When discussing competition law, the Competition Authority and its powers are usually part of the business conversation, given that it is the key enforcer ensuring fair competition and penalizing those who try to distort it. However, for many undertakings, a decision by the Competition Authority isn’t always the end of their fight for justice – sometimes it’s just the beginning. Affected competitors often have to undertake significant efforts to seek compensation from those whose anti-competitive behaviour has harmed or even destroyed their business. In this article, we share our experience with the first-ever successful follow-on damages action in the Czech Republic and the challenges we encountered along the way.
Our story began in 2004 when Student Agency launched its bus service between the two largest Czech cities, Prague and Brno. However, its distinctive yellow buses didn’t remain the sole option on this route for long. In 2007 Asiana – a Czech company previously focused mainly on selling airline tickets – entered the market with its own buses on the same route. To Asiana's surprise, Student Agency responded immediately by aggressively expanding its transport capacity on the Prague-Brno route. Moreover, it provided services at prices lower than the average monthly total cost, slashed fares on buses departing at the same time as Asiana’s, prevented access to the bus boarding point in Brno, and even thwarted a ticket sales agreement with a local newsstand operator in Brno. After nearly a year of fierce struggle, Asiana was ultimately forced out of the market.
Following the anti-competitive behaviour of Student Agency as the dominant player in the market, we assisted Asiana in preparing a complaint to the Czech Competition Authority regarding possible abusive exclusionary practices. The Competition Authority began to look into the matter and to gather evidence it conducted a dawn raid at Student Agency’s headquarters, during which it seized the following emails: “Today the ‘stewardess’ went on her first ride. The fight begins, which must end within 2 months with Asiana's withdrawal from the Brno - Prague route.” and “we decided to take an uncompromising approach. ‘Stewardess’ out of the game. If we don't give it a chance, it will be pushed off the line within 2 months…...”[1] In these emails, the references to ‘stewardess’ refer to Asiana’s other business activities of selling flight tickets through its website and trade name “Letuška“, which translates as ‘Stewardess’. Based on these emails, the Competition Authority concluded that Student Agency deliberately sought to exclude Asiana from the market. Therefore, to establish abuse of dominance the Competition Authority only needed to prove that Student Agency set its prices below the average total costs, rather than the average variable costs.
The Competition Authority then concluded that Student Agency was a dominant undertaking on the relevant market, which deliberately priced its tickets below the average total costs and expanded transport capacity in order to exclude Asiana from the market, as a result of which consumers were restricted in their choice of carrier and suffered harm in the subsequent increase in transport prices. Given the above, the Competition Authority imposed a fine of CZK 5,154,000 on Student Agency.
However, Asiana was still far from receiving proper compensation at this point. Student Agency challenged the Competition Authority's decision in Czech administrative courts, seeking to have it overturned. Understandably, Asiana was eager to prevent this, as the decision formed the foundation for its claims in a subsequent follow-on action. Therefore, Asiana attempted to intervene in the proceedings brought by Student Agency. To be able to intervene in proceedings before the administrative courts in the Czech Republic, one must, simply put, be directly affected in one's rights and obligations by the issuance or revocation of the contested decision of the administrative authority (e.g., the Competition Authority). Thus, we argued that the abuse of dominant position was to Asiana's direct detriment (exclusion from the market) and that if the Competition Authority's decision were overturned, Asiana's private and public rights would be affected. The issue of Asiana's participation in the administrative proceedings came before the Czech Supreme Administrative Court, which - surprisingly enough - concluded that the purpose of the Czech Competition Act[2] is to protect competition as an economic phenomenon, not to protect individual market participants, and that Asiana was thus only indirectly affected by the Competition Authority's decision.[3]
Although Asiana was not able to intervene in the proceedings before the administrative courts, the courts upheld the Competition Authority's decision and the path to compensation was finally open. We therefore filed a lawsuit on behalf of Asiana against Student Agency, asserting several claims. First, we claimed actual damages for the costs incurred in the operation (lost costs consisting of the preparation, entry and implementation of the operation of the Praha – Brno bus line). Second, we claimed lost profits for the duration of the operation. And third, we claimed lost profits for the year following Asiana’s exclusion from the market.
A major benefit of this follow-on action was that the court was bound by the fact that was proven in the administrative proceedings that Student Agency had breached the Competition Act to the detriment of Asiana. Therefore, it was sufficient for us to prove only the amount of damage incurred. Even though our procedural situation was significantly simplified by the existing decision of the Competition Authority, the court proceedings took an unreasonably long time and we did not see a final decision until January of last year (2024). Over the years, a total of seven decisions have been issued, which reflects how the courts have leaned one way or the other throughout the proceedings. However, the lengthy litigation had a happy ending for Asiana, as the courts concluded that it was entitled to compensation of over CZK 22,000,000, which could at least financially compensate for the injustice caused by Student Agency's anti‑competitive behaviour.
Let us conclude with a few remarks for further reflection. The case described above (the first successful follow-on claimant’s damages action in the Czech Republic) shows that enforcement of damages claims arising from competition law infringements remains in its early stages in the Czech Republic and that the courts lack sufficient experience to be able to resolve these claims quickly and effectively. The situation is not helped by the fact that affected competitors cannot join the administrative court proceedings in which the Competition Authority's decisions are reviewed, which not only complicates their access to relevant information and documents but mainly prevents them from exercising influence on the proceedings, the outcome of which has far-reaching consequences for them. In our view, the current dismal situation may discourage affected competitors from pursuing their claims, which we consider unfortunate. We hope that reaching justice in area of private competition enforcement in the Czech Republic will be significantly accelerated in the coming years, whether through the application of adopted competition damage laws or an increase in the experience of the courts with this type of civil action.
[1] The text of the emails was translated from Czech. Some phrases have been modified to maintain their true meaning.
[2] Act No. 143/2001 Sb., on the Protection of Competition (Act on the Protection of Competition), as amended.
[3] See the judgment of the Supreme Administrative Court, file No. 7 As 7/2014-39 of 14 May 2014.
By Pavel Dejl, Partner, and Filip Rehak, Intern, Kocian Solc Balastik
