The Czech Competition Authority publishes new policy on compliance programs as mitigating factor when imposing fines

In December 2023, the Czech NCA - Office for the Protection of Competition (the "Office") published its new Compliance Program Consideration Policy , which has taken effect from 1 January 2024 and which sets out the conditions under which undertakings' compliance programs may be recognized as a mitigating factor when imposing fines.

In its new policy on compliance programs, the Office declares that it will only give credit to compliance programs of sufficient quality and effectiveness, and only within the framework of leniency or settlement arrangements. It is crucial that the compliance program be always "tailor-made" for the undertaking in question to qualify for a fine reduction. The Office will grant a reduction of up to 5% of the fine for the introduction of a new compliance program and a reduction of up to 10% of the fine for the improvement of an existing program.

General standards for recognition of compliance programs by NCA's in the EU

Many other NCAs have moved towards rewarding compliance programs, including newly introduced programs and improved existing programs. Credit may be given to compliance programs in the framework of a leniency or settlement procedure, i.e., if the undertaking self-reports its anticompetitive conduct to the relevant NCA or admits its participation in anticompetitive behavior. Credit is given through a fine reduction, or as a mitigating factor in sentencing (e.g. by shortening the public-tender disbarment period in bid-rigging cases). Furthermore, some NCAs also use compliance programs as an enforcement remedy (e.g. by making immunity in a leniency procedure conditional upon the introduction of a credible compliance program).

This innovative approach to compliance programs in the EU is driven by individual NCAs. As there is no harmonized framework, their approaches do not always coincide. In contrast, the European Commission (the "Commission") does not recognize compliance programs as a mitigating factor, nor do such programs have any impact on the level of fines that the Commission imposes for anticompetitive conduct. This is explained by the fact that those undertakings which typically fall within the Commission's jurisdiction are sophisticated companies with enough resources and strong in-house legal teams to recognize the benefits of credible compliance programs; as such, they do not need any extra reward for implementing them.

Despite differences in approaches, there seems to exist a cross-jurisdictional consensus on what the essential elements of a credible and effective compliance program are:

• Strong measures for internal detection and subsequent reporting of anticompetitive conduct to NCAs, including effective employee training;
• Lack of senior management involvement in infringements;
• Alignment of compliance and remuneration structures and incentives;
• Effective, risk-based internal auditing and monitoring of business processes, including the use of digital screening tools; and
• Compliance responsibility extending to business partners.

The new policy of the Czech NCA

The Office, when reducing fines, gives more credit to pre-existing compliance programs rather than those implemented by undertakings in the context of ongoing proceedings. In its new policy, the Office thinks of compliance programs as sets of preventative measures aimed at raising competition-law awareness, with processes to avoid, detect and react to anticompetitive conduct at all levels of the undertaking in question, from ordinary employees to middle and senior management. A credible compliance program in this sense is not just about a written manual but also about the effective implementation of compliance measures and processes.

The request for consideration of a compliance program as a mitigating factor in fining, including the full wording of all parts of the program, must be submitted to the Office no later than by the issuance of its statement of objections. The Office will recognize a compliance program if all the following conditions are met:

• Effectiveness of the compliance program relative to the undertaking's size, market share and relevant market;
• Successful use of a leniency program or settlement in the relevant proceeding before the Office; and 
• In case of a pre-existing compliance program: no knowledge by the undertaking's statutory bodies or senior management of anticompetitive conduct.

In relation to newly introduced compliance programs, to benefit from fine reduction, the undertaking must submit the complete written text of the program, a plan, and the current status of its implementation within the undertaking. The Office, if it finds the proposed measures sufficient, may then reduce the basic amount of the fine by up to 5%. In determining the percentage of the reduction, the Office considers in particular the undertaking's approach towards the design and implementation of the program (such as the speed, adequacy, and scope of implementation), the program's quality (i.e., the chosen form and complexity of the program), and the ability of the Office to oversee its ongoing and concrete implementation.

In case of pre-existing compliance programs, undertakings may see their fines reduced by up to 10%. This will be the case where a compliance program has proved not fully effective in allowing for the prompt detection and suppression of the anticompetitive conduct at hand, but may nonetheless be considered effective in a broader sense, e.g. with a view to its contribution to the discovery and reporting of the conduct. Furthermore, the undertaking must change its existing program accordingly and start implementing the changes after the opening of proceedings before the Office. In its assessment, the Office will take into account how the pre-existing program has been implemented and applied, why and at what level the infringement occurred, and what measures are being taken to make the program more robust.

What will be the way forward?

By introducing the new policy, the Office strives to bring more transparency into its reward system for competition compliance. Compared to the previous guidance, which essentially amounted to a brief notice hidden on the Office's website, the new guidelines are substantially more detailed and sophisticated. At the same time, compliance programs as a mitigating factor have been mirrored also in the penal methodology applied by the Office. It is to be seen where the Office sets the bar in its decisional practice and what proportion of cases will ultimately benefit from a fine reduction.

If you have questions concerning the practical aspects of the new rules, please do not hesitate to contact Ivo Janda or Magda Olyšarová.

_{1 The Office's Compliance Program Consideration Policy can be accessed here (in Czech).
2 Compliance programs are internal documents containing rules to ensure an undertaking's compliance with competition law.
3 An Executive Summary of the OECD roundtable on Competition Compliance Programs is available here (in English).}

Barbora Smekalova (Associate, White & Case, Prague) contributed to the development of this publication.

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

_{© 2024 White & Case LLP}