On 29 May 2017, the Municipal Court in Brno struck down a decision of the Czech Competition Office (the “Office”) in the so-called “large construction cartel” case, voiding the highest ever CZK 1,659,993,000 (EUR 63,429,000) fine. The Court held that the Office failed to clearly define the scope of the proceedings and declared that on-site investigations, which allowed the Office to gather vast incriminating evidence, were impermissible “fishing expeditions”. The ruling presents yet another challenge to the Office’s investigation practices (on the last occasion reviewed by the European Court for Human Rights in the “Delta Pekárny” case) and may bring about some significant changes as to how dawn raids are carried out in the Czech Republic.
The case started in 2012, when the Office initiated proceedings against two construction companies based on an anonymous tip-off (through the police) regarding possible bid rigging in three public procurement procedures. The Office carried out on-site investigations on the premises of the two companies, but found no evidence of bid rigging in those tenders. It did, however, locate and collect documents regarding totally unrelated procurement procedures. Based on these findings, the Office extended the proceedings to 13 other construction companies and carried out on-site investigations on some of their premises, finding evidence of bid rigging going back as far as 2005. During the entire period of these investigations, the scope of the administrative proceedings was delimited merely as “bid rigging in the construction sector, especially in civil engineering public procurement procedures between 2011 and 2012”. In 2015, the Office issued the CZK 1,659,993,000 (EUR 63,429,000) fine for bid rigging in procurement procedures that had essentially no connection to the original suspicions.
The Court found that the original delimitation of the scope of the proceedings was impermissibly broad. Not only did the vague delimitation of the proceedings allow for unrestrained and unlimited scope of the investigations, it also interfered with the companies’ right to a defence. The companies had not been informed of the specific allegations against them and they were unable to effectively refute the allegations.
As a result, evidence substantiating the awarded fine was ruled to have been obtained illegally. The Court criticised the Office for seizing virtually all public procurement documents it found on the premises. Such conduct, in the view of the judges, was nothing but a so-called “fishing expedition”, as the Office seemed to merely hope that they would find incriminating material, instead of having a specific idea of the material it sought.
The Office has already issued some controversial statements. On the one hand they immediately appealed the judgment to the Supreme Administrative Court and issued a strong press release attacking the first instance court’s findings, whilst on the other hand, the President of the Office made a public statement admitting that the authority will need to adjust its internal guidelines. In spite of this contradictory response, the case will likely bring about some significant changes as to how dawn raids are conducted by the Office in the future.