The Law on Protection of Competition /LPC/ which is in force was adopted in 1998. The law contains the basic provisions of Community Competition law. The LPC was substantially amended in 2003.
The protection against collusive agreements, decisions and concerted practices is provided in Chapter III “Prohibited Agreements, Decisions and Concerted Practices”
LPC. The Law prohibits any type of agreements between undertakings, decisions of association of undertakings, as well as concerted practices, which significantly restrict the competition at the market. The competition is significantly restricted when the agreements or decisions result in:
• Setting prices or other trade conditions;
• Allocating markets or sources of supply;
• Restricting or controlling the production, trade, technical development or investments;
• Applying different terms and conditions for one and the same type of contracts to partners, which represent competitive disadvantage for them as market;
• Binding the conclusion of a contract with undertaking additional commitments by the counterpart, which in its nature or in view of the common trade practice are not related to the subject of the Contract or the performance thereof.
Such agreements and decisions are deemed void.
The CPC may grant exemption to certain agreements, decisions and concerted practices if they have positive effects on the development of market competition, as a result of which the consumers get fair share of the generated profit. They should contribute to: a) increase and improve the production of goods and service delivery; b) enhance the technical and economic development.
Art.13 of the LPC provides the conditions for individual exemption. In any case it should be established that the agreements do not impose restriction to the undertakings, which are not necessary for achieving the preset goals and do not create a possibility to eliminate the competition for a substantial part of the market.
According to Art.14 of the law the Commission can adopt a decision for group exemption when a certain category of contracts meet the requirements for individual exemption.
Chapter IV “Monopoly and Dominant Position” of the law prohibits the actions of undertakings of monopoly or dominant position, as well as the actions of two or more undertakings of joint dominant position at the relevant market, aimed at or resulting in prevention, restriction or distortion of the competition and/or in prejudice to the interests
of the consumers. Art.16 states that monopoly is the position of an undertaking which, by law, has the exclusive right of carrying out definite type of economic activity. Dominant position exists when an undertaking, due to its market share, financial resources, possibilities to access the market, technological level of development and business relations with other undertakings is able to hinder the competition on the relevant market, being independent of its competitors, suppliers or customers. There is a disputable legal text, precluding that an undertaking has dominant position provided it owns more than 35
% of the relevant market.
The existence of dominant position at the market does not by itself constitute an infringement of LPC. Some of the most typical and frequent forms of abuse are listed in the law and they are:
• direct or indirect imposing of purchase/sales prices or other unfair trade conditions;
• restriction of the production, trade and technical development to the prejudice of the customers;
• application of different conditions to identical type of contracts with regard to certain partners, thereby placing them at a competitive disadvantage;
• binding the conclusion of a contract with acceptance by the other party of additional obligations or signing additional contracts, which by their nature or according to common trade practice have no connection with the subject of the main contract or the performance thereof;
• unjustifiable termination of established long-term relations or unsubstantiated refusal to sign a contract when the possibilities for production or supply are existing.
The actions listed above may bring about two types of abuses – structural and operational. Structural abuses are the abuses by which the undertaking of dominant position aims at changing the structure of the market by means of impact on the competitors, leading to exiting the market, distorting the demand and supply, etc.
Operational are the abuses by which the undertaking of dominant position gets benefits from the customers, which would otherwise not be able to get in case it operates in normal competitive conditions. This can happen by imposing unfair and discriminatory trade conditions, limiting the choice of the customers, etc.
The legal framework for evaluation of concentrations is contained in Chapter VI
“Concentration of economic activity” LPC.
Business concentrations occur where operations such as merger/acquisition, transfer of control or setting up of fully functional joint ventures lead to lasting changes in the undertakings operating at the relevant market and thus in the structure of the market.
Operations or transactions, which do not change the quality of the control exercised on the target undertaking, can not be regarded as business concentrations. Those concentrations, which are consistent with the requirements of dynamic competition and can contribute to raising the competitiveness of the national industry by fostering growth and increasing living standards, are authorized unconditionally.
In certain cases concentrations can restrict competition within a certain market by significantly increasing the market power of the merging undertakings, in particular by creating or strengthening of dominant positions. Whenever the CPC establishes that a business concentration has occurred in contravention of the LPC, it imposes pecuniary
sanctions (fines) and may reinforce these by ordering appropriate remedies to restore the initial situation.
According to Art.24 LPC the undertakings are obliged to inform the CPC about a forthcoming business concentration when the total turnover for the preceding year of the participants on the respective market on the territory of the country exceeds BGN 15 million. The commission will authorize a business concentration where it does not result in the creation or strengthening of a dominant position that would significantly impede effective competition on the relevant market; or which, even though creating or strengthening a dominant position, aims at modernization of production or of economy as a whole, improvement of market structures, attraction of investments, increasing the competitiveness on external markets, creation of new jobs, better satisfying of the interests of the consumers, and on the whole outweighs the negative impact on competition on the relevant. In authorizing a concentration the CPC may also impose additional remedies relating to the behavior of the parties to the concentration and the structure of the relevant market (behavioral or structural remedies).
The amended in 2003 LPC included a new provision, according to which the CPC performs sector analyses of the competitive environment in various relevant markets. To facilitate the exercising of these new powers, in 2004 the Commission adopted Guidelines for performing sector analyses.
In 2007, as a consequence of the Bulgaria’s membership in EU and the modernisation of community competition legislation, particularly Regulation 1/2003 and Regulation 139/2004, the CPC prepared a draft of a new Law on Protection of Competition. The purpose of the draft is to ensure the application of acquis communautaire and to enable CPC to take part in the decentralized application of the competition legislation. With the draft CPC aims at full harmonization of the national legislation with acquis.
In line with Art.35 of Regulation 1/2003 the CPC is defined as the national competition authority responsible for the application of Art.81 and Art.82 of the Treaty.
Its powers are provided in accordance with Regulation 1/2003 and Regulation 139/2004.
According to the draft law the commission shall apply in parallel the national legislation and Art.81 and Art.82 of the Treaty. The draft law enables CPC to impose interim measures and remedies, necessary for maintaining effective competition and mitigating the negative impact of the concentration on the relevant market. The commission may adopt commitment decisions.
With regard to the application of Regulation 1/2003 and Regulation 139/2004, the draft defines CPC’s competences and the forms for cooperation between CPC on the one side and the European Commission and the NCAs on the other.
The draft settles rules for avoiding the conflict of interests and for the professional secret.
The law foresees an obligation for the commission to keep an electronic register of the issued decisions. Announcements for initiated proceeding for authorization of concentrations shall also be published.
The draft gives a definition for prohibited agreements, decisions and concerted practices and for agreements with negligible effect. The effect shall be negligible when the aggregate share of the undertakings participating on the market of goods or services within the scope of the agreement, decision or the concerted practice does not exceed:
- 10 % of the relevant market, in case the participants are competitors;
- 15% of each of the relevant markets, in case the participants are not competitors.
The draft provides rules for exemption from prohibition and for block exemption from prohibition. The draft provides that agreements, decisions or concerted practices shall not be prohibited, if they contribute to the improvement of the production or distribution of goods or provisions of services or to the promotion of technological and/or economic progress, while ensuring a fair share of the resulting benefits to the consumers and if they:
a) do not impose on the undertakings concerned restrictions that are not indispensable to the attainment of the objectives set; and
b) do not afford such undertakings the possibility of eliminating competition on a substantial part of the relevant market.
Certain categories of agreements, decisions and concerted practices which comply to the requirements of the law may be exempt from the prohibition.
The abuse of monopolistic or dominant position is provided in Chapter Four. The existing rebuttable presumption for dominant position (market share bigger than 35%) is not provided in the draft. The reason is that only the existence of high market share is not a proof for dominant position.
With regard to the control on concentrations, the draft settles the obligation for the undertakings to notify the commission for a forthcoming concentration if the aggregate turnover of all undertakings participating in the concentration on the territory of the Republic of Bulgaria in the preceding year exceeds BGN 30 million.The draft does not provide the rules for protection against unfair competition. The reason is that from September 2007 this is a subject of the Law on Protection of the Consumers.
The types of proceedings and the grounds for their initiation, suspension and termination are consistent with Regulation 1/2003 and Regulation 139/2004. The draft provides a new ground for initiation of a proceeding before the commission – a request of a national competition authority or of the European Commission under Art.20, paragraph (5) and Art.22 of Regulation 1/2003 as well as under Art.12 and 13, paragraph (5) of Regulation 139/2004.
CPC’s powers for investigation are extended and fully correspond to the powers of the other NCAs. According to the draft during the proceeding the investigator has the right to:
1. request information, material, written, digital and electronic evidence, irrespective of the media on which they have been stored;
2. take oral or written explanations;
3. conduct inspections;
4. entrust the conducting of appraisals by external experts;
5. request information or assistance by the national competition authorities of the EU member-states and by the European Commission.
The commission may carry out all kinds of inspections at the premises of the undertakings and associations of undertakings following an authorization by a judge of the Administrative court- Sofia City.
The extended powers of the commission require the existence of guarantees for the protection of the parties and the stakeholders. They have a right to be heard in an open sitting of the commission before it takes a decision; to examine commission’s objections and to give their statement of objections; to get acquainted with all the materials etc.
In compliance with acquis the procedure for assessment of a concentration is divided into two types – preliminary market investigation and in-depth investigation. In-depth investigation shall be carried out when, as a result of the assessment during the preliminary market investigation, it is established that the concentration raises serious doubts that its implementation may result in the creation or strengthening of a dominant position that would significantly impede effective competition on the relevant market.
A new method for determining the amount of the sanctions is provided. According to the draft the pecuniary sanctions are defined as a percentage of the total turnover in the preceding financial year on an undertaking or associations of undertakings. In certain cases CPC shall impose periodic pecuniary sanctions, which are a percentage of the average daily turnover in the preceding financial year. The periodic sanctions shall be imposed for each day until the unlawful action or inaction is terminated.
The draft law provides general rules for remission or reduction of sanctions for undertakings, which participate in a secret cartel. The sanction may be remitted or reduced, if the undertakings voluntary cooperate with the commission by providing evidence, which is essential for proving the infringement and complies with all the conditions set out in the leniency programme. The CPC shall adopt a leniency programme, which is in compliance with the Model leniency programme, prepared by the European Commission.
LAW ON THE PROTECTION OF COMPETITION