The Protection of Competition Act (PCA) is key to the existence of a number of companies and to the entering of new companies on the free market. Its correct application oftentimes plays a decisive role in the future of an ambitious start-up or a company, which hasn’t fully established itself yet.
Free competition constitutes a demanding challenge. Its restriction through prohibited agreements is not only unfair, but oftentimes proves to be an insurmountable obstacle. That’s why a recent ruling of the Commission for Protection of Competition (CPC) brings much needed clarity in regard to the scope of agreements, prohibited by the PCA.
The scope of the general prohibition of Art. 15 of the PCA is relatively broad and this is not a coincidence. The wording is, at first glance, precise and unequivocal. Though it must be further specified in regard to the entities it applies to, as well as the nature of prohibited agreements and their defining characteristics.
In its ruling, the CPC underlines that the rule applies to undertakings participating in the free market that have the distinctive characteristics of the term “undertaking” according to the PCA. Emphasis is put on their functional character. Sole condition is the carrying out of an economic activity with no restrictions regarding their legal and organisational form.
Alongside this, a further condition is set, requiring the two undertakings to be independent. The general prohibition of Art. 15 applies only to independent undertakings, whose conduct on the market and in the context of the particular agreement are not dictated by a common management or controlling body.
The second condition is the presence of an agreement or concerted practice. The term concerted practice is laconically worded in the PCA itself, defining such a practice as coordinated action or inaction of two or more entities. Court of Justice of the EU (CJEU) case law adds onto this one more defining characteristic – in the absence of a formal agreement between the undertakings, their coordinated joint actions to willingly circumvent the risks of free market competition.
With respect to “agreement”, it constitutes a relatively broad term. Here, CPC and CJEU case law is unanimous, defining it as a joint intention between two undertakings, no matter the form of expression of each party’s will. An agreement can also be seen in pre-contractual relationships, if it has the potential to lead up to a coordinated conduct on the market.
In the realm of vertical markets (vendors of a service and their respective clients) tacit consent for pursuing the respective behavior must be present at the very least. Tacit consent requires there to be an offer, as well as an acceptance of said offer. Here, the actual behavior and actions of the parties is also taken into account.
Last but not least – the respective agreement or concerted practice must be capable of causing an anti-competitive effect, be it a goal or an actual result. The two conditions are presented alternatively. This is why simply the goal of the concerted practice or agreement itself can be sufficient to fall under the scope of Art. 15 of the PCA. It is not required for the pursued result to have been achieved.