RESTRICTEDWORLD TRADE
ORGANIZATIONWT/WGTCP/W/71
30 March 1998
(98-1268)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM THE CZECH REPUBLIC
The following communication, dated 2 March 1998, has been received from the Permanent
Mission of the Czech Republic with the request that it be circulated to Members.
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Introduction
The Czech Republic is a country in which results in the area of foreign trade play an
important role in the entire economy, given its limited natural sources, small internal market and
developed industrial base.  The national economy today is strongly integrated into both the European
and worldwide systems.
With the above-mentioned concerns, also the fact that the Czech Republic implements and
intends to implement a liberal foreign trade policy based on opening access to the markets in productsand services should be noted.  Liberalization of trade on the principle of non-discrimination is realised
by way of decreasing both tariff and non-tariff barriers to trade on a multilateral basis within the WTO
or gradual removal of obstacles to trade on a bilateral basis by negotiating free trade agreements.
Continuously improving the legal framework of international treaties within the WTO is a
significant positive factor.  However, the liberalization and globalization of international trade bringsup other important questions.
It is today's reality that a number of measures which negatively influence competition in both
international and national markets survive within th e scope of governmental trade policies. Therefore
the analysis of the objectives and tools of both policies is very important, not only on a theoretical
basis, but on the basis of their practical application in everyday practice.
The achievement of an agreement on the major objectives of competition law and policy,
especially their relationship to the support of liberalization of trade within the WTO, should be astarting point for the subsequent activities of the Working Group.
The concept of competition policy
The content of the terms "competition policy" and "competition law" is not unified and they
are often used with varied meanings.  Therefore the achievement of an agreement on the content of
these terms will also form an important pre-condition for the effective functioning of the WTOWorking Group on the Interaction between Trade and Competition Policy.WT/WGTCP/W/71
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Within a broader concept, competition policy involves more sets of acts and policies, directly or
indirectly aimed at the consumer's benefit and the effective functioning of markets.  In addition to the
acts protecting economic competition against restrictions, these are, e.g. deregulating acts introducing
competition into so-far regulated sectors. The following sets of laws can be indicated as connected
with competition policy:  acts concerning privatization, act on public procurement, act on anti-
dumping and others.
Within a narrower concept, competition law involves the part of legislation which may be
designated as "competition", "anti-monopoly" or "antitrust" legislation.
The number of countries applying a policy on the protection of economic competition
continuously increases.  At the same time, the number of international transactions is also increasing.
The undertakings in these transactions are forced to contact more national competition authorities
whose competition legislation, including procedural aspects, often varies. The activities of the
Working Group could contribute to the standardization of national competition legislation.
Objectives of competition policy
There has not been a uniform common answer given to the question of what should be a
desirable objective of national competition policy.  It may be stated that the objective of national
competition policies which is commonly shared is the proper functioning of markets;  that is the
protection and support of economic competition, or  put another way the support of the effective
allocation of limited and consumable resources, which is to serve especially to the benefit of
consumers.
Some of the competition policies may seek - in addition to the support of effectiveness - also
other economic, social and political objectives, for example the support of small and medium
undertakings, support of employment, support of dom estic industry, etc.  Many of these secondary
objectives may constitute the risk of a conflict and inconsistent application of competition policy.
The Working Group should attempt to define the objectives of national competition policy.
At the same time, it should determine the objectives the competition policy should not fulfil.
Objectives of trade policy
Trade policy is based on political negotiation between the representatives of various states
with the objective of creating just conditions for trade. These include removing artificial obstacles to
access to foreign markets, which create a disadvantage for foreign undertakings in comparison with
domestic undertakings as relates to sales to domestic customers.  These obstacles may be eliminated
by governmental measures on the basis of international negotiations.
Interaction between trade and competition policy
Theoretically, it can be stated that from a long-term viewpoint, competition policy and trade
policy have the same objectives and are complementary.  Such a relationship is the desired ideal.
However, in practice it is often not so, as specific tools of trade policy and competition policy may be
both complementary and mutually exclusive.  Trade and competition policy have their own
specifications and require separate rules.
When examining the relationship between trade and competition policy, it may be useful to
define such combinations of tools of trade and competition policy which are desirable and on theother hand, such combinations which are reflected by a negative impact on competition or trade.  In
particular, the following items may belong to the problem areas:WT/WGTCP/W/71
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Negative impacts of competition on trade
Private anti-competitive practices may be supported by national competition policy.  For
example, exemptions for export cartels, whose effects are fully implemented on foreign markets, may
prevent effective access to the market as well as the actual competition process.
Negative impact of trade policy on competition
Extensive use of anti-dumping measures with the objective of limitation of access of foreign
competition and of maintaining the position of domestic undertakings on the market may be one of
many potential tools for restricting competition.
The objectives of trade policy may involve the protection of some national procedures or
national manufacturing structure.  Such measures, however, may constitute unequal conditions for
economic competition and, in addition, make it possible to obtain economic advantages for a small
group of producers to the prejudice of a large group of  consumers.  From a l ong-term point of view,
this may lead to losses from limited effectivene ss as a result of a limited competition pressure.
Legal regulation governing the protection of economic competition in the Czech Republic
After 1989, the Czech Republic, still as a part of the former Czechoslovakia, began to
implement the transition from a centrally-planned economy to a market economy.  Within this
process, privatization, liberalization of prices, liberalization of foreign trade and other connected
measures were implemented.  The generation and implementation of national competition policyformed an integral part of this process.
The legal basis for the protection of economic competition is formed by Act No. 63/1991
Coll., on the Protection of Economic Competiti on, as amended under Acts No. 495/1992 Coll. and
286/1993 Coll.  The purpose of the Act is the prot ection of economic competition on the market for
goods and services against its restriction, distortion or elimination.  It is clear from the above that theAct primarily protects competition as such, i.e.  the functions which the free economic competition
fulfils in the market economy.  The substantial provisions of the Act are aimed at the behaviour of the
participants in the economic competition.
The Act has been drawn up according to the pattern of competition law of the European
Communities and it took over the wording of Articles 85 and 86 of the Treaty of Rome as well as thebasic institutions of secondary EC law.  The Act uses general clauses which leave space for
interpretation within the meaning of the decisions made by the European Commission and the Court
of Justice of the EC.
The Act deals with three areas of protection of economic competition:
(a) all agreements between competitors, decisions of an association of competitors or
concerted practices of competitors, which result or may result in distortion of
economic competition are prohibited and void, unless the Act provides otherwise or
unless the Office grants an exemption (Article 3 of the Act);
(b) it is prohibited to abuse a dominant or monopolistic position to the prejudice of other
competitors or consumers and to the prejudice of the general interest (Article 9 of the
Act);
(c) concentrations which distort or may distort economic competition shall be subject to
approval by the Office.WT/WGTCP/W/71
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The creation of competition policy is not limited only to a national framework.  The
provisions on economic competition have begun to occur more frequently even in a large number of
bilateral and multilateral agreements, in particular within free trade agreements.
The basic point for defining the competition rules in such type of agreements was formed by
the Interim Agreement on trade and related issues, entered into with the European Communities and
implemented since 1 March 1992.  The Interim Agreement was replaced by the Europe Agreementestablishing an association between the Czech Republic and European Communities and their
member States which became effective on 1 February 1995.  The competition rules in both
agreements are identical.  In order to implement them, Implementing Rules were adopted.  These
Rules regulate the cooperation between relevant comp etition authorities in those situations where the
negotiated competition rules have been violated.
The competition rules included in multilateral free trade agreements, e.g. in the Free Trade
Agreement with EFTA countries, in the Central European Free Trade Agreement (CEFTA) and someother bilateral free trade agreements have been based on the principles of the competition rules of the
Europe Agreement.
The primary objective of the competition policy in the Czech Republic was to create a
competitive environment that is actually to lay the foundations of the competitive process in the
sectors of the national economy, the creation and strengthening of originally non-existing or veryweak markets.  The privatization process has played a very important role in the creation of the
economic competition. The Office for the Protection of Economic Competition has participated in this
process using the powers given by the Act on the Protection of Economic Competition, i.e. the
preparation of standpoints to the privatization projects and the participation in the interdepartmental
privatization commission.
Institutional framework for the protection of economic competition:  proceedings
Since 1 November 1996, the protection of economic competition is institutionally assured by
the Office for the Protection of Economic Competition (the Office).  The Office has assumed the
activities of the former Ministry of Economic Competition, with the former powers retained to a full
extent.
The Office is a central body of state administration for the promotion and protection of
economic competition from its prohibited restriction.  The Office is headed by a Chairman who is
appointed and recalled by the country's president upon the proposal of the government.
Application of the Act is realised on the basis of decision-making of the Office.  The first-
instance decisions are issued by executive departments, which form the organizational parts of theOffice.  The decision may be appealed to the Chairman of the Office.  The appeal has a dilatory
effect.  The Chairman's decisions may be reviewed by the High Court on the basis of a suit.  The court
decision is final.
Proceedings before the Office are administrative proceedings, which are commenced on an
ex officio basis or on the basis of a proposal.  The Administrative Code (Act. No. 71/1967 Coll.) is the
basic procedural norm, unless the Act states otherwise.
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