What market conducts shall be considered prohibited under the Protection of Competition Act in Bulgaria?
The Bulgarian Protection of Competition Act (PCA) provides general prohibition on all kinds of agreements, decisions and concerted practices between two or more undertakings that are aimed at preventing, restricting or distorting the fair competition on the relevant market.
1. Prohibited agreements between enterprises
The agreement, which may exist in any form, shall be considered prohibited when it restricts the enterprises to determine freely and independently their market behavior. Instead, the undertakings act jointly, which ultimately leads to reducing and eliminating the effective competition between the involved parties. For example, agreements aimed at direct or indirect price fixing and sharing of markets or clients have high potential to damage the competitive market relations and the consumers’ interests. In such case the mere existence of such agreement, without being effected, is enough to be prohibited by law.
2. Concerted practice
The term “concerted practice” is legally defined as the coordinated action or inaction of two or more undertakings. In case of concerted practice, conversely to the prohibited agreement, there is a lack of direct or indirect contact between the parties but the latter adopt identical self-limiting behavior on the market which is not a result of the objective conditions on the relevant market.
3. Decision by association of undertakings
The decision by association of undertakings envisages a situation when undertakings act in concert through the intermediary of an association. In this case, the association itself, as well as each member, could be liable for infringement of the PCA. It has been established that the prohibited decisions by association between undertakings may exist in different forms – letters, orders, instructions, protocols, prognoses, recommendations, verifications, etc., which do not necessarily adopt the form of a “decision”. The articles of association of the associations, as well as the organizational documents adopted by them, can also be considered “a decision” in the sense of the general prohibition.
Types of prohibited agreements, decisions and concerted practices
The Bulgarian Protection of Competition Act (PCA) differentiates between the following types of prohibited agreements: horizontal and vertical agreements, and cartels.
1. The horizontal agreements are concluded between two or more undertakings operating on the same level of manufacturing or distribution of goods and services. The most common anti-competitive effect is achieved by horizontal agreements for fixing prices, restricting production or sharing markets, as well as the agreements that give undertakings the opportunity to preserve, acquire or strengthen their market power.
1.1 The cartel is a special type of horizontal agreement and/or concerted practice between competitors aimed at restricting the competition through price fixing or determining price conditions for purchase or sale, the allocation of production quotas or sales or allocation of markets, including the manipulation of public bids or tenders or public procurement procedures.
2. Vertical agreements are agreements for the purchase or sale of goods or services where these agreements are concluded between non-competing undertakings, carrying out economic activities on different levels of production and distribution such as the agreement between a manufacturer and a distributor for the distribution of certain products.
How does Article 15 of the Bulgarian Protection of Competition Act (PCA) relate to Article 101 of TFEU?
The finding of any of the above prohibited conducts gives grounds to hold liable the involved undertakings under the general prohibition of Article 15 PCA.
After Bulgaria joined the EU, the above general prohibition can be applied either separately or jointly with the prohibition of Article 101(1) TFEU. The joint application of the above referenced provisions is mandatory for the Bulgarian Commission for Protection of Competition (CPC) in all cases when the latter finds that the prohibited conduct may influence the commerce between EU member states. If the infringement concerns only the national commerce then the CPC shall apply only the general prohibition under Article 15 PCA.
Under what conditions an agreement, decision or concerted practice shall not be prohibited?
Agreements of minor importance – De Minimis Rule in Bulgaria An agreement, decision or concerted practice is presumed to fall outside the scope of the general prohibition if it falls within the scope of the De Minimis rule. This rule determines that certain thresholds of the market shares of the undertakings exert inappreciable effect on the market.
To benefit from the De Minimis rule, the first requirement is that the market shares of the parties to the agreement shall not exceed (i) 10% of the relevant market if they are actual or potential competitors; (ii) 15% of each of the relevant markets if the parties to the agreement are not actual or potential competitors. The second requirement, in order to take advantage of the De Minimis rule, is that the agreement shall not contain any of the following restrictions: (i) fixing of prices for selling the products to third persons; (ii) limitation of production or sales; (iii) distribution of markets or clients.
Exemptions from the General Prohibition
Prohibited agreements, decisions and concerted practices within the scope of the general prohibition shall not be prohibited, if they contribute to the improvement of the production or distribution of goods or services or to the promotion of technological and/or economic progress, while ensuring a fair share of the resulting benefits to the consumers.
To benefit from this exemption the conducts between the undertakings shall meet the following requirements: a) do not impose on the undertakings concerned restrictions that are not indispensable to the attainment of the above objectives; and b) do not afford such undertakings the possibility of eliminating competition in respect of a substantial part of the relevant market. The burden of proof in respect of the above objectives shall be upon the undertakings or the associations of undertakings that invoke them.