Croatia: To Fine or Not to Fine?

The Croatian Competition Agency is still reluctant to impose fines. Is one undertaking’s joy another undertaking’s sorrow?

Developments in the fining policy

The intro­duc­tion of the new Com­pe­ti­tion Act in 2010 (Act) pro­vid­ed the Croa­t­ian Com­pe­ti­tion Agency (Agency) with long-expect­ed tools to enforce com­pe­ti­tion rules more effi­cient­ly. The Agency was empow­ered to impose fines for anti-trust infringe­ments direct­ly with­out ini­ti­at­ing mis­de­meanour pro­ceed­ings as before. The cur­rent enforce­ment pow­ers are ful­ly har­monised with EU enforce­ment rules. It was there­fore expect­ed that the Agency would enthu­si­as­ti­cal­ly use its new pow­ers. How­ev­er, in pros­e­cut­ing car­tel agree­ments, Croa­t­ia is far from match­ing the track record of com­pe­ti­tion author­i­ties of oth­er EU mem­ber states.

His­to­ry of fines

Between 2003 and 2009 total fines of ca EUR 185,000 were imposed. The Agency imposed a fine direct­ly for the first time only in 2012, in the case of a bread pro­duc­er car­tel where a group of 17 small bak­eries agreed on the bread price. How­ev­er, in that case fines were not cal­cu­lat­ed on the basis of a stan­dard cal­cu­la­tion method but were mere­ly sym­bol­ic, rang­ing from about EUR 70 to EUR 7,000 in order not to harm the small busi­ness­es too much. The high­est final fine imposed to date was EUR 135,000 in a car­tel case.

Com­ing to terms with the past

In its land­mark deci­sion the Agency recent­ly imposed its first gun-jump­ing fine ever on an under­tak­ing that failed to sub­mit its noti­fi­ca­tion in time, amount­ing to ca EUR 12,500. Only four days lat­er the Agency ren­dered a fur­ther deci­sion in anoth­er case impos­ing a fine of ca. EUR 2,800 in a case where the noti­fi­ca­tion was due in 2006 as declared by the Agency in its final deci­sion in 2007.

Deter­rent effect

It is ques­tion­able whether such a fin­ing track-record will suf­fi­cient­ly deter under­tak­ings from engag­ing in anti-com­pet­i­tive behav­iour. Thus, a series of inter­est­ing ques­tions aris­es. Should insignif­i­cant vio­la­tions sim­ply be dis­re­gard­ed? Con­sid­er­ing the inves­ti­ga­tions expens­es, should the prin­ci­ple of admin­is­tra­tive effi­cien­cy pre­vail over the pro­tec­tion of con­sumers? Is the report­ed approach of the Agency maybe a test­ing field for more rig­or­ous fin­ing prac­tices with the con­se­quent aim to raise aware­ness of under­tak­ings in the mar­ket?

It is no sur­prise that until now the Agency did not report on a sin­gle lenien­cy appli­ca­tion sub­mit­ted. Con­sid­er­able car­tels are main­tained under utmost secre­cy and cas­es of oth­er mem­ber states and the EU Com­mis­sion show that an under­tak­ing apply­ing for lenien­cy is the best source for reveal­ing a car­tel. Although Croa­t­ian under­tak­ings have made a great step for­ward in intro­duc­ing and con­duct­ing com­pli­ance pro­grammes, and there­by show sen­si­tiv­i­ty to the impor­tance of com­pe­ti­tion law and adher­ence there­to, it is ques­tion­able whether fines imposed so far are strong enough to trig­ger a lenien­cy appli­ca­tion. It might be frus­trat­ing to invest sig­nif­i­cant efforts to com­ply with com­pe­ti­tion rules while a com­peti­tor might gen­er­ate remark­able turnover by enter­ing into pro­hib­it­ed agree­ments. Croa­t­ia is still devel­op­ing its legal stan­dards. Fight­ing a bread pro­duc­er car­tel with just a local dimen­sion may be seen as a way to raise aware­ness for the rel­e­vance of com­pe­ti­tion law pro­vi­sions in every­day life. It is prob­a­bly a first step in help­ing local under­tak­ings under­stand that it is good busi­ness to inform the Agency of alleged mis­be­hav­iour.

Fur­ther, one should not sim­ply com­pare the amount of fines imposed by the Agency to fines imposed by the EU or oth­er mem­ber state author­i­ties with­out con­sid­er­ing the par­tic­u­lar­i­ties of the Croa­t­ian econ­o­my, the size of the rel­e­vant mar­ket, and the annu­al turnover of an aver­age Croa­t­ian under­tak­ing.

Outlook

It remains to be seen when the Agency will use its pow­er to con­duct a dawn raid for the first time. How­ev­er, there is always a first time and the Agency is eager to meet Euro­pean stan­dards. Under­tak­ings should be pre­pared and expect that pre­vi­ous prac­tice does not pre­vent the Agency from even­tu­al­ly show­ing its teeth.

The Agency declared strength­en­ing of its activ­i­ties in the enforce­ment of com­pe­ti­tion law to be one of its major strate­gic goals to fos­ter com­pe­ti­tion and pre­vent Croa­t­ian under­tak­ings from infring­ing com­pe­ti­tion law.

Although the deterrent fact of fines imposed so far is questionable, it can be expected that this is only a first step in a more rigorous enforcement of competition law.