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BULGARIAN COMPETITION AUTHORITY’S RECENT APPROACH TO VOLUME REBATE SCHEMES

August 2011 - EU & Competition. Legal Developments by Georgiev, Todorov & Co.

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Until recently there have been debates amongst legal professionals in Bulgaria whether a player on the market is allowed to provide volume rebates in the form of extra quantities of goods or services different from the ones being sold throughout the particular transaction.

Generally, such practice seems to be not explicitly prohibited under the Bulgarian Law for Protection of Competition (LPC) and particularly under Article 36, paragraph 2 LPC:

“Prohibited shall be offering or attachment of extras to the sold goods or service gratuitously or against fictitious price of other goods or service with the exception of: … goods or services as a rebate in the sale of larger quantities.”  

Moreover, in a simple reading the law does not explicitly specify that the extra goods or services shall necessarily be of the same kind as those the rebate has been provided for. 

However, competition law experts being thoroughly acquainted with the practice and approach of the Commission on Protection of Competition in Bulgaria (the Commission) would be able to interpret the provision differently and comprehend the reasoning behind – that indeed the extra goods or services shall be identical to those being sold in larger quantities. 

For avoidance of any doubt, the Commission has recently rendered a decision on the matter (Decision No. 1435 of November 11, 2010, issued by the CPC) clarifying that volume based rebate provided in the form of extra goods or services shall be goods or services identical to the ones being sold in larger quantities. The Commission has motivated its narrow and restrictive interpretation of the law as aiming to reduce the anti-competitive effect such volume rebate may hold.  

In practice and by effect, the discussed rebate scheme is not per se anti-competitive, however, it normally is. The poor anti-competitive statistics with similar types of rebates has actually motivated the Commission to render its restrictive decision as hereinabove mentioned. It is meant to prevent situations where for example the extra goods or services are by various reasons more valuable to distributor/wholesaler so that to make him/her purchase larger quantities of the originally offered goods or services. Such a purchase would ignore the original goods’ qualities which by itself is already anti-competitive. Clearly, those other rivals on the market offering the same goods may not be able to offer those other valuable extra goods although their product has better qualities and price. This would bend the demand of the particular goods and would impose anti-competitive methods of selling them. 

For the sake of fair competition protection, extra goods or service different from the originally offered in a volume based rebate scheme should be treated as circumventing the law and should be considered as additional goods or services meant to influence the distributors’ or wholesales’ behavior and unfairly make them more willing to purchase from that particular supplier/manufacturer. Such practice shall be considered as ipso jure prohibited which actually is the Commission’s most recent approach. 

Nonetheless, there are practitioners who disagree and find it quite restrictive suggesting that the case-by-case approach should be followed by the competition authorities. 

Tzvetoslav Mitev

Legal Counsel

Georgiev, Todorov & Co Law Offices


 

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