Proposed Changes to the Competition Protection Act

The changes proposed to the Competition Protection Act passed first reading on 30 April 2015.

Below is a brief overview of some of the key points of the draft; the opinions against and the regulator’s view on the matter.

1.The amendments are aimed to ensure conditions of equal standing of the parties in the negotiations process and to prevent unfair trading practices.

А) Abuse with “significant market power” is to be prohibited
    • this applies to “any undertaking which does not have a dominant market position, but given its market share, financial resources, market access, level of technology and business relations with other undertakings, may distort competition in the relevant market, since its suppliers or buyers depend on it”;
    • form an abuse with significant market position can be „unreasonable direct or indirect influence on a competitor with the purpose to take out the latter from the relevant market”;
    • specific criteria for approval of concentration between undertakings is introduced as well – “no objection should be filed by the merging undertaking”. Simultaneously, such concentration should not lead to establishing or increasing the significant market power of the undertaking.

B) The Commission will assess the general terms/contracts of undertakings, having aggregate annual turnover for the past year above BGN 50 million.

    • such undertakings shall be obliged to send their general terms/contracts to the Commission;
    • if necessary, the latter will instruct the undertakings to remove any irregularities found;
    • the undertakings shall be obliged to adhere to the approved terms/contracts, but also to publish these on their websites;
    • a penalty to the amount of 0.1% of the average aggregate annual turnover of the undertaking for the past financial year(in case of breach of any of the obligations above) is introduced as well.

2. Representatives of the leading Parliamentary Commission have analyzed the unfair trade practices in the food chain industry only. Broadly speaking, however, the changes might affect any other undertakings as well.

Opponents comment that these changes will eventually have an adverse effect on food prices and small and medium-sized enterprises. Last but not least, the Commission’s authority to approve the general terms/agreements is found to be too excessive.

3.The competent authority has also expressed its position on the matter (Decision No 53/20.01.2015):

    • differentiating the terms “significant market power” and “dominant position” is a straightforward and much needed approach – significant market power will be present, as long as the undertaking does not enjoy dominant market position;
    • the new criteria for approval of concentrations between undertakings remains unclear, since concentration can be accomplished through acquisition as well;
    • as regards the Commission’s approval of the general terms/contracts – such an approval shall be incorporated in decisions, which are not legally binding for the respective regulatory authority (so that there is no interference with its sector-specific competencies). Therefore, no sanctions can be imposed either.

4. It should be mentioned that the proposed changes are identical to the ones, filed in 2014 (Draft № 454-01-32). The President has vetoed the draft back then, since some of the amendments were found to be unclear.

As a conclusion, it is uncertain whether this is the needed legislative approach. Thus, for example in its 2014 Report, the World Bank has established that addressing unfair trading practices through commercial courts is the most viable and effective option for Bulgaria.

Second reading is expected to be held within the next few weeks.