Czech Republic: Supreme Administrative Court backs gun-jumping decision

In 2017 the Office for the Protection of Competition imposed a gun-jumping fine of Kc4.9 million (approximately €190,000) on Armex Oil sro, a company active in the wholesale fuel market (gasoline and diesel). However, Armex Oil challenged the amount of the fine before the competent regional court, which found the fine to be disproportionate and reduced it. The office then filed an appeal with the Supreme Administrative Court, which ultimately backed the original fine.(1)

Facts

In Armex Oil's view, the gun-jumping fine was disproportionate and had been imposed in violation of statutory fining principles and the principle of legitimate expectation. Armex Oil claimed that the office had:

• erred in its assessment of the gravity of the administrative offence;
• failed to take sufficient account of Armex Oil's conduct during the administrative proceedings or of its efforts to eliminate the harmful consequences of its conduct; and
• acted contrary to its previous decision-making practice.

Armex Oil further stated that the contested decision conflicted with the office's fining guidelines. The regional court largely backed these objections (taking into account the presented mitigation circumstances) and lowered the fine to Kc1 million (approximately €38,000).

Decision

The Supreme Administrative Court highlighted that a fine for an administrative offence is the result of administrative discretion. It is intended to reflect the economic power of a competitor and therefore ensure the fairness of the fine. Armex Oil was fined less than 1% (approximately 0.3%) of the statutory maximum fine. The Supreme Administrative Court emphasised that Armex Oil, as a company doing business in the Czech Republic for many years and with the financial means to pay for legal services, had violated important legal obligations (ie, the obligation to notify a transaction and the standstill obligation). The violation had not been caused by objective reasons, but purely for a subjective omission for which Armex Oil must logically be held liable, even taking into consideration all mitigating circumstances. The Supreme Administrative Court also stated that a fine which does not hurt the infringer economically does not make sense, unless it is an exceptional case where only a symbolic fine would suffice, which according to the court was not the case here.

The Supreme Administrative Court concluded that although a Kc4.9 million (approximately €190,000) fine might seem hefty for Armex Oil, it cannot be said that it is manifestly disproportionate, particularly in view of the gravity of Armex Oil's conduct and overall economic strength and influence on the wholesale fuel market (gasoline and diesel), the structure of which has undoubtedly changed as a result of the transaction.

In view of the above, the regional court's judgment was set aside and the case was referred back. The regional court is now bound by the Supreme Administrative Court's legal opinion.

(1) Available here (in Czech).

This article was first published on www.internationallawoffice.com

Co-Author: Ondřej Holowka