(nejen) v oblasti soutěže a regulace

THE EUROPEAN COURT OF JUSTICE RULES ON LIABILITY OF ONLINE MARKETPLACE OPERATORS | 2 |

EXTINCTION OF RIGHT TO PAID ANNUAL LEAVE | 3 |

CONSENT TO PERSONAL DATA PROCESSING, OR HOW TO ACCEPT COOKIES | 5 |

A NEW DIRECTIVE ON CONSUMER RIGHTS – BAD NEWS FOR SELLERS? | 7 |

EUROPEAN COMMISSION: ASSESSMENT OF TRADE MARK SYSTEM | 9 |

MAIN OBJECTIVES OF A NEW AMENDMENT TO THE COMPETITION LAW | 11 |

AMENDMENT TO COMPETITION LAW CONCERNING SIGNIFICANT MARKET POWER | 13 | REGIONAL COURT IN BRNO: ČESKÉ DRÁHY (CZECH RAILWAYS) DISCRIMINATED AGAINST THE CUSTOMERS OF THEIR RAILWAY FREIGHT TRANSPORTATION SERVICE | 14 | COMPETITION UPDATES | 16 | CONTACTS

CONTENTSDear clients,

I am pleased to present you with another set of contri-butions prepared by our EU law specialist team. The summer has been rather quiet in the legal fi eld and only a few weeks have passed since the last issue of EU Legal News, however we are pleased to present you with a summary of some important news.

The fi rst article by Štěpán Štarha presents a judg-ment of the Court of Justice concerning the liability of

operators of online auction portals which will certainly draw the attention of pro-ducers and offi cial dealers of brand products. The next contribution is from Soňa Audesová and outlines the opinion of the Advocate General on the termination of the right to untaken leave. Equally interesting is the article of our colleague, Jaroslav Šuchman, which explores the latest tendencies in the interpretation of the European privacy directives and deals with the issue of consent to personal data processing - a key legal concept in this area.

Furthermore, Ivan Rámeš will present you with the current developments regard-ing the new directive on consumer rights. Zuzana Šimonovská adds her com-ments on the latest study on the trademark evaluation system in Europe that was prepared on the initiative of the European Commission. Additionally, as always, we did not forget to examine the important area of competition law: Firstly, Robert Neruda will inform you of the main objectives of the proposed amendment to the Competition Act. His contribution is followed by Lucia Hudecová’s article on the Competition Act amendment in connection with signifi cant market power. Lenka Gachová comments on the decision of the Regional Court in Brno in a case of the alleged discriminatory conduct of the Czech Railways towards its freight service clients. Finally, you can enjoy a brief segment of traditional news from the world of competition law.

I wish you a pleasant reading of the European Legal News.

Robert Nešpůrek, Partner

O C TO B E R 2 0 11

(not only) in the f ield of Competit ion & Regulatory matters

EU LEGAL NEWS

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EU LEGAL NEWS 2

THE EUROPEAN COURT OF JUSTICE RULES ON LIABILITY OF ONLINE MARKETPLACE OPERATORS

that violate intellectual property rights andare made through the European website of eBay. However, L’Oréal was not satisfi ed with the answer it received and fi led sev-eral actions against eBay in different coun-tries, including a suit before the High Courtof Justice (England & Wales), ChanceryDivision. In its petition, L’Oréal requestedthat the court determine that, among other things, eBay is responsible for the sale of goods that infringe on L’Oréal’s trademark rights.

In accordance with Article 14 of the Direc-tive on Electronic Commerce, an informa-tion society service provider is not liable for information stored at the request of a recipient of the service, on the condi-tion that the provider does not have actualknowledge of illegal activity or informationand, regarding claims for damages, is un-aware of the facts or circumstances from which the illegal activity or information is apparent. Furthermore, the service pro-vider is not liable if, upon obtaining such knowledge or awareness, it acts expedi-tiously to remove or to disable access to such information. Courts of the EU Mem-ber States generally applied this provi-sion to the liability of online marketplaceoperators for goods offered through thesewebsites. Thus, in principle, the indus-trial property rights owners were always required to inform operators of online mar-ketplaces if goods offered through thesewebsites infringed upon their industrial property rights. The operators of online auction portals could only be held liable if the offer of such goods was not removed.

In its judgment in the L’Oréal v. eBay case,the ECJ ruled that the above-mentioned exemption from the liability of online mar-ketplace operators may only apply if therole played by that service provider is neu-tral, meaning that it is possible to point at a lack of knowledge, or control regarding

Operators of online marketplaces, such as eBay or Aukro, may be held responsiblefor counterfeits sold by third parties ontheir websites if these operators take ac-tive part in promoting the goods and opti-mising their presentation.

On 12 June 2011, the European Court of Justice (the “ECJ”) issued a long-awaitedjudgment in the case of L’Oréal v. eBay (C-324/09). In this judgement, the ECJ clari-fi es the interpretation of Directive 2000/31/EC of the European Parliament and of theCouncil of 8 June 2000 on certain legalaspects of information society services, inparticular electronic commerce, in the In-ternal Market (the “Directive on ElectronicCommerce”). Among other things, thejudgment clarifi es the extent of exemp-tions from liability of information societyservice providers set out in Article 14 of the Directive on Electronic Commerce. Inaddition, a number of other questions weredealt with in the L’Oréal v. eBay case. Asthe extent of these questions substantiallyexceeds the possible coverage of this ar-ticle, we will only focus on the extent towhich the liability of operators of onlinemarketplaces is limited.

In the L’Oréal v. eBay case, the proceed-ings before the ECJ were initiated upona preliminary question referred by the UKHigh Court of Justice (England & Wales),Chancery Division. The High Court of Jus-tice requested that the ECJ answer pre-liminary questions arising in cases con-cerning trademark infringements on theInternet.

In the original proceedings, the UK courtsdealt with a dispute between L’Oréal,a world producer of perfumes and cosmet-ics, and eBay, an operator of an onlinemarketplace. In its letter of 22 May 2007,L’Oréal informed eBay of its concerns re-garding the high number of transactions

the data which it stores. On the other hand, an active role mainly consists of assistingin optimising the presentation of the con-cerned offers or in promoting such offers.Thus, an operator of an online auction por-tal that assists in promoting or increasing the sale of goods is liable for offering pro-ducts that infringe upon the rights of their producers or offi cial distributors.

In its judgment, the ECJ further concluded that an operator of an electronic market-place, even one who did not have an ac-tive role in promoting the products, maynot seek exemption from the liability set out in Article 14 of the Directive on Elec-tronic Commerce if he knew of any cir-cumstances under which an undertaking who proceeds with due care, would haveto point at the illegality of the concernedoffers that were for sale.

The judgment in the L’Oréal v. eBay caseis another judicial contribution to the fi ghtagainst counterfeits and illegal fakes, andit should be welcomed by producers andoffi cial dealers of brand products, as it willenable them to exercise their rights bothtowards sellers who infringe upon indus-trial property rights, and towards operatorsof electronic marketplaces that are active-ly involved in promoting such goods.

Štěpán Štarha, Associate

EU LEGAL NEWS 3

EXTINCTION OF RIGHT TO PAID ANNUAL LEAVE

These questions follow up the ECJ’s judg-ment of 20 January 2009 in the joinedcases C-350/06 and C-520/06 - decisions Gerhard Schultz-Hoff v Deutsche Renten-versicherung Bund and Stringer and oth-ers v Her Majesty’s Revenue and Customs(“decisions Schultz-Hoff and Stringer”) and seek clarifi cation of the issue of leave and the failure to take leave due to temporaryincapacity for work. More specifi cally, theyseek an answer to the question of whether the principles of the Directive’s interpreta-tion set out in these decisions also applyto cases of long-term temporary incapac-ity for work, including cases of incapacity lasting for several years and preceding thetermination of employment.

The Schultz-Hoff and Stringer decisions in2009 also concerned the interpretation of Article 7 of the Directive and led to debates on the legislation regulating the taking of leave. The ECJ arrived at the conclusion that a worker who is absent from workdue to illness may not be allowed to takea holiday during a period that falls withinthe period of sick leave. The ECJ further concluded that a worker who has been onleave due to illness, and whose incapa-city for work prevented him from exercis-ing his right to paid leave, should, at thetermination of his employment, continue tobe entitled to paid leave and to a fi nancialcompensation for any untaken leave. Thenormal salary of the worker shall be usedas the basis for calculating the fi nancialcompensation.

The legal regulation applied after theSchultz-Hoff and Stringer decisions wasbroadly defi ned and caused complicationsfor employers. For small and medium en-terprises, the payment of the allowance for

According to the Opinion of the Advocate General, European law allows the limit-ing of the period during which the right to untaken leave and the right to fi nancial compensation for untaken leave may be exercised on the condition that the original purpose of leave is maintained.

The period during which workers may ex-ercise their right for fi nancial compensa-tion for untaken leave in cases of long-term sickness may be limited. At least this is theview that the Advocate General Trstenjak expressed in her opinion of 7 July 2011 no. Rs. C-214/10 (Schulte v. KHS). She pro-posed to allow Member States to limit theperiod during which workers may exercise their right to leave in cases of a long-term incapacity for work, for which she fi nds a period of 18 months to be suffi cient. However, she leaves space for differences among the Member States in laying down the time-limit for the extinction of the right to annual leave.

In her opinion given in July of this year, the Advocate General comments on twoquestions that were submitted to the Eu-ropean Court of Justice (the “ECJ”) by theLandesarbeitsgericht in Hamm in connec-tion with the interpretation of Article 7 of Directive 2003/88/EC of the EuropeanParliament and of the Council of 4 Novem-ber 2003 concerning certain aspects of the organisation of working time (the “Di-rective”). These questions specifi cally dealwith the issue of whether it is required, un-der EU law, for national legal regulations to accord the right derived to workers from untaken leave for several years in cases of long-term illness, even if they were notable to exercise their right after a long-term incapacity for work.

untaken leave had a substantial impact on the budget and infl uenced the organisa-tional aspect of their business operations. The Advocate General argues in favour of limiting the time-limit for exercising the right to untaken paid leave while referring to the actual purpose of leave, i.e., rest from work in the year in which the work was done or, if appropriate, in the period immediately following. Moreover, fi nancial compensation for untaken leave makes the institute of leave a mere fi nancial ben-efi t and fails to meet the intention of thelawmaker. Another reason that formed the opinion of the Advocate General regarding limiting the right for the carrying over of leave entitlement is the more complicated re-engagement in working activities after a long-term absence from work, and theeven more complicated re-engagement in working after an absence due to a sick-ness that was extended by paid leave. Thus, in her opinion, the Advocate Gen-eral concludes that Article 7 of the Direc-tive must be interpreted as meaning that it precludes national legislation or practices in which the right to paid annual leave is extinguished at the end of the leave year and/or at the end of a carry-over period laid down by national law, even where the worker has been on sick leave for a whole leave year and where his incapacity for work persisted until the end of his employ-ment relationship, which was the reason he could not exercise his right to paid an-nual leave. On the other hand, Article 7 does not preclude national legislation or practices in which a worker on sick leave is not entitled to paid annual leave or to an allowance for the unused leave after the lapse of a certain period, even in cases of long-term temporary incapacity for work,

EU LEGAL NEWS 4

on the part of the employee, where theuntaken leave may be carried over to thefollowing year, are exempt from this rule. The provisions of Sections 217 and 218 of the Labour Code provide that the right to annual paid leave shall cease to exist if theemployee fails to take the leave before theend of the following calendar year, even incases where he could not take the leave due to a temporary incapacity for work. At the same time, the Labour Code precludes that employer determine the taking of leave for the period during which the em-ployee is temporarily incapable of working. Thus, for objective reasons, under Czechlaw, the employee is not able to take theleave and loses his right to it. In addition, under Section 212 of the Labour Code,a leave entitlement in a calendar year isonly created on the condition that the em-ployee did indeed work at least 60 days in the relevant year. This regulation con-tradicts European law and damages therights of employees.

Under an amendment to the Labour Code which is currently in preparation, an em-ployee is only entitled to salary compen-sation if his employment is terminated.

provided that the carry-over period is setout so as to preserve the purpose of theoriginal entitlement to rest.

The Advocate General relies on Conven-tion no. 132 of the International Labour Organisation and proposes as suffi cienta period of 18 months following the year in which the leave entitlement of a worker has arisen, upon the expiration of whichthe leave entitlement shall terminate. Thetwo and a half year aggregate period dur-ing which a worker has the right to takepaid annual leave is objectively suffi cientto allow for the exercising of the right totake leave. However, this 18-month periodis not fi rmly fi xed and the Member States,in their domestic legislation, are free to laydown a different time-limit with respect tothe boundaries defi ned by the Directive.

Act no. 262/2006 Coll., the Labour Code,as amended (the “Labour Code”), providesfor annual leave in Section 211 et seq. Theemployer must determine that the leave istaken by an employee in the year in whichthe employee’s entitlement to the leavehas arisen. Obstacles to work and, amongothers, the temporary incapacity for work

Where paid annual leave cannot be taken due to a temporary incapacity for work, the employer will be obligated to determine that the leave was taken after this obstacleceased to exist.

Although the opinion of the Advocate Gen-eral is not binding for the ECJ, and onlyserves as a recommendation for its fi nal decision, the ECJ decides in favour of the Advocate General’s decision in threequarters of the cases. Thus, it is very likely that we can expect new developments re-garding the question of losing the right to leave.

Soňa Audesová, Managing Associate

CONSENT TO PERSONAL DATA PROCESSING, OR HOW TO ACCEPT COOKIES

EU LEGAL NEWS 5

The Directives and the Czech Personal Data Protection Act 3 defi ne the data sub-ject’s consent in a similar way, as a freely given indication of the data subject’s wish-es by which he signifi es his agreement topersonal data relating to him being pro-cessed, while Directive 95/46/EC adds theword “express”.4 However, what is pre-cisely meant by these attributes, and howshould they be interpreted in practice? This is not quite clear, and we will now take a brief look at WP 29’s approach to selected issues of the application practice.

While comparing Directive 95/46/EC andthe Czech Personal Data Protection Act, a question arises in connection with per-sonal data processing of whether consent is to be perceived as a privileged form of legitimising data processing, or rather as just one of the necessary forms, the oth-ers being the necessity of data processing (i) for the performance of a contract withthe data subject, (ii) for compliance with a legal obligation to which the controller issubject, or (iii) in order to protect the vital interests of the controller or a third party. The WP 29 opinion embodies a rather strong message that consent should mere-ly be perceived as one of legal grounds of equal weight, and should only be usedwhere one of the other legal grounds to le-gitimise personal data processing does notapply on the basis of the “necessity” test. However, Czech law apparently brings consent to the foreground, while the other legitimisation grounds are listed as mere

In July 2011, the Data Protection Work-ing Party1 (“WP 29”) issued an extensiveopinion regarding the interpretation of theEuropean directives concerning privacy protection 2 (the “Directives”), dealing withone of the fundamental aspects of this top-ic – the substance of consent to personal data processing. Below we will highlight some of the conclusions of the Working Party which will undoubtedly have practi-cal impacts.

Personal data protection has been har-monised within the EU by means of thetwo Directives referenced above. Howev-er, the harmonisation is not full, and thusthe Member States have a relatively widemanoeuvring space for implementing therequirements of EU law in their nationallaws. Consent is one of the factors thatdiffers from state to state, mainly with re-spect to what is regarded as informed con-sent, and in what types of situations. Dueto the inconsistent practice, which may, inWP 29’s view, weaken the position of indi-viduals – data subjects, the Working Partydecided to issue its opinion on this topic. Its opinions are not formally binding, but,in the practice of national personal dataprotection authorities throughout the EU, they are respected as interpretation guide-lines. Since substantial penalties maybe imposed by the Czech Personal DataProtection Offi ce for the unauthorised pro-cessing of personal data, it is necessaryto pay attention to the interpretation of thiskey issue.

exceptions to the rule of data processingon the basis of consent.5 This may be a purely theoretical question; on the other hand, it may be important in making it pos-sible to use consent in specifi c situationswhere the individual’s right to autonomousdecision-making, as to how and to whomhe permits the processing of his personaldata, collides with the protective functions of privacy protecting regulation.

What are the limits of “indication of wishes”?One of the mantras of regulation in thearea of personal data protection is theneed to fi nd a balance between the pro-tection of data subjects (ensuring that if a data subject grants his consent, he hasall the necessary information underlyingsuch consent, and also ensuring that there is no doubt that the consent was granted)and fl exibility (regarding the manner inwhich consent can be validly given). Theopinion clearly states that consent can onlybe given by means of an action or behav-iour, admitting that a wide range of actionsexists whereby consent may be given. In any particular case, it always depends on the context whether an action constitutesvalidly given consent to personal data pro-cessing. For example, the activation of theBluetooth function on the mobile does notautomatically constitute valid consent for receiving commercial ads via that service. On the other hand, dropping a businesscard in a glass bowl at the entrance to a social event could be interpreted as valid

1 A working party set up pursuant to Article 29 of Directive 95/46/EC as an independent advisory body on issues related to the protection of personal data and privacy.2 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on

the free movement of such data, and Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications).

3 Act No. 101/2000 Sb. on the protection of personal data and on amendments to certain other laws, as amended (the “Personal Data Protection Act”).4 § 4 (n) of the Personal Data Protection Act and Art. 2 (h) of Directive 95/46/EC.5 Cf. § 5 (2) of the Personal Data Protection Act.

EU LEGAL NEWS 6

asserts that such consent is not suffi cient-ly free. In fact, in case of unavailability of the concerned person’s consent as legal grounds for personal data processing, theuse of scanners would only be possible on the basis of legislation.8

Generally, the opinion is rather sceptical regarding the possibility of personal data processing on the basis of consent in cas-es where a public entity is the processor, and completely refuses that possibility in a situation where the controller is a lawenforcement authority, such as the police.In such a case, doubts will always exist as to whether an individual’s consent to theprocessing of his personal data was given freely.

Consent in the virtual worldMost interesting is WP 29’s position ongranting consent via electronic communi-cations. With respect to social networks, WP 29 believes that the importance of vir-tual life on the web may cause some users to accept (not freely) the receipt of behav-ioural advertising in order to avoid the risk of being excluded from social interactions.Most likely, such a hint may be perceivedas an excessive one which causes pro-tectionist tendencies to prevail, but it mayalso indicate that special requirementsshould be placed on controllers who havea “dominant position” in the “market” withprivacy.

WP 29 places a strong emphasis on therequest that the text of consent proposedto web users by pop-up boxes, as well asthe related information, should be instantlyaccessible and comprehensible to a nor-mal user. Blanket consent should not begiven for anything that happens, or mayhappen, on a visited website; instead, spe-

consent 6 for the processing of such data(however, it would be diffi cult to determinethe processing purposes for which suchconsent was given).

Freely given consentAn individual’s freedom to decide whether he will give another person consent to in-terfere with his privacy means, in simplewords, that an individual’s refusal to grantconsent will not have any adverse im-pacts. An issue that is quite frequently en-countered in practice is the considerationof whether consent may be freely given if the data subject is under the infl uence of the data controller – such as in an employ-ment relationship – and the employee isrequired to give consent for personal dataprocessing that goes beyond the employ-ee’s obligations stipulated by law or in hisemployment contract. WP 29 notes thatthere is a “presumption in similar situa-tions that consent is weak”, but, nonethe-less, does not preclude the possibility of consent being validly given. Apart from a trivial example of uploading employeepictures on the employer’s intranet, WP29 does not offer any other example in thiscontext.7

The opinion offers much more interest-ing examples in the context of situationswhere personal data are processed bya public entity, but without direct authori-sation by law. The opinion refers to bodyscanners, the use of which at airports canbe presented as an option to passengerswho are motivated to give consent to be-ing scanned because by doing so theywill avoid potential problems or delays, astheir fi rst priority is to board their fl ight ontime, and their refusal to go through thebody scanners might trigger additionalcontrols, such as a body search. WP 29

cifi c consent should be given, as neces-sary, on a step-by-step basis, with respect to each service, depending on the user’s contemplation of individual services (andthe ensuing need for data processing).9

The principal question currently moving the world of personal data and information technology is how to allow data processingregarding the use of terminal telecommu-nication equipment by means of cookies after the amendment to Directive 2002/58/EC, which makes the possibility of allowingcookies10 conditional on informed consent(opt-in), rather than on the option of refus-ing to allow them (opt-out).11 WP 29 couldbring some more light on the ambiguities that this amendment caused, particularly as to whether it is possible to assume that the user does or does not give informed and specifi c consent merely by browser settings. Much to the disappointment of many internet dealers and service provid-ers, WP 29 tends to support an interpreta-tion which does not allow for such a fl ex-ible solution. Thus, we will have to accept each offered electronic cookie separately while browsing the Internet.

6 The Czech Offi ce for the Protection of Personal Data uses the phrase “implied consent” in this context.7 WP 29 refers to its opinion no. 8/2001 on the processing of personal data in the employment context.8 § 5 (2) (a) of the Personal Data Protection Act.9 WP 29 uses the term “granularity” in this context.10 A cookie, also known as an HTTP cookie, web cookie, or browser cookie, is used for an origin website to send state information to a user‘s browser, and for the browser to

return the state information to the origin site. The state information can be used for authentication, identifi cation of a user session, user‘s preferences, shopping cart contents, or anything else that can be accomplished through storing text data. (source: en.wikipedia.org).

11 Article 5 par. 3 of Directive 2002/58/EC: “Member States shall ensure that the storing of information, or the gaining of access to information already stored, in the terminal equipment of a subscriber or user is only allowed on condition that the subscriber or user concerned has given his or her consent, having been provided with clear and com-prehensive information, in accordance with Directive 95/46/EC, inter alia, about the purposes of the processing.”

Jaroslav Šuchman, Senior Associate

EU LEGAL NEWS 7

deviate from the provisions contained in the new Directive, unless the Directive provides allows for it.

Consumer liability for the use of goods be-fore their return is covered in detail, andprovisions are in place for the return of thepurchase price to the consumer upon his withdrawal from a contract, as well as for situations where it is impossible to with-draw from a contract, and a new defi nitionhas been provided for the usual businesspremises and for running the 14-day time-limit for withdrawal. Please read more about some of these novelties below in this article.

Advantages for sellersWhile, in line with the current Europeantrends, the concept of the Directive ben-efi ts consumers rather than sellers, thenew provisions also include a number of advantages for the sellers. In our opinion,the following are critical matters that cur-rently complicate the business of Internetsellers, but are not regulated by law:

• The consumer will be liable for any diminished value of goods after having used the goods to an extent more than was necessary to ascertain the nature and functioning of the goods. In a nutshell, this appliesto all situations that go beyond the usual physical testing and trying on of goods in a store that a customer might engagein before buying the goods.

• Considering the fact that, in the event of a withdrawal from the contract, the seller is obliged to return to the consumer the purchase price for the goods, aswell as the price for the transportation associated with the return of thegoods, the Directive newly provides for

On 21 July 2011, the European Parliament took a new approach to the new Europeandirective on consumer rights (the “Direc-tive”), the main objective of which is to set out uniform rules for the whole EuropeanUnion in the area of consumer informationand joint provisions for distance contracts and contracts negotiated away from busi-ness premises. The new amendment has been motivated by efforts to improve con-sumer protection and the functioning of theinternal consumer market, which should be achieved through a higher degree of legal certainty for both the consumers and the entrepreneurs. What novelties will theproposed consumer directive bring?

The current text of the proposed Direc-tive assumes modifi cations to, or replace-ments of, the current principle of minimumharmonisation that is laid down primarily infour directives, i.e., Directive 93/13/EEC,on unfair terms in consumer contracts, Di-rective 1999/44/EC, on certain aspects of the sale of consumer goods and associ-ated guarantees, Directive 85/577/EEC,on the protection of the consumer withrespect to contracts negotiated away frombusiness premises, and Directive 97/7/EC, on the protection of consumers withrespect to distance contracts.

The Directive covers contracts concludedbetween a seller and a consumer andaims to defi ne uniform rules for all Mem-ber States that, inter alia, sell goods or services on the basis of distance contractsconcluded mainly via the Internet or awayfrom the business premises.

At the same time, the new legislation en-visages an option for Member States tomaintain valid domestic rules or adopt newones in connection with certain aspects of this issue. However, these rules may not

situations where a consumer selects a mode of transport that is more costlythan what is offered by the seller. Inthis case, the costs arising from the difference in prices for these modesof delivery should be born by the consumer.

• The consumers will be obligated tosend the goods that are associated with their withdrawal from the contract back to the seller withinfourteen days from the notice of withdrawal. Thus, the sellers will nothave to return money to consumerswho did not return the goods. In thecase of purchase contracts, the sellers may wait to return the payment untilthey receive the returned goods, or a confi rmation of their return.

• It will not be possible to withdrawfrom a contract for goods where theprice depends on the fl uctuationin the market, or for goods that aremade based on the consumer’s order, i.e., goods made according to his requirements or customised to his needs. Similarly, it will not be possible to withdraw from a contract for services offering the reservation of a certaincapacity, which is typically the case for booking in accommodation facilities,etc. Also, it will not be possible to withdraw from a service contract after the full provision of the services.

• The new Directive defi nes premises that are not usual for business(where off-premises contracts areconcluded) in an effort to bring an endto the never-ending discussion on what constitutes business premises and/or premises usual for business. By defi nition, business premises should

A NEW DIRECTIVE ON CONSUMER RIGHTS – BAD NEWS FOR SELLERS?

EU LEGAL NEWS 8

contract should commence when the consumer has acquired the last of the ordered goods in his/her materialpossession.

• If the seller failed to properly inform theconsumer of the possibility of withdrawalfrom a distance contract, the fourteen day period may be extended to twelvemonths.

• The Directive introduces a model form that should simplify the process of withdrawal from a contract. A sample of this form is included in the Directive. Thesellers should offer the consumers theoption of withdrawing from the contractthrough a web form, the receipt of whichmust be promptly confi rmed by theseller by, e.g., e-mail. This obviously does not affect the consumer’s right towithdraw from the contract in a different manner that is clear for the seller andcan be proven.

• If the seller and the consumer do notagree otherwise, the seller should deliver the goods as soon as possible,however, no later than within 30 days. Should the seller fail to do so, even after the consumer’s request, the consumer may terminate the contract.

• The sellers may not charge the consumers for the use of any specifi cmode of transport more than what are the real costs which must be bornby the seller. In practice, this means that the sellers should stop enticing customers with low prices of goods that should be subsequently compensatedby high transport costs. A similar provision should apply to the costs of consumer telephone lines operated by the seller.

What’s the conclusion?It is necessary to mention that the Direc-tive has not been adopted by the Euro-pean Parliament and the Council and that,therefore, it is not binding for the Member States. It is currently very diffi cult to esti-

include spaces used by the seller asthe permanent or usual place for trading(typically shops, stalls, seasonallyoperated stalls, etc.) Accordingly,premises that are not usual for businessinclude the customer’s home or workplace, promotional trips organisedby the seller, streets, beaches, publictransport, etc. However, if a contractis concluded later in the seller’sestablishment (although the goodswere presented off the establishment),it cannot be considered an off-premisescontract.

Disadvantages for sellersAs the consumer is regarded as theweaker contracting party that should beprotected in the contractual relationshipwith the seller, the Directive brings newrequirements for the sellers and lays downnew consumer rights. These items are notcompletely new and should rather be per-ceived as a more precise specifi cation or clarifi cation of matters that are currentlyunclear or not entirely provided for by thelaw:

• No later than at the commencement of the order-placing process, the Internetpages of the seller must provide clear and legible information on the acceptedmethods of payment and on whether the delivery of the goods is subject toany limitations.

• The seller is obliged to place themain parts of the contract in thedirect vicinity of the confi rmation thatis required before the order is placed.These parts must be placed so that theycan be easily read by the consumer.At the same time, there must be clear information stating that, by placing theorder, the customer agrees to pay to theseller.

• Where the customer orders severaltypes of goods under one purchaseorder, but the different goods aredelivered separately, the fourteenday period for withdrawal from this

mate when the Directive will be adopted,its exact contents, and the timing of its effective applicability in the concernedareas through national legislations. What-ever the future of this initiative might be,the current text of the Directive showsthe consumer protection trends in Europeand indicates changes that we can expect sooner or later.

Ivan Rámeš, Associate

EUROPEAN COMMISSION: ASSESSMENT OF TRADE MARK SYSTEM

EU LEGAL NEWS 9

fordability of Community trade marks thepractice differs. Applicants register Com-munity trade marks without the intention to use them at the Community level. Such trade marks then represent an obstacle to the registration of national trade marks in Member States where they are not actu-ally used (Article 4 (2) (a) (i) of the Direc-tive). In this connection, the study refers to the requirement for the genuine use of Community trade marks and the territorial scope of such use. At present, this require-ment is met by use in one Member State,since requirement to the contrary wouldnot be in line with the single market con-cept that disregards the political borders between Member States. However, the scope of genuine use should still be as-sessed with respect to the current size of the European Union on a case-by-casebasis, and the courts should not be de-prived from taking it into consideration.

The study proposes a solution to the situa-tion where a Community trade mark is only used in a small part of the EU. The pro-prietor of a Community trade mark should keep the right to oppose the registration of a trade mark in a country where he doesnot, even after the lapse of the fi ve-year grace period, use his Community trade mark, provided he will extend use of his trade mark across other parts of the Euro-pean Union within additional grace period. The additional grace period should not be too long (not more than 15 years). After the lapse of this period, the proprietor of the Community trade mark would lose theright to oppose or invalidate the later trade mark in a territory where he fails to use his

The Study on the Overall Functioning of the European Trade Mark System has been drawn up by the Max Planck Insti-tute for Intellectual Property and Competi-tion Law from the European Commissioninitiative. It constitutes one of the sourcematerials for reviewing the overall func-tioning of trade mark protection, both at the EU and the national level, and someof the proposals will certainly be refl ected in amendments to the relevant legisla-tion, including Council Regulation (EC) No207/2009 on the Community trade mark (the “Regulation”) and Directive 2008/95/EC of the European Parliament and of theCouncil to approximate the laws of theMember States relating to trade marks (the “Directive”).1

One of the key questions is the relationbetween the Community and the nationalsystems, specifi cally the balance betweenthe systems and their harmonisation,which has still not been fully achieved.The study points out that in many casesthe use of the Community system is un-founded, i.e., by applicants, who have nointention or real possibility to use the Com-munity trade mark in all Member States.

The coexistence between these two sys-tems constitutes a basic principle of Eu-ropean trade mark law. As stated in thePreamble of the Regulation, “the Commu-nity law relating to trade marks does notreplace the laws of the Member States ontrade marks. National trade marks contin-ue to be necessary for those undertakingswhich do not want protection of their trademarks at Community level.”2 Given the af-

Community trade mark. Given the fact that the confl ict between the two trade markswould only be hypothetical, the proposedsolution might represent acceptable op-tion.

The proposal to reduce the grace periodfrom fi ve (Article 15 of the Regulation,Article 10 of the Directive) to three years would probably gain little support, and rec-ommendations have been made to pre-serve its current duration.

Another important fi eld the study looks intois the defi nition of signs of which a trademark may consist. A proposed removal of the requirement for graphical representa-tion, both from Article 4 of the Regulationand Article 2 of the Directive, would, inpractice, simplify the protection of sound, smell and taste marks, the registration of which the requirement makes rather un-common.

The classifi cation of goods and servicesfor which a trade mark is sought to be reg-istered should be harmonised at the Com-munity and national levels. The current practice of the Offi ce for Harmonization in the Internal Market (OHIM) allows, upontrade mark registration, for class head-ings to be used for all goods and servicesthat fall within a particular class. However, generic terms in the class headings lead to uncertainty about what they really com-prise. Although both OHIM and the na-tional offi ces use the Nice classifi cationsystem, in practice the scope of goodsand services comprised in the broadclass headings differs from offi ce to offi ce.

1 Based on information provided by users (a survey by the Institut für Demoskopie Allensbach), statements by relevant user associations (such as ECTA, INTA, MARQUES, AIM, BUSINESSEUROPE) and by all 25 national trade mark offi ces. An additional analysis of economic aspects was provided by the INNO-tec institute at the Economic Faculty of the Ludwig-Maxmilian University of Munich.

2 Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark, Recital 6 in the Preamble.

EU LEGAL NEWS 10

The option for fi ling a Community trade mark application with a national industrial property offi ce remains unchanged. The European Commission is to decide wheth-er the period of time set for forwarding theapplication to OHIM should be reduced from two weeks to one week given theuse of electronic means of communication (Article 25 (2) of the Regulation). Regard-ing the enforcement of decisions fi xingthe amounts of costs, the study points outthat some Member States still have notdesignated a competent national author-ity within the meaning of Article 86 (2) of the Regulation. The designation of the rel-evant authority is communicated to OHIM and the Court of Justice, and the studyproposes that it also be obligatorily noti-fi ed to the European Commission, whichcould thus supervise the fulfi lment of theobligation by the Member States. Despite some doubts regarding its viability, the study mentions the possibility of convert-ing the current pre-registration opposition into a post-registration opposition. Fur-thermore, the study deals in detail with thefee amounts and structure, and the sys-tem administration by OHIM.

As for the Madrid Agreement Concerningthe International Registration of Marks and the Protocol Related to the Madrid Agreement, the study proposed aligningthe opposition period with the examination period for absolute grounds for refusal, in particular “it is proposed to have the op-position period starting three months af-ter the publication of the Madrid mark byOHIM. The opposition period would then expire six months after the publicationdate, and coincide with the end of the six months period for the examination as to absolute grounds for refusal.”5

Although the European trade mark system has been amended several times duringits existence, it is likely to be subject to

Thus, for the classifi cation to be more con-sistent at both the Community and nation-al levels, it is necessary to indicate classheadings that should be narrowed to moreaccurate terms.

Similarly, the possibility of registeringa trade mark in three classes within theinternational classifi cation system in a ba-sic fee should be reviewed. The basic feeshould only cover one class; registrationin each additional class should be sub-ject to an extra fee. The aim is to preventregistrations (renewals) of trade marks for goods or services that the applicant doesnot need, as well as congestion of trademark registers.

Given its extensive scope, the study cov-ers many other issues, such as needto establish acquired distinctiveness byshape of product marks and trademarksconsisting of colours per se, need to es-tablish common rules for the registrationof collective marks, and regulation of non-registered marks.

The Regulation and the Directive provi-sions should be harmonised, especial-ly with respect to the regulation of thegrounds for refusal or invalidity concern-ing confl icts with earlier rights (Article 8 of the Regulation, Article 4 of the Directive),as well as protection of reputation marks.Also, many provisions of the Directiveshould become mandatory.3

Regarding issues related exclusively tothe Community system, the study men-tions the redundant disclaimer concerningthe non-distinctive elements referred to inArticle 37 (2) of the Regulation. The studyproposes that it should be clearly set outthat “a fi nding of the likelihood of confusioncannot be based on elements which arenot distinctive or otherwise not eligible for protection.”4

further reviews based on the conclusions drawn in the study. It remains to be seenwhich of its proposals will be taken into account as the European Commission isto present its offi cial standpoint, together with draft amendments to the relevant leg-islation, by the end of this year.

Zuzana Šimonovská, Senior Associate

3 E.g. Art. 4 (4) (a), (b), and (c), Art. 4 (5), Art. 5 (2) and Art. 9 (2) of the Directive.4 The Study on the Overall Functioning of the European Trade Mark System, page 76.5 The Study on the Overall Functioning of the European Trade Mark System, page 206.

EU LEGAL NEWS 11

MAIN OBJECTIVES OF A NEW AMENDMENT TO THE COMPETITION LAW

on the proposed legal regulation of theleniency programme, the settlement pro-cedure, and the Offi ce’s option not to pro-ceed with marginal cases.2

Leniency programme and settlementprocedureThe embodyment of the leniency progra-mme3 and the settlement procedure4

will be embodied in the Competition Act. In practice, all these instituties have al-ready been applied for several years. Sofar, the leniency programme principles have been provided for in a soft law, i.e., in a notifi cation of the Offi ce.5 Thus far, thesettlement procedure has not been pro-vided for even in soft law; the rules havebeen created through the decision-makingpractice.6 Based on the explanatory re-port, the Offi ce expects that, in practice, both the leniency programme and thesettlement procedure will be applied more frequently. At the same time, the inclusionof both these institutes in the CompetitionAct should increase the legal certainty of the applicants regarding their immunityfrom sanctions or the reduction of a poten-tial fi ne.

According to the proposed legislation re-garding the leniency programme and the

Although a leniency programme has been applied by the Offi ce for the Protectionof Competition (the “Offi ce”) since 2001, it is only now, after ten years of its applica-tion, that the programme will be embod-ied in the Czech legislation. This article deals with the main principles of the new legislation for the leniency programme, the settlement procedure, and the other changes proposed by the Competition Act.1

The ninth amendment to the Competi-tion Act was prepared by the Offi ce. Theamendment, which is currently about to start passing through the whole legisla-tive process, should result in a rather large number of changes. Some of these chang-es are substantial. In addition to the legalregulation of the leniency programme andsettlement procedure, the changes should affect the enforcement of the obligations of undertakings, the prohibition of under-takings who concluded a prohibited agree-ment from participating in public contracts, the option of the Offi ce not to proceed with marginal cases and other procedural rules for delivery, and the inspection of legal fi les or legal succession.

Each of the mentioned areas deserves attention. This article primarily focuses

settlement procedure, the documentssubmitted in connection with leniency ap-plications should be fi led outside the legal fi le until the delivery of objections by theOffi ce.

The change should also be refl ected bythe new provision of Section 248a of thePenal Code, according to which thereshould be no criminal liability for any viola-tion of the competition rules if the condi-tions for granting immunity from sanctions, or for reducing a fi ne for the participa-tion in a secret vertical agreement havebeen met under the Competition Act. Theamendment to the Penal Code is widelyappreciated because the concept of im-munity is closely connected to the leni-ency programme. It is also assumed thata new law on the criminal liability of legalentities will be enacted, and therefore, theproposed Section 248a of the Penal Codeformulates the immunity conditions for in-dividuals and legal entities.

The right of the Offi ce not to proceedwith marginal casesThe amendment brings a brand new pro-vision in Section 21 (2), the purpose of which is to enable the Offi ce to not dealwith violations that have a marginal effectand to exclude any administrative sanc-

1 Cf. Act no. 143/2001 Coll., on the protection of competition and on amendments to certain laws (the “Competition Law”), as amended (the “Competition Act”). 2 The draft bill amending Act no. 143/2001 Coll., on the protection of competition, as amended, and on amendments to certain laws, was submitted to the Offi ce under no. PID:

RACK8KLJQC5S and authorised on 10 August 2011.3 Under the leniency programme, the Offi ce offers leniency and potential immunity from fi nes to parties to cartel agreements. An undertaking which makes a cartel notifi cation

and provides all available information and evidence may completely avoid any sanctions or at least achieve a substantial reduction of the fi ne. (Source: The Offi ce: Leniency programme – rules and advantages of reporting a cartel).

4 The settlement procedure is a procedural tool for accelerating and simplifying the proceedings while improving the effi ciency of the Offi ce’s activities. Under this procedure, a fi ne to be imposed on a party to the proceedings may be reduced (with the effect of saving the procedural costs and efforts of the Offi ce in detecting and proving violations) in exchange for the party’s accepting the objected behavior (action), its liability for the anti-competition conduct and the legal qualifi cation of the objected behavior determined by the Offi ce (Source: Offi ce’s press release no. 10/006/HS001 from 13 January 2011: ÚOHS uzavřel čtvrtý případ narovnání).

5 Cf. Offi ce notifi cation of the leniency programme http://www.compet.cz/fi leadmin/user_upload/Legislativa/HS/SoftLaw/Leniency_program.pdf.6 Cf. Decision of the Offi ce in the case Kofola, Albatros, RWE Transgas and Karlovarské minerální vody.

EU LEGAL NEWS 12

damaged by the anti-competitive conduct. Therefore, the legislation must provide suffi cient guarantees that the Offi ce’s dis-cretionary right not to proceed with a casedue to its marginal signifi cance will notbe excessively used or abused. The op-tion of judicial examination of such an ac-tion taken by the Offi ce should pose such a guarantee.

The new amendment to the Competition Act does not explicitly mention the op-tion of examining such a resolution. The explanatory report refers to the provisions of the Penal Code, according to which a resolution on the discontinuation of the proceedings may be challenged by a com-plaint, and under which it is also possible to insist on a hearing in the matter. The re-ference to the Penal Code should only be considered to the extent that the purpose of the amendment is concerned. I believe that, in this case, it will not be possible to proceed in analogy with penal procedure, but it will be necessary to proceed in ac-cordance with the Rules of Administrative Procedure, under which it is impossible to appeal against a decision that is noted in the fi le. Such a decision may only be ex-amined in review proceedings. However, in my opinion, this regulation does not provide suffi cient protection against any

tions for these violations. Section 21 (2) of the Competition Act should read as fol-lows:

“In discharge of its duty, the Offi ce shallnot commence the proceedings whileadopting a decision to not proceed with the case, if with respect to the degree of violation of a privileged interest, there is no public interest in proceeding with thecase. This decision should only be noted in the fi le.”

Although we understand the Offi ce’s mo-tives for introducing the new regulation and fi nd it natural that the same material procedure is being applied in the current legal situation, we cannot ignore the con-cerns about the impact of the proposedprovision on the rights and legitimate in-terests of end consumers or claimants.According to some legal practitioners, in duly examining and sanctioning anticom-petitive conduct, the interest of the wholesociety should be prioritised over the right of a presumed violator to an expeditious and economical assessment of its alleged anti-competitive conduct.7

The experience shows that a matter thatis perceived as marginal by the Offi ce may be of signifi cant importance to entities

potential discretionary actions of the Of-fi ce. The explanatory report also showsthe effort of the Offi ce to further supportthe development of private enforcementof competition law and to use this typeof enforcement, among others, in thesecases that have lower importance for thewhole society. If the authors of the amend-ment state that private enforcement of competition law should provide suffi cient protection for the legitimate interests of the entities affected by anti-competitionpractices (end consumers or undertak-ings), they ignore the fact that this legalarea is completely underdeveloped (notonly) in the Czech Republic.

Robert Neruda, Managing Associate

7 Cf. Nedelka, M.: Vyšetřování skončilo – zapomeňte, Antitrust 2/2011.

EU LEGAL NEWS 13

AMENDMENT TO COMPETITION LAW CONCERNING SIGNIFICANT MARKET POWER

food sectors, but apply to the business re-lationships of all entities with a turnover of more than CZK 10 billion, even if they arenot in a dominant position and do not havea signifi cant market share. Abuse of marketpower would remain subject to a fi ne of up to10% of the entity’s turnover, which already currently applies.

In our opinion, the proposed legislation isvague and contradictory. First, we must point out the very defi nition of ‘signifi cant eco-nomic position’. We believe that the purposeof the regulation, which is to defi ne entitieswith a bigger market power and regulate any actions of those that might distort competi-tion, has not been achieved at all. Accord-ing to this defi nition, a signifi cant economic position can be attained by anyone exceptfor a dominant undertaking itself. In our view, the defi nition explicitly excludes dominantundertakings, which may result, in certaincases, in dominant undertakings being al-lowed to take actions that are forbidden to much smaller entities, still, however, havinga signifi cant economic position.

A demonstrative form of abuse of a signifi -cant economic position is, in particular, the restriction of the time for the payment of a purchase price to 30 days following in-voice delivery. Given the defi nition of a sig-nifi cant economic position (i.e., its scope of application), the new regulation could meanfi xed time limits for invoice payments appli-cable to all major undertakings throughout the economic system. In light of the abovedefi nition of a signifi cant economic position,no major undertaking could be sure that its

The Czech Act on Signifi cant Market Power (the "Act")1 came into effect on1 February 2010. Since then, the Of-fi ce for the Protection of Competition (the"Offi ce") has commenced a number of ad-ministrative proceedings based on theAct, two of which have been closed in fi rst-instance decisions (see the CompetitionUpdates section). From the very begin-ning, the Act has been criticised by bothbusinesspeople and experts who consider it to be, among other things, unmethodical and legally weak. The Offi ce has prepared a draft amendment to the Act on theProtection of Competition, which is toincorporate the signifi cant market power regulation and repeal the Act on Signifi cant Market Power.

In response to the criticism of the Act, thegovernment established an expert commit-tee last year comprised of representatives of the Ministry of Industry and Trade, the Min-istry of Agriculture, the Ministry of Finance,and the Offi ce. The committee recommend-ed that the Act be cancelled and that someof its provisions be implemented into other legislation.

Following the on-going discussions, the Of-fi ce initiated a public debate in early April2011 on the proposed repeal of the Act andthe parallel amendment to the Act on theProtection of Competition and the Act onPrices.2 3

Unlike the current legislation, the new regulation proposed by the Offi ce wouldnot be restricted to the agricultural and

conduct does not constitute such a wrong (if exceeding the 30-day limit). We are of theopinion that the proposed regulation couldartifi cially restrict the times for payment,even in situations where longer due periodsare quite common, and make the disadvan-tages that are associated with the cutting of usual periods become refl ected in the pur-chase prices, as there will be pressures to cut those as well (for lower prices, there will be a shorter time for payment).4 This could also lead to artifi cial support and a boost of factoring services.

After the strong criticism by the experts and entrepreneurs, the Offi ce decided to onceagain re-assess the proposed amendment.5

We think that, while further considering it, theOffi ce should focus, above all, on removing the controversial provisions, such as thoserelated to the defi nition of a signifi cant eco-nomic position. It should also ensure that the new legislation is applicable in practiceand, simultaneously, that it serves its pur-pose, which is to identify entities of a big-ger market power, and purposefully regulatethe conduct of such entities that may cause a signifi cant distortion of competition.

1 Act No. 395/2009 Sb., on Signifi cant Market Power in the Sale of Agricultural and Food Products (the “Act”).2 Act No. 526/1990 Sb., on Prices, as amended (the „Act on Prices“).3 Cf. http://www.compet.cz/hospodarska-soutez/aktuality-z-hospodarske-souteze/verejna-diskuse-k-navrhu-zruseni-zakona-o-vyznamne-trzni-sile/.4 We make this comment being aware of Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial

transactions of which we informed in the March issue of our EU Legal News (cf. Solský, P.: European Union strengthens its rules on combating late payment in commercial transactions). The said Directive introduced a rule for transactions between undertakings under which the basic period for payment fi xed in a contract shall not exceed 60 calendar days, unless otherwise expressly agreed in the contract and provided it is not grossly unfair to the creditor. The new amendment to the Act on the Protection of Competition goes beyond this rule and establishes a general 30-day time-limit for payment following the date of receipt of the invoice, providing for no agreement on diffe-rent contractual terms.

5 Press release at the vz24.cz server, dated 15 August 2011, Antimonopolní úřad chce přehodnotit novelu soutěžního zákona, available at: http://www.vz24.cz/clanky/antimo-nopolni-urad-chce-prehodnotit-novelu-soutezniho-zakona/.

Lucia Hudecová, Associate

EU LEGAL NEWS 14

REGIONAL COURT IN BRNO: ČESKÉ DRÁHY (CZECH RAILWAYS) DISCRIMINATED AGAINST THE CUSTOMERS OF THEIR RAILWAY FREIGHT TRANSPORTATION SERVICE

with fair means. If, however, the dominant undertaking acts in a way that it would otherwise, in a suffi ciently competitiveenvironment, be unable to act, and by so acting causes detriment to competitors or customers, then such conduct constitutes an abuse of a dominant position. Accord-ing to the Regional Court, discrimination as such by a dominant is prohibited, with-out the need to prove any other, partial, or subsequent abusive anticompetitive prac-tices through which the dominant under-taking endeavors to increase the effi cien-cy of its discriminatory conduct vis-à-vis specifi c market players. Since a dominant undertaking cannot apply different pric-ing policies vis-à-vis its business partnerswithout a valid reason, even without simul-taneously using other exclusionary prac-tices, the Regional Court believed that it was not necessary to further investigate whether other such exclusionary practiceswere part of some broader conduct of theinvestigated undertaking.

This judgment, as well as the preceding decisions of the Offi ce, were in line withthe position that pricing discrimination al-ways results in the deterioration of over-all customer comfort. Discrimination wasperceived negatively due to its exploitativeeffect and ineffi cient allocation of outputamong consumers. However, I believe that this approach is already being overrid-

In April 2011, the Regional Court in Brno(“Regional Court”) dismissed1 a legal ac-tion brought by Czech Railways against sa decision of the Czech Offi ce for theProtection of Competition (the “Offi ce”),which declared Czech Railways’ abuse of dominance by price discrimination. TheRegional Court concluded, inter alia, that discrimination is prohibited as such, with-out the need to prove any other, partial, or subsequent abusive anticompetitive prac-tices through which the dominant under-taking endeavors to increase the effi cien-cy of its discriminatory conduct vis-à-vis specifi c market players.

Between 2008 and 2009, the Offi ce is-sued decisions2 by which it declared thatCzech Railways abused its dominant posi-tion by applying different pricing for its ser-vices and different discounts to customerswithout any objectively justifi able reasons.By doing so, Czech Railways allegedlydisadvantaged some of the customerswho purchased its railway freight transportservices, and also impaired the position of other railway freight carriers.

Czech Railways brought a legal actionagainst this decision of the Offi ce. Re-cently the action was fully dismissed bythe Regional Court. In its judgment, thecourt admitted that even a dominant un-dertaking has the right to face competition

den in practice by the concept of a “moreeconomic approach” regarding the appli-cation of competition law. This concept isnot only based on the assessment of theformal characteristics of a particular con-duct, but rather on the analysis of the ac-tual impacts of that conduct in the contextof the specifi c conditions prevailing in themarket. The “more economic approach” isnow actively advocated by both the Euro-pean Commission and the Offi ce, the rep-resentatives of which are highlighting thepotential pro-competitive effects of pricediscrimination.3

According to the economic theories that are currently coined by competition au-thorities, price discrimination does notnecessarily have to result in the reduction of social welfare. To the contrary, it mayincrease general welfare by enabling an undertaking to increase its output by re-ducing the price to those customers whowould not demand the product at a high-er price. Increasing social welfare goeshand in hand with a willingness to under-take investment and innovation, which eventually benefi ts the consumers. Pricediscrimination may also enhance compe-tition based on individual customers or customer groups; this type of competition is probably more effi cient than a situationwhere undertakings are limited by the ob-ligation to charge an uniform price to all

1 Cf. judgment of Regional Court case no. 62 Ca 37/2009 – 680 of 21 April 2011 in České dráhy.2 Cf. Decision of the Offi ce case no. S 220/06-13976/2008/830 of 14 July 2008 in České dráhy; Decision of the Chairman of the Offi ce case no. UOHS-R 155/2008/01-

5485/2009/310/MVr of 6 May 2009 in České dráhy.3 Cf. Brouček, M. Cenová diskriminace – opravdu takové zlo? Antitrust 1/2011.

EU LEGAL NEWS 15

enon, and that it should not be, in itself (per se), perceived as conduct constitut-ing the abuse of a dominant position. The more economic approach indicates that,in many cases, price discrimination brings about advantages to both competition andconsumers. In the future, the competitionpolicy will probably focus on those cases of price discrimination which will result in, or will have the potential to result in, theanticompetitive exclusion of market com-petitors, mainly in situations where this practice will be associated with predatory pricing or margin squeezes.

Thus, we are witnessing a court uphold-ing the former formalistic approach of thenational competition authority regarding price discrimination applied by a dominant undertaking, which is nearly equivalent,per se, to the prohibition of such conduct;

the customers. Thus, price discriminationallows undertakings to target new custom-ers by enabling them to present specifi c offers to new customers, while simulta-neously maintaining the achieved rate of profi t from existing customers. Price dis-crimination may also reduce the marketpower of a dominant undertaking in a situ-ation where a strong customer insists onbeing offered a discount or more advanta-geous conditions. The general rule is thatthe ability and opportunity to negotiateindividualized terms and conditions in a bi-lateral relationship is one of the fundamen-tal elements of a competitive environment.

The currently applied economic theories,as well as the decision-making practiceof competition authorities, are based onthe assumption that price discrimination isnot an unambiguously negative phenom-

however, in the meantime this approach has been, apparently, abandoned by theOffi ce. Although undertakings are likely towelcome the Offi ce’s change of approach, it will be of crucial importance for the Of-fi ce to remain steadily on this new track,and for the more economic approach re-garding the application of competition lawto withstand judicial review.

Lenka Gachová, Senior Associate

EU LEGAL NEWS 16

COMPETITION UPDATES

ity of its suppliers, thus breaching the Acton Signifi cant Market Power. The Offi cealso criticised Kaufl and for agreeing withits suppliers that if they assigned their re-ceivables from Kaufl and to a third person, they would pay a fee at 4% of the value of the assigned receivables, or that theywould grant Kaufl and an additional dis-count for an early payment of their invoic-es. The decision is not yet fi nal and con-clusive, as Kaufl and has lodged an appealagainst it.

Amendment to Public Health InsuranceAct (5 August 2011)3

The Czech Parliament is currently dis-cussing an amendment to the Act on Pub-lic Health Insurance. Among other things,the proposed amendment prohibits bo-nuses and other benefi ts granted by phar-macies in connection with the dispensingof prescription medicine covered by publichealth insurance. The Offi ce commentedon this amendment and considers it to be contrary to the antitrust rules, as it mayrestrict price competition among phar-macies. In addition, if the amendment ispassed, the Offi ce will not be able to take action against such practices. Addition-ally, the Offi ce believes that competition among pharmacies could be distorted and

General Court annuls fi nes on Unipet-rol and Kaučuk (13 July 2011)1 The General Court annulled the Com-mission decision on the cartel in the syn-thetic rubber market that concerned three companies: Unipetrol, Kaučuk and Trade-Stomil. By fi ling the action, the parties sought the annulment of the Commission’s decision to impose a fi ne of an aggregate amount exceeding EUR 519 million. In the case of Unipetrol, Kaučuk and Trade-Stomil, the General Court concluded that the submitted evidence was insuffi cient in proving the companies’ participation in anti-competitive conduct, and decided to annul the Commission’s decision and the EUR 17.55 million fi ne.

Offi ce makes fi rst decision on abuse of signifi cant market power – fi ne on Kau-fl and retailer (19 July 2011)2 The Czech Offi ce for the Protection of Competition (the “Offi ce”) has imposeda fi ne of CZK 13.6 million (aprox. EUR 326.4 thousand) on Kaufl and Česká re-publika for breaching the Czech Act on Signifi cant Market Power, making the fi rst decision concerning this fi eld. According to the press release published by the Of-fi ce, Kaufl and agreed upon a maturity pe-riod of more than 30 days with the major-

restricted by the initiative that was recentlypublished by the Czech Ministry of Healthaimed at regulating the number and loca-tion of pharmacies.

Google to buy US manufacturer of Motorola mobile handsets (15 August2011)Google is about to acquire the US manu-facturer of Motorola mobile handsets for 12.5 billion dollars. The aim of the acquisi-tion is to bolster the Android operating sys-tem, which will stay open and available toother mobile phone manufacturers. By thisacquisition, Google (who was, until now,active in the fi eld of Internet search) willexpand to the hardware operating system business. Yet the transaction must fi rst beapproved by the US Federal Trade Com-mission and the European Commission.

Chairman of the Offi ce confi rmed fi nefor bid-rigging (17 August 2011)4

The Chairman of the Czech competitionoffi ce confi rmed fi nes of an aggregateamount of almost CZK 5 million for bid-rig-ging on HOKRA Spedition, INZET, PROM-INECON GROUP, CBK SHIFT and NAT-URAL MYSTIC. The undertakings havebreached the antitrust law by coordinatingtheir bids in a tender.

1 Judgment of the General Court of 13 July 2011 in Case T-38/07, Unipetrol and Others v Commission, available at: http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=EN&-Submit=rechercher&numaff=t-38/07.

2 Press release of the Offi ce: ÚOHS poprvé rozhodl ve věci zneužití významné tržní síly – pokuta pro řetězec Kaufl and, avail-able at: http://www.compet.cz/hospodarska-sou-tez/aktuality-z-hospodarske-souteze/uohs-poprve-rozhodl-ve-veci-zneuziti-vyznamne-trzni-sily-pokuta-pro-retezec-kaufl and/ (in Czech only).

3 Press release of the Offi ce dated 5 August 2011: Úřad se obává podstatného zhoršení soutěžního prostředí v lékárenství, available at: http://www.compet.cz/hospodarska--soutez/aktuality-z-hospodarske-souteze/urad-se-obava-podstatneho-zhorseni-soutezniho-prostredi-v-lekarenstvi/ (in Czech only).

4 Press release of the Offi ce of 17 August 2011: Pokuta za bid-rigging byla potvrzena, available at: http://www.compet.cz/hospodarska-soutez/aktuality-z-hospodarske-soute-ze/pokuta-za-bid-rigging-byla-potvrzena/ (in Czech only).

EU LEGAL NEWS 17

breach of the Act on Signifi cant Market Power while selling agricultural and food products. The Offi ce investigated the pos-sible breach of the law through a non-transparent application of a discount on the invoiced price of the supplied goods. AHOLD proposed commitments in rela-tion to the early payment of invoices and specifi ed the terms of the discount, and the Offi ce accepted such commitments. It is the Offi ce’s second decision concerning the Act on Signifi cant Market Power (see above).

Opinion of Advocate General in Toshi-ba Case (8 September 2011)8

In her opinion of 8 September 2011 in the Case Toshiba Corporation and Others, Ad-vocate General Juliane Kokott comment-ed on the application of the ne bis in idem principle, specifi cally on the number of competition authorities that may deal with one and the same cartel. The Advocate General concluded that, in cases where the European Commission commences proceedings, the domestic competition of-fi ce remains authorised to prosecute the anti-competitive effects of a cartel under national antitrust legislation if the cartel concerns a period prior to the country’s accession to the EU and a different terri-tory. According to the Advocate General, a cartel prior to the accession to the EU constitutes an infringement separate from that which continues after the accession. Therefore, the sanctions imposed by the Commission do not prejudice a parallel sanction imposed by the domestic compe-

AGROFERT may take control over Mlékárny Hlinsko (24 August 2011)5

The Offi ce approved the merger of AGRO-FERT HOLDING and Mlékárna Hlinsko after fi nding out that such a merger will not substantially distort competition. TheOffi ce enquired into the effects the merger could have on the milk markets, the pro-duction and sale of milk, butter and cream, and the production and sale of powdered milk, which are areas where the activitiesof the two undertakings overlap (AGRO-FERT already owned OLMA before the merger). The conclusion is that the mar-ket shares of the two companies will onlyslightly increase. The Offi ce also stated that the inspected markets included other competitors of a similar market power, and took into account that a majority of theproducts was supplied to retail chains.

AGROFERT may take control over meatcompanies (7 September 2011)6

In two fi rst-instance decisions, the Offi ce approved the takeover of ZEDNÍČEK andRecht by AGROFERT Group. ZEDNÍČEKoperates in the fi eld of international trade in chilled foods, specifi cally meat prod-ucts, fi sh, cheese and delicatessen. Recht is mainly involved in plant and livestockprimary production, as well as in the trade of agricultural products.

Offi ce closes administrative proceed-ings with AHOLD (30 August 2011)7

Without imposing a sanction, the Offi ce has closed the administrative proceed-ings held against AHOLD for a possible

tition authority for conduct performed dur-ing the period prior to the accession to theEU, and with effects on the country’s terri-tory. The opinion of the Advocate Generaldoes not constitute the fi nal resolution of the case; the decisive verdict will be that of the Court of Justice.

Robert Neruda, Managing Associate

5 Press release of the Offi ce of 24 August 2011: Převzetí Mlékárny Hlinsko nenaruší hospodářskou soutěž, available at: http://www.compet.cz/hospodarska-soutez/aktuality--z-hospodarske-souteze/prevzeti-mlekarny-hlinsko-nenarusi-hospodarskou-soutez/ (in Czech only).

6 Press release of the Offi ce of 7 September 2011: Agrofert může převzít fi rmy Zedníček a Recht, available at: http://www.compet.cz/hospodarska-soutez/aktuality-z-hospo-darske-souteze/agrofert-muze-prevzit-fi rmy-zednicek-a-recht/ (in Czech only).

7 Press release of the Offi ce of 30 August 2011: ÚOHS ukončil správní řízení se společností AHOLD, available at: http://www.compet.cz/hospodarska-soutez/aktuality-z-hos-podarske-souteze/uohs-ukoncil-spravni-rizeni-se-spolecnosti-ahold/ (in Czech only).

8 Opinion of Advocate General of 8 September 2011, C-17/10 in Case Toshiba Corporation and Others, available at: http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=en&-newform=newform&Submit=Submit&jurcdj=jurcdj&docop=docop&typeord=ALL&affi nt=affi nt&numaff=C-17%2F10&ddatefs=08&mdatefs=09&ydatefs=2011&ddatefe=08&m-datefe=09&ydatefe=2011&nomusuel=&domaine=CONC&mots=&resmax=100.

O c t o b e r 2 0 11

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