of the Competition Law, the Treaty on the Functioning of the European Union (hereinafter - TFEU) and the Prohibition of Unfair Trading Practices Law. Also, the amendments were supplemented with changes in the methodology for calculating fines for violations of European Union competition law and their alignment with the procedure applied by the European Commission, criteria for calculating compulsory fines and fines for procedural violations, the procedure for calculating net turnover for the financial year for violations of European Union competition law, as well as clarified Conditions of application of the leniency program.
On June 23, amendments to the Competition Law entered into force, which, among other things, supplement the law for the specifics of calculating fines applicable to market participants, determining changes in the thresholds of the maximum fine applicable, as well as expanding the framework of the Leniency Program. Along with the amendments, Articles 12 and 14 of the Competition Law were supplemented with new legal norms, which provide for changes in the procedure for calculating fines for violations of the TFEU. Namely, liability for violations of European Union competition law will in future be determined from the worldwide turnover of the competition law breaker, and the maximum applicable fine threshold for market participants will be determined for Article 101 of the TFEU (prohibition of agreements) and Article 102 of the TFEU (prohibition of abuse of a dominant position) 10% of their net global turnover for the last financial year.
Changes in the methodology for determining net turnover and penalty for the financial year
In order to adapt the current provisions of the Regulations to the framework of the Competition Law and to fully implement the requirements of Directive 2019/1, the procedure for calculating fines has been improved with amendments to the Regulations. The rules for determining the amount of the fine apply to both national competition law violations and European Union competition law violations. Accordingly, the amendments to the Regulations have been supplemented with the procedure for determining the net turnover of the financial year, from which the fine for violations of the competition law of the European Union is calculated, i.e., for violations of the prohibition of agreements and abuse of a dominant position. From now on, the fine shall be calculated as a percentage of the net turnover of the market participant in the last completed financial year in the world before the date of detection of the violation.
On November 1, 2021, the Prohibition of Unfair Trading Practices Law entered into force. The regulations retain the existing gradation of fines based on the severity and duration of violations, as well as the existing conditions under which the amount of fines can be increased or decreased, which were already established for violations of unfair retail practices. Along with the amendments to the Regulations, the fines applied for the violations established by the Prohibition of Unfair Trading Practices Law will also be calculated from the market participant's net turnover of the last reporting year.
The Regulations stipulate that the amount of the fine for the violation provided for in the first part of Article 101 or Article 102 of the TFEU corresponds to the part of the sales volume of goods or services directly or indirectly involved in the violation, which is determined depending on the severity of the violation by multiplying it by the number of years during which it was committed violation. Thus, the duration of the violation of European Union competition law is of fundamental importance in the calculation of the total fine, because each year of the continued violation doubles the amount of the fine calculated for the severity of the violation.
The regulations emphasize that the CC has the right to increase the total amount of the fine in cases where, for example, the market participant continues or repeats the same type of violation, and the CC has determined this and made a relevant decision. In this case, the amount of the fine may be increased up to 100 percent for each such violation. Likewise, the CC has the right to reduce the total amount of the fine in cases where there are extenuating circumstances, for example, the market participant has provided evidence of its small and limited role in committing the violation, the market participant has provided evidence that the violation occurred as a result of negligence, or the anti-competitive behaviour was authorized by or facilitated by public authorities or legal regulation.
The amount of the fine for the violations provided for in the first part of Article 9.4 of the Competition Law
The rules have been supplemented with the criteria for setting fines - severity and duration - for procedural violations. Also, the CC has the right to reduce the total amount of the fine in cases where there are extenuating circumstances, for example, the person held accountable has admitted and regretted what he did, or the person held accountable voluntarily prevented the consequences of the violation, compensated the loss or prevented the damage caused.
On the other hand, the CC’s total amount of fine can be increased if there is at least one of the aggravating circumstances, for example, the person held responsible has repeatedly committed the same type of violation, and the KP has found this and made a relevant decision, or the illegal behaviour has continued despite the request of an authorized official end it. If the violation is committed in the case of a possible violation of European Union competition law, the liability will be calculated from the global net turnover of the market participant or association of market participants in the last financial year.
Extended use of the Leniency Program
At the same time, the Regulations have been clarified by including the conditions for application and application of the Leniency Program stipulated in Directive 2019/1. If earlier the framework of the Leniency Program applied only to the discovery of secret cartels, now, with the amendments to the Competition Law, the framework of the Leniency Program is being expanded. Namely, for the cooperation of market participants with the institution, the CC can be exempted from a fine or it can be significantly reduced also for a prohibited vertical agreement on determining resale prices or restricting passive sales in the opening.
Calculation of forced money
The amendments provide that, when determining the amount of forced money, the Competition Council observes the principle of proportionality, as well as the economic status of the addressee. It is also specified that the forced money will be calculated as a percentage of the market participant's average one-day net turnover of the last concluded financial year before the date of detection of the violation for each day until the legal for the fulfilment of the obligation. If the violation is committed in the case of a possible violation of European Union competition law, the compulsory payment will be calculated as a percentage of the market participant's average one-day total net turnover of the last completed financial year in the world before the day of detection of the violation for each day until the legal obligation is fulfilled.