Priorities in the work of the Croatian Competition Agency for 2024

The mission of the Croatian Competition Agency (hereinafter: CCA) is to ensure and contribute to fair functioning of the market for consumers, undertakings, and the economy through effective competition by removing the barriers that have arisen or may arise by restricting competition. This mission of the CCA is implemented in the interest of all market participants and is based on the principles of market economy and free competition. The CCA carries out the procedures by applying national legislation (Croatian Competition Act), but parallelly applying the EU law, concretely, Article 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). In defining the priorities in its work, the CCA acts in relation to those practices that have the greatest impact on the development of competition in the market and producing efficiencies regarding innovation, productivity, and market resilience. The purpose of defining these implementation priorities is:

– efficient and effective use of resources in dealing with received complaints and other submissions,

– rejection of complaints whose content is not regarded as implementation priority,

– sufficiency of the CCA resources for effective action,

– the assessment of likelihood of efficiencies in the market following the CCA actions,

– the existence of an alternative way to the CCA action.

For the purpose of achieving this mission and its objectives within the legal powers of the CCA to define priorities in its work, in the case of receiving an initiative (complaint) to initiate proceedings ex officio, the CCA will focus on the following priorities in its work in 2024:

DETECTION AND SANCTIONING OF SERIOUS INFRINGEMENTS OF COMPETITION LAW:

Prohibited horizontal agreements – cartels

Entering into a prohibited horizontal agreement constitutes the most serious infringement of competition law, regardless of the market share of the participants to the agreement. Therefore, all infringements listed under Article 8 paragraph 1 of the Croatian Competition Act, like price fixing, limiting or controlling production and markets, technical development or investment, market or sources of supply sharing, applying dissimilar conditions to equivalent transactions with other undertakings, thereby placing them at a competitive disadvantage, making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage have no connection with the subject of such contracts, have been listed as priorities in the work of the CCA.

Cartels – prohibited horizontal agreements between competitors in which they agree on prices or other parameters of competition, share markets, allocate customers or locations where they want to sell their products or services, agree rebates, define the scope of production, and the entire industry, arrange their behaviour and the bidding terms in public procurement procedures, thus closing the market to new competitors, constitute the most severe infringement of competition law that causes the greatest harm to the economy, consumers, and society as a whole. Cartels raise prices of goods and services above the competitive price, so consumers choose either not to pay a higher price for products and services covered by the cartel or still pay for the products or services they want, thus unknowingly transferring the profit to cartel participants. Various international studies investigating the negative impact of cartels on prices have found that cartels on average lead to a price increase of 15-30 percent, and sometimes up to high 50 percent. Therefore, the primary focus of the CCA remains detecting and sanctioning these most serious infringements of competition law. Although several cartels have been detected in various relevant markets and industries in the past period (driving schools, bus transport, utility services, food delivery for soup kitchens), there are several cartel cases ongoing which are the priority for the CCA to resolve during the current year.

Also, there are definitely more cartels in the Croatian market that still need to be detected and for whose activities evidence must be furnished. Therefore, it is necessary to strengthen the existing resources and tools of the CCA and introduce some new ones.

Thus, in 2024 the CCA is planning to strongly advocate and promote the importance of leniency programmes in detecting cartels and encourage the leniency applicants to report about the existence of a cartel. A leniency applicant is a member of a cartel who first comes forward and reports about its involvement in the cartel and hands over evidence of the cartel. The leniency applicant who comes first can be offered total immunity from fines, or a reduction from the fines as any subsequent applicant that follows and provides relevant evidence on the cartel concerned. The largest cartels in the last fifteen years have been detected by the European Commission (EC) using this instrument. Through appropriate advocacy activities, the undertakings will be reminded of this instrument and encouraged to report cartels to the CCA.

Similarly, the CCA will advocate the legal tool “settlement in cartel cases” in already opened cases against undertakings and remind them of the possibility of concluding a settlement agreement, after which the proceeding can be closed more quickly, and the undertakings who have concluded a settlement agreement with the CCA can receive further reduction in fines of 10 to 20 percent, which does not exclude the reduction based on the leniency programme. With the view to obtaining more information about possible infringements of competition law, primarily prohibited horizontal agreements between undertakings, a new digital tool will be introduced this year –anonymous digital whistleblowing platform through which anyone can anonymously report prohibited agreements on the CCA website granting the reporters confidentiality and anonymity.

Combating cartels in public procurement

Additionally, in this part of the priorities related to combating and detecting prohibited agreements between undertakings, special emphasis will be placed on prohibited agreements in public procurement procedures (bid rigging cartels) as particularly harmful to consumers and the economy. In this sense, useful cooperation will be continued with the Ministry of Economy and Sustainable Development, giving the CCA access to the Electronic Public Procurement Data Base of the Republic of Croatia, and the State Commission for Supervision of Public Procurement Procedures (DKOM). To detect bid rigging between the bidders in public procurement procedures, the contractors will be provided trainings in cooperation with the DKOM and other institutions, as well as through the implementation of the project with the OECD, the European Commission, and several other EU Member States.

Among other things, and exactly for the purpose of achieving this objective, the CCA established a new Digital Affairs Department whose experts will focus on the development and use of algorithms that would help in faster detection of certain suspicious patterns of behaviour based on the insights gained from the Electronic Public Procurement Data Base.

Prohibited vertical agreements

In addition to prohibited horizontal agreements, vertical agreements between undertakings who are not competitors, but which contain serious restrictions of competition (such as the restriction of the buyer’s ability to determine its sale price or the restriction of cross-supplies between the members of the selective distribution system) and prohibited obligations in vertical agreements (such as the obligation on the buyer not to purchase goods or services which compete with the contract goods or services or any direct or indirect non-compete obligation, the duration of which is indefinite or exceeds 5 years) under the Vertical Block Exemption Regulation, will also be prioritized in the work of the CCA. In this regard, priority will be given to vertical agreements between small, medium sized, and large enterprises, while agreements between micro-enterprises will be left out.

Abuse of a dominant position

In the area of abuse of a dominant position by undertakings, another   priority of the CCA during this year will be to close previously initiated cases of abuse of dominance and to carry out preliminary market investigations in complaints – initiatives for the initiation of proceedings or where there is suspicion that a particular undertaking may be abusing its market power. In this area priority will be set on markets and behaviours that are particularly important for the consumers or where the undertakings can significantly distort competition. For this purpose, the CCA will apply additional interpretative tools, such as the criteria under the Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, as well as new EU regulations, such as the Commission Notice on the definition of the relevant market for the purposes of Union competition law.

In conclusion, the priority areas of action of the CCA have been set for the sake of efficiency, effectiveness and proper allocation of the CCA resources. However, a certain degree of flexibility is necessary to be able to react to some unforeseen developments or events in the market that may occur during the year, and which may require action on the part of the CCA to maintain fair competition in the Croatian market.