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P 061305Z NOV 06
FM AMEMBASSY PRAGUE
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UNCLAS SECTION 01 OF 02 PRAGUE 001375 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ENRG EPET ECON EZ
SUBJECT: CZECH REPUBLIC: AMBASSADOR'S INTRODUCTORY CALL ON 
ANTI-MONOPOLY OFFICE CHAIRMAN PECINA 
 
REF: PRAGUE 256 
 
¶1.  (SBU) Summary: During the Ambassador,s introductory call 
on Antimonopoly Office Chairman Martin Pecina on October 25, 
Pecina discussed antitrust issues, energy independence and 
the government tender review process.  Pecina remains worried 
about EU dependence on Russian energy and monopolies within 
the Czech economy in the energy industry.  He also explained 
that his office is frequently dragged into legal disputes 
involving large government tenders and listed the Kapsch toll 
road tender as an example.  End summary. 
 
¶2.  (U) During his first visit to the Czech Republic,s 
second largest city, Brno, on October 25, Ambassador Graber 
had lunch with Martin Pecina, Chairman of the Office for the 
Protection of Competition. 
 
¶3.  (SBU) By way of introduction, Pecina relayed that by law 
his office must approve any government tender over 2 million 
crowns ($91,000).  He stated that in the area of large 
government tenders he felt that the process worked well but 
Pecina worried that government corruption and favoritism was 
a larger problem with small and medium-sized tenders.  He 
explained that local and sometimes central government 
officials try to circumvent the requirement for his office's 
review by breaking one big tender into several smaller ones. 
 
¶4.  (SBU) Pecina complained that the legislative mandate for 
his office remains deficient.  For instance, his office has 
no legal authority to void signed contracts.  If his office 
discovers errors or tenders that were less than transparent 
in the bidding stage, he can merely fine the company and 
government agency that signed the contract and issue a 
statement stating that the law was broken.  In the review 
process, Pecina,s deputies have 30 days to review the larger 
government contracts and issue a decision; if any side 
disputes the results they can appeal directly to Pecina 
wherein the 30-day review clock is restarted.  He noted that 
both EU regulations and Czech laws govern the decision-making 
process. 
 
¶5.  (SBU) Pecina explained that his greatest concerns in the 
anti-trust area relates to single-company monopolies in the 
fields of natural gas, electricity, telecommunications and 
water.  As an example, he complained that the government sold 
natural gas distribution rights to one German company, RWE 
Transgas, and that this has raised large anti-trust concerns. 
 RWE Transgas controls 83 percent of the Czech market in 
natural gas distribution and 100 percent of the market in 
natural gas purchase and transit (reftel).  Pecina stated 
that his office had recently fined RWE Transgas 370 million 
crowns ($17 million) for abuse of its dominant market 
position but that the company merely views these fines as a 
cost of doing business and is still making huge profits in 
the Czech Republic. 
 
¶6.  (SBU) On the issue of overall Czech energy dependence on 
Russia, Pecina spoke of his prior experience as Deputy 
Minister for Industry and Trade.  In this capacity he was the 
government,s point person on energy issues.  He joked about 
having to travel every three months to Russia in this 
capacity to &beg8 for stable energy supplies.  Pecina 
explained that without the growth of nuclear power, EU states 
would be a slave to Russia,s energy reserves for the 
long-term future.  He asserted that by 2030, without 
diversification, the EU would be dependant on Russia for 70 
percent of its natural gas and oil.  Currently, 40 percent of 
Czech,s electricity generation capacity is from nuclear 
power and 55 percent is from coal. 
 
¶7.  (SBU) As an example of how the overall anti-trust system 
works, Pecina gave the recent high-profile example of the 
tender to build an electronic toll system that was won by the 
Austrian company Kapsch TrafficCom.  The value of the 
implementation and operation of the tender over the next 10 
years is close to $1 billion.  At the close of the bid phase, 
the Ministry of Transport dismissed the Italian firm 
Autostrade,s offer because it was incomplete, according to 
Pecina.  Autostrade disputed the Transport Ministry,s 
decision and filed an appeal with Pecina,s office at the end 
of last year.  In January, the Office for the Protection of 
Competition confirmed the results of the tender and ruled 
that no laws had been broken.  At that point, Autostrade 
appealed to the European Commission and in March the Office 
for the Protection of Competition reconfirmed its earlier 
decision.  Autostrade then sued the Czech Government in March 
in Regional Court in Brno.  On October 17, the Regional Court 
sided with government saying that Autostrade,s allegations 
were groundless.  Pecina said it was gratifying to have his 
office,s decisions upheld in court. 
 
PRAGUE 00001375  002 OF 002 
 
 
GRABER