How the New Civil Code Affects Economic Competition

March 31, 2014  |  Martin Vráb

The New Civil Code (“NCC”) has brought a number of changes and introduced several new institutions to competition law.

One is referred to as a prohibition on competition. Prior to the NCC, Czech law contained no general provisions on non-compete clauses, only the legal regulations concerning business representation agreements contained special rules in this respect.

When setting up a non-compete clause, it is first necessary to agree on the territory, sphere of activities and group of persons that the prohibition concerns. In addition, non-compete clauses may not be set for an indefinite period of time or even for a period exceeding five years. If these conditions are not met, a legal fiction applies that the clause is agreed for five years. A court is empowered to limit, cancel or declare invalid a non-compete clause that restricts the bound party more than necessary in order to protect the entitled party similarly as in the case of the above-mentioned non-compete clause concerning agency contained in the Commercial Code.

The NCC also contains rules on harassment, which reflects the need for protection against a phenomenon that increasingly affects the privacy of both legal and natural persons. Providing information or offering a good or service to persons who clearly do not want it is considered harassment. This includes providing information about a competitor or goods and services by phone, fax, email or similar means, as well as advertisements where the disseminator conceals or disguises its identity and does not state how the recipient can “unsubscribe” to such advertising at no extra cost. The legislation can certainly be welcomed, since it is also aimed at protection against spam, which is widespread nowadays. Nevertheless, recipients of spam must clearly demonstrate that they do not wish to receive it. In relation to harassment, a legal entity may also exercise its rights to prevent an infringing party from engaging in unfair competition or force it to eliminate defective status even if it is not authorized to protect the interests of its competitors or customers.  

This protection also applies to persons whose right was jeopardized or infringed by unpermitted restriction of competition, i.e. conduct conflicting with the Antitrust Act (for example, by concluding and performing a cartel agreement, misusing a dominant position etc.). Persons whose right was jeopardized or infringed by an unpermitted restriction of competition may request that the infringing party refrain from restricting the competition or eliminate the defective status. They can also require reasonable satisfaction, compensation for damage and surrender of unjust enrichment. The chosen option, however, may make it difficult to interpret the character of the jeopardized or infringed right. Unlike the previous legislation, the NCC does not expressly stipulate the right of competitors to freely develop their competitive activities. On the other hand, one cannot exclude that courts may infer such rights, for example, on the basis of the general ban on restricted competition stipulated in the NCC.   

The new legislation on harassment and means of protection against unlawful restrictions of competition certainly reflects legitimate social interests. But whether or not such interests will be satisfied will be answered ultimately by the court practice.