I ENFORCEMENT POLICIES AND GUIDANCE
The primary legal basis for cartel and leniency enforcement is the Slovenian Prevention of the Restriction of Competition Act (the Competition Act),2 which entered into force on 26 April 2008 and closely follows the EU competition law concepts set forth in Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty establishing the European Community (Regulation (EC) No. 1/2003). Although the Competition Act was amended in 2009, 2011, 2012, 2014 and 2015, the provisions regarding cartel prohibition have remained unchanged since 2008. The amendments in 2009 complemented the possibility to apply for immunity from fines that has been provided for in Slovenian law since 2008. However, the Slovenian leniency programme only started functioning from 1 January 2010 (see Section IV, infra).
The statutory provision dealing with cartels in Slovenia is Article 6 of the Competition Act (‘Prohibition of restrictive agreements'). Its main wording corresponds to Article 101 of the Treaty on the Functioning of the European Union (TFEU) and provides that:
[…] agreements between undertakings, decisions by associations of undertakings and concerted practices of undertakings, which have as their object or effect the prevention, restriction or distortion of competition on the territory of the Republic of Slovenia shall be prohibited and shall be null and void.
The Competition Act lists the same examples of restrictive practices as Article 101 TFEU, such as price-fixing, fixing of production, sales quotas and market sharing. In particular, the following activities are prohibited:
- a direct or indirect fixing of purchase or selling prices, or other trading conditions;
- b limiting or controlling production, sales, technical progress or investment;
- c applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
- d making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject of their contracts; and
- e sharing markets or sources of supply.
It follows that Slovenian competition law prohibits anticompetitive agreements, decisions and concerted practices that have as their object or effect the prevention, restriction or distortion of competition in the territory of Slovenia. Such agreements are null and void. The application of the concepts of ‘object' and ‘effect' is in line with the practice developed by the European Commission and the EU courts. Slovenian competition law covers horizontal as well as vertical restrictive agreements.
The Slovenian Competition Protection Agency (the Agency) has the power to enforce Article 6 of the Competition Act and Article 101 TFEU. Infringements of the competition rules as set out in these articles are treated as minor offences. The Agency is empowered not only to establish the infringement of the competition rules, but also to impose fines. Therefore, the Agency conducts two types of procedures: an administrative procedure in which infringements of Article 6 of the Competition Act or Article 101 TFEU, or both, are assessed and brought to an end; and a minor offence procedure where fines are levied. For the minor offence procedure, the provisions of the Minor Offences Act3 also apply.
Furthermore, infringements of the cartel prohibition are also defined as criminal offences. Article 225 of the Slovenian Criminal Code4 contains the criminal act of ‘unlawful restriction of competition', which criminalises cartels. A prison sentence of not less than six months and not more than five years can be imposed on a person who, in pursuing an economic activity contrary to regulations governing the protection of competition, violates the prohibition on restricting agreements between companies, and thus prevents or significantly impedes or distorts competition in Slovenia or in the European Union market (or a significant part of it), or significantly influences trade between Member States, causing a large material benefit for such a company or companies, or a large material damage for another company. An undertaking can be held responsible for the same criminal offence according to the Liability of Legal Persons for Criminal Offences Act.5
II COOPERATION WITH OTHER JURISDICTIONS
As a Member State of the European Union, Slovenia implemented Regulation (EC) No. 1/2003, which implies close cooperation in the application of EU competition rules between the European Commission and the Agency. The Agency is a member of the European Competition Network (ECN), through which it can exchange important information on competition issues and cases with the European Commission and other national competition authorities (NCAs).
According to Regulation (EC) No. 1/2003, the Agency and Slovenian courts are fully empowered to enforce Article 101 TFEU. The Agency has the duty to inform the European Commission before or immediately after commencing the first formal investigative measure when acting under Article 101 TFEU. Further, before making its final decision on such a case, the Agency must provide the European Commission with a summary of the case and the envisaged decision.
The Agency also cooperates with the European Commission and other NCAs by coordinating and assisting in investigations initiated by the European Commission or NCAs, where necessary.
The European Commission and NCAs, including the Agency, may provide one another with and use evidence in any matter of fact or of law, including confidential information, and discuss various issues of common interest. Article 13b(2) of the Competition Act expressly allows the Agency to disclose information in its possession to the European Commission and authorities of EU Member States responsible for the protection of competition, in accordance with the procedure in Regulation (EC) No. 1/2003. Employees of the Agency and persons cooperating with it in the implementation of tasks pursuant to the Competition Act who come into contact with confidential information must treat such information as confidential in compliance with the rules determining the protection of such information.
The cooperation between the Agency and non-EU countries depends mainly on bilateral agreements. Article 13b(2) of the Competition Act provides for the possibility of disclosing information to authorised authorities of foreign countries when so determined by international treaties that are binding for Slovenia.
Finally, the Agency also participates in a number of internationally organised competition law fora such as the Organisation for Economic Co-operation and Development's Competition Committee and the International Competition Network.
III JURISDICTIONAL LIMITATIONS, AFFIRMATIVE DEFENCES AND EXEMPTIONS
Article 6 of the Competition Act applies to anticompetitive agreements, decisions and concerted practices that have as their object or effect the prevention, restriction or distortion of competition in the territory of Slovenia. Therefore, agreements between undertakings located outside Slovenia or agreements concluded abroad might be subject to examination under Slovenian competition law as long as they have effects on competition within Slovenia (the extraterritoriality principle).
Efficiency-enhancing agreements fall outside the scope of Article 6(1) of the Competition Act. Article 6(3) of the Competition Act provides that agreements that contribute to improving the production or distribution of goods, or to promoting technical and economic progress, while allowing consumers a fair share of the resulting benefit, may be exempt from the prohibition. This exemption is not available if the agreement imposes restrictions that are not indispensable to the attainment of these objectives, or affords the possibility of eliminating competition in respect of a substantial part of the products or services that are the subject of the agreement.
In addition, certain types of agreements of minor importance (the de minimis exemption) are not prohibited (Article 7 of the Competition Act). The thresholds are 10 per cent (for horizontal agreements and mixed horizontal-vertical agreements) and 15 per cent (for vertical agreements) of the aggregate market share, in combination with other undertakings in the group, in any of the relevant markets in the territory of Slovenia. If competition in a relevant market is restricted by the cumulative effects of parallel or similar agreements between other undertakings, the market share thresholds are lowered to 5 per cent. However, Article 7 defines certain anticompetitive agreements for which the de minimis exemption does not apply, even when the thresholds are not exceeded. Such agreements are hard-core practices such as price-fixing, the limiting of production or sales and market sharing in cases of horizontal agreements, and the fixing of retail prices or granting of territorial protection in vertical agreements.
Article 6 of the Competition Act applies to ‘undertakings'. The Competition Act defines an ‘undertaking' as any entity that is engaged in economic activities, regardless of its legal and organisational form and ownership status. An ‘economic activity' means any activity that is performed in the market in exchange for payment. Accordingly, public entities and other legal entities subject to public law and performing economic activities are also subject to the Competition Act. An undertaking also means an association of undertakings that is not directly engaged in an economic activity but affects or may affect the behaviour in the market of undertakings as defined above.
The responsibility of a parent company for the infringement of competition rules by its subsidiaries is not determined by the Competition Act. However, the Agency follows the established practice of the European Commission and EU courts. The application of this practice in the Slovenian competition regime has also been recently accepted in an administrative procedure by the Supreme Court.6 The conduct of a subsidiary may be imputed to the parent company, in particular where, although having a separate legal personality, that subsidiary does not decide independently upon its own conduct in the market, but carries out the instructions given to it by the parent company, having regard in particular to the economic, organisational and legal links between those two legal entities. In such a situation, the parent company and its subsidiary form a single economic unit, which enables the Agency to address a decision to both entities. In the specific case of a parent company having a 100 per cent shareholding in a subsidiary that has infringed competition rules, there is a rebuttable presumption that the parent company does, in fact, exercise a decisive influence over the conduct of its subsidiary. However, there is no case law as yet regarding minor offences procedures. Therefore, it is still not clear whether the Agency is able to impose fines on a parent company without first having to establish its involvement in the infringement.
Under Slovenian competition law, no sectoral exemptions exist in the Competition Act in terms of industry-specific defences in cartel cases.
IV LENIENCY PROGRAMMES
The possibility of applying for immunity from fines has been provided in Slovenian law since 2008. The amendment of the Competition Act in 2009 also introduced the possibility for cartel participants to apply for a reduction of fines. Nevertheless, the leniency programme started functioning on 1 January 2010 when the government decree on the procedure for granting immunity from fines and reduction of fines in cartel cases came into force (the Leniency Decree).7 The Leniency Decree provided a detailed procedure for the leniency programme, and set the rules for leniency applications as well as the rules for handling such applications. The Slovenian leniency programme is largely based on the ECN Model Leniency Programme.
The leniency programme applies to undertakings as well as natural persons (responsible persons of undertakings) involved in cartel cases. According to Article 79(1) of the Competition Act, the leniency programme refers only to:
[…] agreements or concerted practices between two or more competitors aiming at the prevention, restriction or distortion of competition on the territory of the Republic of Slovenia through practices such as the fixing of purchase or selling prices or other trading conditions, restriction of production or sales, the sharing of markets.
In principle, an application submitted by an undertaking also relates to its responsible persons. However, an application submitted by a responsible person does not relate to an undertaking, unless otherwise indicated in the application.
Full immunity from fines that may otherwise be imposed by the Agency can only be granted to one undertaking participating in the alleged cartel (i.e., the first applicant to meet all the conditions for immunity). Conditions for granting full immunity from a fine are as follows:
- a the applicant (undertaking or responsible person) fully and completely discloses its participation in an alleged cartel;
- b the applicant is the first to submit information and evidence that, in the Agency's view, will enable an inspection in connection with the alleged cartel or the finding of an infringement of Article 6 of the Competition Act or Article 101 TFEU in connection with the alleged cartel;
- c the applicant cooperates with the Agency throughout the procedure;
- d the applicant ends its involvement in the alleged cartel immediately after the beginning of cooperation with the Agency in respect of the immunity from a fine except for what would, in the Agency's view, be against the interests of the inspection; and
- e the applicant did not coerce other undertakings to join the cartel or to remain in it.
If an undertaking or responsible person does not meet all these conditions and does not qualify for immunity from fines (i.e., the following applicants), it may still apply for a reduction of fines. The conditions for granting a reduction of fine are the following:
- a the applicant must provide evidence of its participation in the alleged cartel that represents significant added value with respect to the evidence already in the Agency's possession;
- b the applicant cooperates with the Agency throughout the procedure; and
- c the applicant ends its involvement in the alleged cartel immediately after beginning its cooperation with the Agency in respect of the immunity from or reduction of fines, except for what would, in the Agency's view, be against the interests of the inspection.
An applicant may receive a reduction in the level of fine that would have been imposed if it had not cooperated with the Agency, as follows:
- a a fine reduction of 30 to 50 per cent is granted to an applicant that meets all the conditions for granting the reduction and is the first to provide evidence of its participation in the alleged cartel that represents significant added value;
- b a fine reduction of 20 to 30 per cent is granted to an applicant that meets all the conditions for granting the reduction and is the second to provide evidence of its participation in the alleged cartel that represents significant added value; and
- c a fine reduction of up to 20 per cent is granted to other applicants meeting all the conditions for granting the reduction and that are next in line to provide evidence of their participation in the alleged cartel that represents significant added value.
It is important to apply for leniency as early as possible to ensure the granting of total immunity. The immunity from and reduction of fines is decided by the Agency in the decision adopted during the minor offence procedure. The leniency programme allows hypothetical applications, summary applications and requests for a marker, but they are all only possible in applications for immunity. Leniency applications can be made orally, except in cases of hypothetical applications or requests for a marker. If an application is submitted to the Agency by making an oral statement, the applicant must substantiate such application and submit all evidence to the Agency. All applications must be made in Slovene.
If an applicant is not in possession of information that would enable the submission of a complete application for immunity from a fine, it may apply for a marker. Applications for a marker must be substantiated and contain reasons for the submission of the application for the marker. The application for a marker must be accompanied by an application for immunity form containing certain information, and evidence in the applicant's possession or available to it when submitting the application for a marker. If the Agency grants the marker, it also determines the period within which the applicant must complete the application. In the interim period, the marker protects the applicant's place in the queue of applications.
An applicant must cooperate with the Agency from the time of submitting an application throughout the administrative or minor offences procedures. It must:
- a promptly provide the Agency with all relevant information and evidence relating to the alleged cartel that comes into its possession or is available to it;
- b provide the Agency with all information that may contribute to the establishment of the facts;
- c ensure that current and, if possible, former employees and members of management or supervisory bodies cooperate with the Agency;
- d not destroy, falsify or conceal information or evidence relating to the alleged cartel; and
- e not disclose the fact that the application has been submitted or any of its content before the Agency has issued a statement of objections in an administrative procedure without written permission from the Agency.
According to Article 6 of the Leniency Decree, a leniency application is considered a business secret. The Agency may only disclose information and evidence from an application to an undertaking under an infringement procedure after a statement of objections has been issued in an administrative procedure if it deems that its disclosure, because of the right to defence, might objectively prevail over the interests of protecting such information as a business secret.
The Criminal Code explicitly provides that immunity can also be granted in the criminal procedure to a perpetrator who concludes a restrictive agreement, provided that the offender discloses an alleged cartel before its discovery; cooperates throughout the investigation of the cartel and is involved in the elimination of its consequences; and did not coerce other undertakings to join the cartel or to remain in it.
However, the benefits from the Decree can only be granted in procedures before the Agency and only extend to administrative fines. Therefore, there are no safeguards that immunity granted by the Agency would also be granted in the criminal procedure.
In the case of a breach of Article 6 of the Competition Act or Article 101 TFEU, or both, the Agency can impose a minor offence fine on a legal entity, entrepreneur or an individual who performs economic activity of up to 10 per cent of the annual turnover of the undertaking in the preceding business year. A fine of between €5,000 and €30,000 can also be imposed on the responsible person of a legal entity or the responsible person of an entrepreneur.
Detailed guidelines on the method of setting fines in competition cases do not exist in Slovenian legislation. When setting a fine, the Agency takes into account the provisions of the Minor Offences Act; thus, all circumstances that may reduce or increase the sanction (mitigating and aggravating circumstances), such as:
- a the level of the perpetrator's liability for the minor offence;
- b the perpetrator's motives for committing the minor offence;
- c the level of threat or violation of a protected good;
- d the circumstances in which the minor offence was committed;
- e the perpetrator's previous conduct;
- f the perpetrator's personal circumstances; and
- g the perpetrator's conduct after the minor offence was committed, in particular whether he or she provided compensation for the damage.
The calculation of a fine imposed on a legal person and individual sole trader shall take into account their economic strength and previously imposed sanctions. When imposing a fine on the responsible person of a legal entity or the responsible person of an entrepreneur, the calculation of such fine shall also take into account the perpetrator's financial conditions, salary, other incomes and property, and family duties.
Slovenian case law on imposing fines in cartel cases is still limited to a few cases, which were concluded with the force of res judicata. The Agency's practice in cases of restrictive agreements shows that it also takes into account the nature and gravity of the infringement, the market power of the undertaking, effects on the market, the geographical scope of the infringement and the duration of the infringement.
VI ‘DAY ONE' RESPONSE
The Agency has extensive investigatory powers with regard to discovering breaches of the prohibition on restrictive agreements. It can issue requests for information and carry out inspections not only on the premises of undertakings against which a procedure has been initiated, but also on private homes.
An inspection of the premises of an undertaking against which a procedure has been initiated shall be based on the consent of the undertaking or a reasoned written court order. If the latter is the case, the inspection must be carried out in the presence of two adult witnesses. When conducting an inspection, authorised persons may enter and inspect premises at the registered office of the undertaking, and at other locations where the undertaking itself or another undertaking authorised by the undertaking concerned performs the activity and business for which there is the probability of an infringement of Article 6 of the Competition Act or Article 101 TFEU. They may examine business books and other documentation, irrespective of the medium on which they are stored, including electronic devices. The authorised persons may ask any representative or member of staff of the undertaking to give an oral or written explanation of facts or documents relating to the subject matter and purpose of the inspection, and may record it.
The Agency may also search the premises of an undertaking against which a procedure has not been initiated, or the residential premises of members of the management or supervisory bodies or of staff or other associates of the undertaking against which a procedure has been initiated, if there are reasonable grounds to suspect that business books and other documentation relating to the subject matter of an inspection are being kept at the mentioned premises. In this case, Article 33 of the Competition Act provides that the Agency must obtain a court order to search the premises from a judge of the competent court in Ljubljana, and that during the inspection of the residential premises two adult witnesses must be present.
Therefore, it is important that undertakings subject to investigations by the Agency, especially in the event of an unexpected dawn raid, are assisted by legal counsel as soon as possible. The authorised persons of the Agency are not obliged to wait for the arrival of an attorney, and are entitled to start an inspection without his or her presence.
The legal representatives and employees of the undertaking are obliged to cooperate with the authorised persons of the Agency. If the undertaking refuses to permit an authorised person entry into the premises, interferes with their entry, denies access to business books or other documentation, or obstructs or otherwise interferes with an inspection, the authorised persons have the right to enter the premises or access business books and other documentation against the will of the undertaking with the assistance of the police. It is also important that undertakings give clear instructions to their employees not to destroy any documents or electronic data, or communicate with other undertakings about the inspection. Otherwise, the undertaking risks incurring a penalty for obstruction.
In the case of obstruction of inspection, the Agency may impose on an undertaking a penalty payment amounting to 1 per cent of its annual turnover in the preceding business year; or on a natural person (if it is not deemed that the inspection has been obstructed by the undertaking) a penalty payment amounting to €50,000.
An undertaking shall be deemed to be obstructing an inspection if the inspection is obstructed by members of its management or supervisory bodies, its employees or even by its external contractors.
Letters, notifications and other means of communication between the undertaking against which the procedure has been initiated and its attorney (privileged communications) are excluded from an inspection to the extent that such communications pertain to the procedure in question. An undertaking or its attorney may refuse to allow access to information, claiming it to be privileged communication. If an authorised person considers that such claim is evidently unfounded, the authorised person shall seal the document (or its copy) in an envelope signed by both the undertaking and its attorney and send it to the Administrative Court. The Court then decides on the justification of claiming privileged communication within 15 days of the date after the request has been filed by the Agency.
It is also advisable at the beginning of the inspection to form a team of employees who accompany and communicate with the authorised persons. Although the Agency usually obtains copies of the original documents, it is crucial to make copies of all documents taken by the Agency in order to prepare an effective defence.
VII PRIVATE ENFORCEMENT
Private enforcement in Slovenia is mainly focused on damage claims. The Competition Act provides that a person who, intentionally or through negligence, infringes the provisions of Article 6 of the Competition Act or Article 101 TFEU, shall be liable for the damage caused by such infringement, but it contains no specific rules for private enforcement. Therefore, in such damage claims, the general rules for damages apply.
Companies or consumers harmed by cartel infringements have a claim for damages. District courts are competent in civil disputes and can adjudicate on such claims. If the damage has been caused by the infringement of provisions of Article 6 of the Competition Act or Article 101 TFEU, the court shall be bound by the final decision of the Agency and the European Commission establishing the existence of the infringement. The statute of limitations for compensation claims is suspended from the date of initiating the procedure before the Agency or the European Commission to the date on which such procedure has been finally concluded.
In practice, such cases of private enforcement are rare, mostly because of difficulties in meeting the burden of proof in damage claims. The injured party must prove the existence of an unlawful damaging act, damages (existence and amount of loss) and causation. There is no possibility under Slovenian law to file collective (class) actions. However, actions can be joined by the court if several actions were lodged at the court with the same or similar factual and legal basis.
VIII CURRENT DEVELOPMENTS
Fighting cartels has been a priority in recent years and will undoubtedly continue to be so, although the Agency has not initiated any new cartel investigations in the past three years (at least according to publicly available information). The last cartel case in Slovenia was a bid-rigging case in the construction sector that was initiated in 2013 and decided in 2014, but is still in the process of court review.
Since the changes to the inspection regime came into force in May 2014, no major changes have been applied to the competition legislation. However, in 2016, the Ministry of Economic Development and Technology (the Ministry) and the Agency proposed some important changes to the Competition Act. For the purpose of implementing Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, the Ministry has prepared amendments to the Competition Act that will govern, among other matters, the right to compensation for victims of competition law infringements, disclosure of evidence, the implication of final infringement decisions of EU Member State competition authorities, rules on period of limitation, ‘passing-on' defence, antitrust damages on different stages of the supply chain, evaluation of damages, the implication of settlement agreements, etc. Considering the draft of the proposed amendments, the Agency proposed a system for sanctioning breaches of competition law that could finally be excluded from the general minor offence proceedings system and is intended to be governed by specific rules laid down in the Competition Act.
These amendments are still in the legislative process. As the implementation of Directive 2014/104 /EU is anticipated to be carried out by the end of 2016, we expect the Ministry's proposed amendments to be adopted in the near future.
1 Andrej Fatur is a senior partner and Helena Belina Djalil is an external expert at Fatur Law Firm.
2 ZPOmK-1 (Official Gazette of the Republic of Slovenia No. 36/08); ZPOmK-1A (Official Gazette of the Republic of Slovenia No. 40/09); ZPOmK-1B (Official Gazette of the Republic of Slovenia No. 26/11); ZPOmK-1C (Official Gazette of the Republic of Slovenia No. 87/11); ZPOmK-1D (Official Gazette of the Republic of Slovenia No. 57/12); Act Amending the Courts Act (Official Gazette of the Republic of Slovenia No. 63/13); ZPOmK-1E (Official Gazette of the Republic of Slovenia No. 33/14); and ZPOmK-1F (Official Gazette of the Republic of Slovenia No. 76/15).
3 ZP-1 (Official Gazette of the Republic of Slovenia No. 29/11 - official consolidated text); ZP-1H (Official Gazette of the Republic of Slovenia No. 21/13); ZP-1I (Official Gazette of the Republic of Slovenia No. 111/13); Constitutional Court's Decision (Official Gazette of the Republic of Slovenia No. 74/14); Constitutional Court's Decision (Official Gazette of the Republic of Slovenia No. 92/14); and ZP-1J (Official Gazette of the Republic of Slovenia No. 32/16).
4 KZ-1 (Official Gazette of the Republic of Slovenia No. 50/12 - official consolidated text); KZ-1C (Official Gazette of the Republic of Slovenia No. 54/15); and KZ-1D (Official Gazette of the Republic of Slovenia No. 38/16).
5 ZOPOKD (Official Gazette of the Republic of Slovenia No. 98/04 - official consolidated text); ZOPOKD-B (Official Gazette of the Republic of Slovenia No. 65/08); and ZOPOKD-C (Official Gazette of the Republic of Slovenia No. 57/12).
6 See, for example, Case G 19/2012, Construction cartel, Judgment of the Supreme Court of 14 January 2014, and Case G 26/2012, Construction cartel, Judgment of the Supreme Court of 14 January 2014.
7 Official Gazette of the Republic of Slovenia Nos. 112/09 and 2/14.