Article 5 of the Law on Competition and Article 101 of the Treaty on the Functioning of the European Union prohibit agreements between companies which prevent, restrict or distort competition, and the breach of these laws may result in heavy fines. Anti-competitive agreements include, for example, price-fixing or market-sharing cartels which do not create other companies competitive pressure for launching new products, improving their quality and decreasing prices, which leads to higher prices for consumers.
Agreements indicated below are generally considered anti-competitive:
- fixing prices;
- limiting production;
- sharing markets or customers;
- sharing commercially sensitive information;
- bid rigging;
- fixing resale prices (between manufacturers and distributors).
Vertical agreements, which are concluded between two or more undertakings operating at different levels of the production or distribution chain, do not normally restrict competition when they determine the price and quantity for a specific sale and purchase transaction. Although a restriction of competition may occur if the agreement contains restraints on the supplier or buyer, vertical agreements might have positive effects and may help a manufacturer to enter a new market.
The General Block Exemption Regulation and the Guidelines on Vertical Restraints adopted by the European Commission help other companies conduct their own assessment of vertical agreements of different categories. The Competition Council takes into consideration the provisions set out in the aforementioned Guidelines as well.
Irrespective of the occupied market share, vertical agreements that encompass hardcore restrictions (Article 4 of the General block exemption) and inflict harm on the consumers are considered breaching competition law.
- The first hardcore restriction concerns resale price maintenance;
- Online sales restrictions are prohibited as well, unless certain objective reasons can justify them.
Examples of vertical agreements:
- Exclusive distribution (points 151-167 of the Guidelines);
- Selective distribution (points 174-188 of the Guidelines);
- Single branding (points 129-148 of the Guidelines);
- Exclusive supply (points 192-201 of the Guidelines);
- Franchise agreements (points 43-45, 189-191 of the Guidelines).
Participating in a cartel may result in:
- a fine of up to 10 per cent of the gross annual income in the preceding business year;
- personal liability for the manager of the enterprise – restricted right to occupy the managing position for a 3 to 5 year-term and a fine of 14,481 EUR;
- disqualification from public procurement for up to 3 years;
- victim‘s claims for damages;
- loss of good repute.
Companies co-operating with the Council during the investigation into a cartel, submitting with all the details of the cartel prior to its investigation or those which had not initiated the cartel may be exempted from fines or granted reductions in the fines of up to 75 %, which would otherwise have been imposed upon them.