Bulgaria’s Parliament is currently discussing a draft law on amendment of the effective Protection of Competition Act. The bill has been proposed by individual Members of the Parliament and is a result of a continued lobbying by several groupings of local companies, mainly from the food and beverage industries. If enacted by the Parliament as a statute, the proposed amendments, among others, would introduce into the national competition law the new concept of “significant market power” and would impose new obligations on larger companies operating in various sectors across the entire national economy.
In a nutshell, the new regime would increase the risks and the costs of doing business in Bulgaria, and especially in the industries, where larger companies contract local suppliers and vendors.
We note at least three negative implications from a legal perspective that need to be considered in addition to the obvious deficiencies in the draft’s economic rationale, if this proposal enters into force:
– The new concept, including the definition, of “significant market power” essentially overlaps with the concept and the statutory definition of “dominant position”. The competition authority should prepare a sufficiently detailed and clear guidance (i.e. “methodology”) as to when and how it intends to apply the new rules. In any case the competition commission must allow sufficient time to all affected companies to understand the new rules and the differences with the existing regime and to adjust their market behaviour accordingly.
– The new rules would extend the controlling and sanctioning powers of the national competition authority over companies that have not a dominant position on their respective markets. Thus companies with market shares below the thresholds that would normally indicate the existence of dominance (40%) would have to review their existing contracts and practices to ensure that they remain compliant in these new circumstances.
– The proposed amendment is aimed at the large supermarket and hypermarket chains but virtually all companies with annual turnover exceeding BGN 50 million (about EUR 25.5 million) could fall into this new category and would have to comply with additional obligations, such as pre-approval of their existing standard supply contracts and/or general terms and conditions by the competition authority as well as any subsequent amendments of such standard contracts and general terms. Some companies already submit their standard contracts and/or general terms for approval to their sector regulators as required by the applicable special laws (for instance the mobile and fixed telecommunications operators, electricity distribution companies, etc.) but regardless of such approvals, they would need a separate approval from the competition commission.
If the Parliament would take into account the potential risks and costs for the national economy as a whole it would either reject the current proposal, or at least adopt a more sensible version of the proposed amendments from an economic and legal point of view.