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ÚOHS fines steep, but lack teeth

Anti-Monopoly head takes relaxed stance toward penalizing

By František Bouc
Staff Writer, The Prague Post
February 21st, 2007 issue

Source: ÚOHS
Big Reductions
The Anti-Monopoly Office (ÚOHS) levied the highest fine in its history Feb. 12: a 979.2 million Kč ($45.4 million) penalty to be paid by nine power-equipment manufacturers accused of price fixing since 1988. But, when Siemens found out it had to pay nearly a third of that total, the company didn’t panic. Instead, it adopted an increasingly common stance.
“We will not oppose the fact that we were breaching anti-monopoly laws, but rather the amount of the fine,” Siemens spokesman Petr Sedláček said. “The fine is disproportionately big.”
Siemens’ strategy is well-planned. More and more companies have succeeded in softening ÚOHS penalties since Martin Pecina took over as chairman of the government’s most powerful business watchdog in late 2005.
During Pecina’s tenure, 32 percent of ÚOHS rulings have been reduced or thrown out completely, up from 22 percent during the agency’s first 15 years. Out of a total of nearly 700 million Kč in fines the ÚOHS levied last year, the Brno-based office will only collect 140 million Kč.
Most significantly, Pecina drastically cut a fine in December over a “cartel agreement” among six building societies from the original 484 million to 55 million Kč. He said the ÚOHS failed to prove all the shortcomings for which the building societies had been fined.
In another example, he lopped 40 million Kč off a fine for gas distributor RWE Transgas abusing its dominant position. Pecina said the company’s action to correct the abuse played a key role in granting the relief.
“Today, corporations sanctioned for breaching anti-
monopoly rules tend to dispute the fine and adjust their operations to the law,” said Radek Pokorný, president of the Czech Association for Competition Law. “Then there is a good chance the final sanction will be relieved.”
Pecina’s personal philosophy has changed the ÚOHS from an iron-fisted judge to a calm reformer.
“Our work cannot be about setting the height of fines, but rather about preventing the breach of anti-monopoly laws,” Pecina said.
ÚOHS spokesman Filip Vrána said the organization’s management was not bothered about the increasing number of revised cases.
“Since Pecina took over, we’ve been mainly focusing on removing any possible shortcomings in companies’ behavior as soon as possible, and sanctions are only a tool toward accomplishing that goal,” Vrána said.
In the past, the ÚOHS used to perform undercover investigations of suspected businesses before striking them with hefty fines, but no more.
Pokorný said Pecina’s concept of “a nice father who talks to the child before using the rod” was positive because it helped restore order on the market much faster. Rather than arguing with the ÚOHS, more companies now choose to cooperate with it in order to reduce their penalties.
The increasing number of revised rulings is also the result of companies starting to use the courts to their advantage, particularly the Supreme Administrative Court, which was set up four years ago to deal with appeals against decisions levied by state authorities or regional courts.
“Companies began only recently to turn to that court to challenge the ÚOHS’s verdicts,” Pokorný said. Unlike previous courts, which could only look at the facts at hand, the Supreme Administrative Court can conduct more in-depth analyses, thus increasing the likelihood that ÚOHS verdicts could be overturned.
Still, Pokorný said, the ÚOHS should increase its number of investigators to ensure that fewer of its rulings are later revised.
Six companies fined by the ÚOHS in 2006 successfully appealed in courts to have their fines canceled.

František Bouc can be reached at fbouc@praguepost.com


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