In this second part of our overview of the CPC’s proposal for amendments of the Bulgarian Competition Protection Act (the “Proposal”), we comment on some of its most important aspects.
Mandate of the CPC
The Proposal provides for an extension of the CPC members’ mandate from five to seven years. According to the CPC, the enforcement of competition law is a specialized field, which requires more time (i.e. additional two years) and continuous practice to accumulate experience.
The CPC’s affirmation that it should be more specialized is commendable. However, it raises the fundamental questions: (i) what qualifications the CPC’s members should possess in the first place in order to be elected (eligibility criteria) and (ii) how they should be elected (i.e. the election process from selection and nominations to assessment of the candidates’ eligibility to formal election and appointment). Currently, the members of the CPC are elected by the Parliament (on nomination by a political group or individual MPs) and should possess, among others, a legal or economic higher education diploma and 5+ years of post-qualification experience (10+ years for the chairman) in the specialty area (but not necessarily in the field of competition law).
Sadly for us, the Proposal fails to address another related and particularly worrying trend, i.e. practice of dismissal (sometimes en masse) of in-house experts and administrators (e.g. directors of directorates) by each newly elected Commission. We have witnessed delays in the CPC’s practice for prolonged periods of time, where the newly appointed or promoted internally and often inexperienced experts have had to catch up and step in the pending cases.
Extended powers of the CPC
The Proposal expressly broadens the CPC’s investigative powers by including the right to make dawn raids in private premises of concerned directors, managers and other staff members of the undertakings, associations of undertakings or buyers of agricultural and food products, where “justifiable suspicion exists that documents or other records related to the business and to the subject-matter of the inspection are stored there”.
The text obviously differs (without justification) from the equivalent provision set out in Art. 21 of Regulation (EC) 1/2003 insofar as it omits the requirement that the documents sought are relevant to establishing “a serious violation”. Тhis means that the CPC would be able to inspect private premises in relation to any violations investigated regardless of gravity. The persons concerned could generally argue that any inspection on grounds of an alleged ‘non-serious’ violation may fail to satisfy the conditions of Art. 8(2) of the European Convention on Human Rights.
Another novelty proposed is the Commission’s right to refuse to open a case based on a complaint of а interested third party or a leniency application „where the case does not fall within the enforcement priorities, defined […] by the Commission”. According to the Proposal’s motives, this would allow the CPC to concentrate its efforts and resources where most needed. “To guarantee legal certainty“, affected parties would be entitled to judicially appeal the CPC’s refusal before the courts. The court’s assessment, however, would be limited in scope since it would in any case be based on the priorities defined by the CPC itself.
The Proposal should be reconsidered in that part due to the potential conflict with fundamental human rights. Beyond any doubt the CPC should rethink and restate its priorities (expressed and silent). If the objective of the proposed amendment were to free some of the CPC’s capacity and resources and ease the CPC’s heavy workload then other non-legislative solutions might have been more efficient and produced faster results. For an awfully long time, the CPC has had a clear focus (in terms of number of cases and value of the fines imposed) on unfair competition cases. For decades, the Commission has been investigating (often on its own initiative) marketing and trade practices, which are more closely related to consumer protection than competition, e.g. misleading and unlawful comparative advertising, and/or practices that should have been solved in private lawsuits between the competitors.
The Proposal seeks to broaden the scope of the CPC’s assessment of concentrations by aligning it with the standard established in Regulation (EC) 139/2004. As per the effective provision of Art. 26, para. 1 of the CPA the CPC would permit a concentration if it will not lead to the establishment or strengthening of a dominant position in detriment to effective competition on the relevant market. The Proposal introduces a new wording of Art. 26, para. 1 providing that the CPC will approve “a concentration which would not significantly impede effective competition in the relevant market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position”. Regardless of this proposed clarification, the CPC’s practice on merger cases has been in line with the EU Commission’s relevant practice on applying the standard substantive test.
Further, the CPC may, in the future, invite the merging parties to propose commitments in cases where the Commission establishes substantial impediments to the effective competition in the course of the first (accelerated) stage of the investigation. In our view, there have been no obstacles for the CPC in the current wording of the law to make such invitations/proposals to the notifying parties, where it might have deemed that appropriate. Historically the CPC has refrained from doing so in pending merger cases. Hopefully, the Commission would in the future use that regulatory instrument more effectively when it is in the interest of the protection of the effective competition on the affected market(s).
Unfair trading practices in the agricultural and food supply chain
As discussed in the first part of our analysis, the CPC suggests that the entire Chapter 7a (Abuse of a Stronger Bargaining Position) be repealed and replaced by a new Chapter 7b entitled “Unfair Trade Practices in the Agricultural and Food Supply Chain”.
The wording of the Proposal is for the most part a verbatim adoption of the text of Art. 3 of Directive (EU) 2019/633. However, the new text supplements the list with additional unfair trading practices: (i) limitations on the supplier’s freedom to sell/buy to/from other third parties, (ii) sanctions on the supplier for offering better terms to third parties, (iii) retroactive price discounts or additional taxes/rebates having similar effect, (iv) unilateral and unjustified termination of the contract with the supplier “without a reasonable notice allowing the supplier to cover its investment costs and in view of the previous trade relations of the parties to the contract, the relations in the sector etc.”, and (v) requests for payment of transportation or logistics costs (unless previously agreed in clear and unambiguous terms in the supply agreement).
Chapter 7b will have an immediate impact on the commercial relations between the grocery and supermarket chains and, mostly, the local producers of agricultural and food products. We will be discussing this issue in more detail in a third part to this analysis once the Proposal enters the Parliament.
* The opinions expressed in this article are not a legal advice and should not be relied or acted upon as such.