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Editorial

Competition Legislation Imposes New Restrictions on Business

On 14 June 2012, the Ministry of Economy, Energy and Tourism published on its Internet site draft amendments to the Protection of Competition Act and respective reasons.

The bill provides for the introduction into Bulgarian legislation of a completely new institute: "significant market power" of undertakings. The way in which this new concept is introduced and the mechanism according to which this new legal institute is to function and interact with pre-existing institutes, however, raises a number of justified questions and concerns regarding the legal conformity, correctness and above all, the legal and economic consequences of the proposed amendments to the Protection of Competition Act.

Above all, the proposed amendment inadmissibly blends the newly established institute with the pre-existing institute of the "undertaking with dominant position". Apart from introducing very similar definitions for the two concepts, which overlap in a number of their essential elements while, at the same time, conflicting with one another, the draft provides that the abuse of dominant position and the abuse of significant market power have identical forms of manifestation. Apparently - and this is unambiguously stated in the reasons to the bill, its authors seek to extend the restrictive treatment, so far applicable in respect of undertakings with dominant position also to undertakings which objectively do not qualify as such.

Even though the public debate, with which the bill is associated, concerns conflicts between retail chains and their suppliers, if the proposed amendments are adopted, the restrictive standards and, respectively, sanctions vis-à-vis undertakings with dominant positions for their violations shall become applicable to practically any undertaking in any economic sector if, according to the subjective judgment of the Commission on Protection of Competition however, without any legal criteria for it to have been put in place, it is determined that for a particular case, even though a given undertaking dose not hold a dominant position and is by no means in a position to exert negative influence on competition in principle, its bilateral relations with a specific supplier or client may qualify as relations of dependence of the specific supplier or client.

Besides, the proposed amendments create prerequisites to confuse the framework of abuse of a dominant position (and now of "significant market power" as well) with the framework of unfair competition, identifying as a manifestation of abuse behaviour which is defined identically with the definition of unfair competition under Chapter Seven of the Protection of Competition Act. As a result, the Competition on Protection of Competition may run into substantial difficulties in applying the legal standards, and business may face unpredictability in assessing a given market behaviour as it might be qualified as both unfair competition within the meaning of Chapter Seven of the Protection of Competition Act and as abuse of dominant position within the meaning of Chapter Four of the Act.

Absurdly, the forms of manifestation of unfair competition which, as we have pointed out on previous occasions, are an unusual subject of regulation by competition law in European legislations and do not lie within the competences of the competition authorities, are now transformed into forms of manifestation of abuse of dominant position or, respectively, of "significant market power" and are analysed and accordingly sanctioned in the same way as the forms of abuse provided for in Article 102 of the Treaty on the Functioning of the European Union.

Worse yet, there is a risk for one and the same behaviour to be qualified as unfair competition in respect of some undertakings and as an act of abuse in respect of other undertakings, the latter being liable to severer penalties compared to the acts of unfair competition, according to the existing methodology of the Commission on Protection of Competition and, most probably, according to the future methodology as well.

Everything discussed above calls for a careful reconsideration and reformulation of the bill, looking beyond the ad hoc problems arising from conflicts between consumer goods retail chains and their suppliers and analysing and taking into consideration all effects, both positive and negative, which the proposed amendments could have on the competition environment as a whole in all economic sectors.

 

Svetlin Adrianov


For more information please visit www.penkov-markov.eu

 

 

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