Czech Republic: Confusion over the decision of the Czech antimonopoly office in favour of Plzeňský Prazdroj

Czech breweries are puzzled by the Czech antimonopoly office’s decision last week to make an exception for market leader Plzeňský Prazdroj, allowing it to conclude contracts with restaurants on minimum beer sales, Czech Business Weekly reported on March 27 .

The Office for the Protection of Economic Competition (ÚOHS) ruled March 21 that Prazdroj can set a minimum delivery level for its buyers. It made the decision after the brewery agreed to lower the minimum delivery amount stated in its contracts to 70 % of annual deliveries made between 2003 and 2005.

“To make an exception for the dominant player on the Czech beer market is strange,” said Zdeněk Mikulášek, spokesman for Rodinný pivovar Bernard, which has criticized the commercial practices of large breweries in the past. Other breweries are still not certain what impact the ruling could have. “ÚOHS’ decision could have a negative impact on the competitive environment in the Czech market,” said Michael Trýznová, spokeswoman for No. 2 brewer Pivovary Staropramen, but added that her company hasn’t yet seen the full decision or the reasons behind it.

According to ÚOHS chairman Martin Pecina, the decision should help restaurant and pub owners. “This will enable restaurant operators to buy a significant amount of beer from [Prazdroj’s] competitors,” he said.

Some contracts on minimum beer purchases required buyers to purchase the same amount of beer as in previous years, but include perks such as free promotional items with Prazdroj’s logo or those of other Prazdroj products. Prazdroj produces Gambrinus, Velkopopovický Kozel and Radegast brand beers, among others.

Jan Veselý, chairman of the Czech Beer and Malt Association (ČSPAS), takes a neutral view on the issue. “The practice of all breweries is very similar,” he said. “The only difference is that Prazdroj is larger.”

According to industry figures, Prazdroj has a 49 % market share, followed by Staropramen, with a 14 % share. Prazdroj spokesman Alexej Bechtin said the brewery has already renegotiated “thousands” of contracts with buyers, but couldn’t offer an exact number. Prazdroj has some 20,000 contracts here, and more than 50 % of its total beer sales go to restaurants, according to Bechtin.

Prazdroj originally asked for an exemption to the restriction on minimum delivery contracts in 2003, after ÚOHS fined the brewery Kč 2.3 million (€ 80,500) for harming competition. The request was rejected, but the brewery has been working with ÚOHS since then on creating conditions to help competition.

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