November 2015 Issue 1
Albania th th UNCTAD Peer Review SCF held its 5 and 6 meeting page 3
Bosnia and Herzegovina Electronic Communications page 20 Bulgaria Abuse of dominant The 5th meeting of the Sofia Competition Forum took place on 13 – 14 position by Sofia’s November 2014 in Sofia. The main topics were “Inspections on spot” water supplier and “Procedural fairness in inspections on spot”. page 12 Page 24 Croatia Agrokor/Mercator merger page 14
Kosovo Amendments in Competition Law page 2
Macedonia Cartel decision on The 6th SCF meeting was held on 29 May 2015 in Sofia with main electricity trading topics “Procedural fairness in competition cases” and “Interrelation page 6 between public and private enforcement of competition law”. Page 27 Montenegro Special report: Competition Success stories Daily newspapers authorities at a cartel glance: page 5 Inspections on spot Croatia: Serbia Insurance First dawn raids Albania page 34 page 7 main conclusions page 30
UNCTAD Bulgaria: New global strategy Bosnia and Wholesale trade page 22 Herzegovina of medicines page 46 page 32 page 35
November 2015 Issue 1
Legislation 2 News Prohibited agreements 5 Abuse of dominant position 12 Mergers 14 Advocacy 16 Institutional 20 International cooperation 22
5th SCF meeting 24 SCF meetings 6th SCF meeting 27
Albania 30 Competition authorities at a Bosnia and Herzegovina 32 glance
Croatia: Positive effects of insurance sector 34 Success stories probe
Bulgaria: Advocacy opinion removes 35 restriction of competition in wholesale trade of medicines
Expert’s Competition Policy and SDGs 36 TV rights in football 38 comments Standard-essential patents 40 Acquisition of minority shareholdings 42 OECD Competition Assessment Toolkit 44 Volume 3 Special report Inspections on spot 46
Copyright © 2015 Commission on Protection of Competition (Bulgaria) No part of this publication may be copied, reproduced and published without the prior written permission of the Commission on Protection of Competition (Bulgaria)
Kosovo Amendments in Kosovo Competition Law
Law No.04/L-226 on amending and supplementing the Law 03/L-229 on Protection of Competition was passed in February 2014 and came into force in March 2014. With the enactment of the new amendment of the Competition Law, Kosovo further confirms its commitment towards European Union integration and the further improvement of its regulations in the field of competition with the primary aim of further harmonizing the country’s legislation with the EU acquis and practice. The amendment represents a step forward towards further compliance with the EU requirements but it also helped to overcome the existing deficiencies that had been previously identified in the national legal system that weakened the regulatory role and the preventive effects by the Authority. At the same time, in accordance with the wording of the Stabilization and Association Agreement (Kosovo will sign SAA within 2015), the Authority in future may in certain cases directly apply the competition rules of the EU where the matter at hand directly Assembly of Kosovo affects trade between an EU member Credit: Assembly of Kosovo state and Kosovo. The Kosovo Competition Authority is motivated to focus on more sophisticated aspects of competition enforcement and with regard to this it will attempt to avail the additional enforcement tools on the basis of improved legislation. The amendment of the Law started with the block exemptions for horizontal and vertical agreements, and block exemptions for particular sectors (transportation, motor vehicles, insurance) and matters (technology transfer) – Article 7A. The percentage of dominant position is changed from 40% to 25% (Article 10, par. 2). Two or more independent enterprises may be in a dominant position if, in relation to their competitors they operate jointly on the relevant market and if their total market share is higher than 40% (collective dominance position – Article 10, par. 3). A merger must be pre-notified if the combined turnover of all the business involved in the merger is more than 20 million euro (previously it was 100 million euro) and if at least one of the participants is located in Kosovo and the turnover of at least two participants in the merger within Kosovo domestic market exceeds 3 million euro, and the period two or more agreements between the same enterprises to be considered as a single concentration is amended from 20 years to 2 years (Article 15, par. 1.1, par. 5). As regards certifications for allowing Concentrations and decision for Assessment of Concentration the deadline “within sixty (60) days” is replaced with the deadline “within ninety (90) days” (Article 20, par. 8). The President, the Vice President and the members of the Kosovo Competition Commission shall be proposed by the Government and nominated by the National Assembly; as well the Assembly by the majority of votes may dismiss the President, the Vice President or a member of Commission (Article 25-27). A new Article 57A envisages fine in the amount of 1000 to 3000 Euro for a person in charge of the enterprise as well as a person in charge of a state body, if he/she is involved in the violations provided in Article 56 and 57 of the Basic Law.
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Legislation Albania UNCTAD Peer Review on Albanian Competition Law and Policy presented
In the last months, Albanian Competition Authority has experienced an “exercise” as unknown and interesting at the same time. Our institution has been visited by an expert, with the mission to write a report on the Albanian competition law and policy, a peer review report, based on a decade of experience on competition issues, law and practice. On March 2014, the Albanian Competition Authority celebrated its 10th anniversary of its creation and functioning as an independent and public institution in Albania. It was the time, 10 years of experience, challenging and hard work to be evaluated and to seek something new. During the 7th United Nation Conference of UNCTAD held in Geneva on 6-10 July 2015 a special session was held to assess (Peer Review) the Competition Policy and Competition Law in Albania, which was voluntarily required from the Albanian Competition Authority. The group of known experts engaged from UNCTAD conducted the fact-gathering interview with all the representatives of the main institutions, which have an important role in the implementation of the competition policy in Albania. The prepared report was presented and the chair of the session assessed the implementation of the competition law and policy in Albania, the investigation cases and the independence in the decision making process of the Competition Commission, the approximation process, the competition advocacy, competition culture etc. In her speech, the Chair of the Albanian Competition Authority, Mrs. Lindita Milo (Lati) emphasized that despite the fact that the Albanian Competition Authority has a short history, almost 11 years of independent institution, it has played an important role in the protection of free and effective competition in the market and also in promoting the competition culture in Albania, cooperating closely with the regulatory bodies, public institutions and the European Commission. In the conclusions of the report it was Credit: Albanian competition authority emphasized that the actual legal framework enables the implementation of an effective competition policy in all sectors of the economy and that the Albanian Competition Authority has ensured continuous progress in the promotion and increase of the competition culture through the business community and the consumers by also giving the necessary recommendations for the policy makers on the legal acts that may have impact on competition in the market. The report evaluates that the involvement of the Competition Authority in the regulatory reform and the implementation of the competition advocacy through the recommendations for the regulatory entities, definitely has had effects in the well-functioning of the regulatory markets. According the UNCTAD experts, fighting cartels besides the professional work of the Competition Authority require a leniency program and more cooperation with other public institutions, especially for the prohibited agreements in public procurements (bid ridding). The report concludes with some recommendations among which: . full approximation of the national competition policy with the EU standards; . approximation of the legal framework for the concentration notification; . public awareness for the anti-cartel policy; . attractive leniency policy; . fighting cartels in public procurements in close cooperation with the institutions in charge for public procurements and anti-corruption; . increase the competition culture to the economic operators; . rules in commitment decisions;
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. increase the public awareness for the requirement of the business for the implementation of the competition law; . increase the capacities on inspections; . create an efficient system for the execution of fines of the Competition Authority (recommendation for the government); . continue the technical assistance project; . training of judges. The cooperation between UNCTAD and the Albanian Competition Authority will continue with the initiation of a technical assistance project that starts in autumn 2015, with the intention to implement the recommendations, the professional increase of the authority staff and to increase the business awareness and other public institutions on the role and importance of the competition law and policy implementation for a well-functioning market economy.
Bulgaria Serbia Amendments in the Competition New regulation for notification Law address the abuse of of concentration stronger bargaining position In September 2015 the Commission for In July 2015 the Bulgarian Parliament Protection of Competition proposed adopted amendments in the Law on adoption of a new regulation on the content Protection of Competition (LPC) introducing and manner of filing a notification of the concept of stronger bargaining position. concentration. The new Regulation shall The amendments envisage that any act or further harmonize the regulations of the omission by an undertaking during Republic of Serbia with European Union negotiations which is contrary to good faith regulations in relation to solutions commercial practice and harms or may contained in the current Regulation and harm the interests of the weaker party and allow more efficient acting of both market consumers shall be considered as participants and Commission. European constituting abuse of stronger bargaining Commission applies Regulation no. position and hence be prohibited. 802/2004 on the application of Regulation 139/2004 on the control of concentrations The new legal provision clarifies that unfair (including the latest amendments to this trading practises are all acts or omissions Regulation from 2013, covered by European that have no objectively justifiable Commission Regulation no. 1269/2013), economic ground such as unjustified refusal which, among other things, regulates the to deliver or purchase goods or services, content and manner of filing notification of imposition of unjustifiably burdensome or concentration with a European dimension to discriminatory terms or unjustified European Commission. Regulation no. termination of commercial agreements. 802/2004 also regulates summary In accordance with the amendments the notification of concentration, thus existence of stronger bargaining position facilitating the filing of notification and shall be assessed by reference to the increasing the efficiency of procedure in the structure of the relevant market and the control of concentration. specific legal relationship between the Proposed Regulation contains provisions undertakings concerned, taking into which, as a most significant changes, account the level of economic dependency compared to the Regulation in force since between them, the nature of their activity 2009, provide the possibility that market and its difference in scale, the availability of participants submit a “summary”, or alternative commercial partner, including simplified notification, and the possibility the existence of alternative sources of that, at their request, in direct contact, supply, distribution channels and/or clients. before the filing of notification, fulfillment of The sanctions for infringement of the new prescribed conditions for submission of provision are up to 10% of the annual regular or simplified notification of turnover of the product(s) concerned for concentration be considered. the preceding financial year.
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Prohibited agreements Montenegro The cartel agreement in the relevant market of issuing daily newspapers
Podgorica Credit: Wikimedia Commons
The Agency for Protection of Competition Montenegro initiated proceedings ex officio, due to the suspicion on existence of prohibited agreement, on the relevant market of issuing daily newspapers available to readers throughout the territory of Montenegro. Prohibited and concluded agreement had as its objective and effect determining prices of daily newspapers of all publishers with national coverage, with the agreed price increase in a fixed amount. During the proceedings, data and requested information were collected, three oral hearings were held, and the Statement of Objections was issued being delivered to the parties, to which the parties have declared. After the last oral hearing, held at the request of the parties, in April 2013 the Agency has issued a Decision establishing that publishing company “Daily Press” doo Podgorica, export import company “Jumedija Mont” doo Podgorica, newspaper publishing and printing joint-stock company “Pobjeda” ad Podgorica, and “Media Nea” doo Podgorica, have concluded prohibited agreement on the relevant market of issuing daily newspapers on the territory of Montenegro, with the object of establishing a fixed selling price. The proceedings were suspended against “Novosti Pres” doo Podgorica and “Ringer Axel Springer” doo Beograd, due to the lack of substantive evidence of participation in the prohibited agreement. Against parties that are determined in Decision as participants of the prohibited agreement, misdemeanour warrants were submitted in accordance with the Law, while determination of the sentence amount is within the jurisdiction of the Misdemeanour court. After establishing the existence of cartel agreement in the relevant market of publishing and distribution of daily newspapers, the Agency has in its Decision determined the conclusion of prohibited agreement - cartel by the four largest participants in the market of printed daily newspapers available throughout the territory of Montenegro (Daily Press – Vijesti, Jumedia Mont – Dan, Nea Media – Dnevne novine and Pobjeda). By rejecting lawsuits of Daily Press and Jumedia Mont, the Administrative Court upheld the decision of the Agency, thereby it became final. In the same proceedings, two administrative disputes were raised on conclusions of the Agency, and rejected by judgments of the Administrative Court. These were confirmed by the Supreme Court.
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Macedonia Cartel decision on electricity trading
The Commission on Misdemeanour Matters of the Macedonian Commission for Protection of Competition (hereinafter: CMM) on its session held on 21 October 2014 has adopted a decision finding that five undertakings engaged in electricity trading have participated in prohibited concerted practice which distorts competition in the Republic of Macedonia. These five undertakings are the following: Company for Production, Trade and Services EFT Macedonia DOOEL – Skopje, Company Electricity Trade EZPADA DOOEL Skopje, Company for Electricity Trade RUDNAP DOOEL Skopje, Company for Electricity Trade and Sale GEN-I DOOEL Skopje and GEN-I Electricity Trade and Sale d.o.o. Krško Slovenija. The CMM established that the abovementioned undertakings, when taking part in public procurements of AD ELEM Skopje for purchase of electricity for the needs of tariff customers in the Republic of Macedonia (households and enterprises connected to the distribution electricity system), supplied offers for sale of electricity with prices and quantities previously determined in a way that allowed them to share the quantities of electricity which were to be delivered to ELEM Skopje in a manner of directly submitting bids and indirectly by concluding mutual sales agreements for the electricity Credit: Ian Muttoo, flickr that was subject of the public procurements of ELEM Skopje. These actions had an effect of distortion of competition through price fixing and market sharing of the relevant market for supply of electricity for the needs of tariff customers in the Republic of Macedonia. The CMM established that the conduct of the aforementioned undertakings represented a misdemeanour according to Article 59 paragraph (1) point 1) in relation to Article 7 paragraph (1) points 1) and 3) of the Law on Protection of Competition (“Official Gazette of the Republic of Macedonia” no. 145/10, 136/11 and 41/14). The CMM established that the Company for Production, Trade and Services EFT Macedonia DOOEL – Skopje, Company Electricity Trade EZPADA DOOEL Skopje, Company for Electricity Trade RUDNAP DOOEL Skopje and Company for Electricity Trade and Sale GEN-I DOOEL Skopje participated in the prohibited concerted practice in the period from 18 October 2011 to 29 February 2012 in 11 occasions. GEN-I Electricity Trade and Sale d.o.o. Krško Slovenija participated in the prohibited concerted practice in the period from 28 October 2011 to 29 February 2012 in 4 occasions. The CMM fined all five undertakings with a total fine amounting to approximately 3 million Euro (184 858 733 denars). The parties lodged an appeal of the decision of the CMM. Enforcement of CMM decisions in misdemeanour cases is suspended on appeal until a final decision is taken by the Administrative Court of the Republic of Macedonia. The case is still in court proceedings.
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Prohibited agreements Serbia Serbian Competition Authority carries out first dawn raids
In July 2015 the Commission for Protection of Competition of the Republic of Serbia carried out its first dawn raids, unannounced inspections, at the premises of the companies active in the wholesale and retail market of electronic cigarettes and liquid for electronic cigarettes. The Commission is investigating whether concerned companies have engaged in anticompetitive practice in breach of article 10 of the Law on Protection of Competition, related to restrictive agreements. The proceedings were initiated on the ground of suspicion that the undertakings concluded agreements on setting minimum prices in retail trade. These inspections were successful and concerned undertakings have fully cooperated with Commission’s officials. Also, during the inspections Commission’s officials have used the IT Forensic Tool to acquire relevant electronic data. According to Article 53 of the Law on Protection of Competition, if there is a reasonable doubt of danger of disposal Belgrade or altering evidence that are in Credit: Vlada Marinković, Wikimedia Commons possession of the party or third party,
a dawn raid may be ordered. Dawn raid is performed by unexpected control of premises i.e. information, documents and objects on the spot, on which the party, or holder of premises and objects is notified at the time of investigation and on the spot. Although the competencies of the Commission to undertake unannounced inspections were introduced in 2009, other preconditions, such as adequate and trained staff, procurement of IT Forensic Tools and sufficient enforcement record, prevented the Commission to effectively use this investigative tool. Having in mind that dawn raids are the most efficient instrument for discovering the secret cartels and other forms of competition infringements, the Commission expects that this experience will improve the work and will enable the Commission to be more successful in implementation of competition legislation in Serbia. Electronic cigarettes Credit: festivaldulivredenice.com For the preparation of its first dawn raid, Commission’s officials were using knowledge and experience shared among different competition authorities within the framework of the Sofia Competition Forum.
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Macedonia is hardly conceivable that the same price (up to two decimals) could be offered Cartel decision on drugs spontaneously at the same bid, on the same market for the same product. The CPC adopted 2 decisions on bid rigging, one regarding the drug docetaxel (in March 2014) and the other regarding the drug etoposide (in May 2014). The other 3 proceedings were closed for lack of evidence. Fines imposed in the case regarding the drug etoposide: . Undertaking 1 – 225 284 den. (3 663 €) . Undertaking 2 – 117 280 den. Credit: Open Grid Scheduler/Grid Engine, flickr (1 907 €) Fines imposed in the case regarding the
In March 2012 the Ministry of Health drug docetaxel: submitted initial information and . Undertaking 1 – 26 939 500 den documentation to the CPC about possible (438 040 €) bid rigging case in public procurements of . Undertaking 2 – 18 533 100 den drugs in one of the University hospitals in (301 351 €) Skopje (University Hospital for Radiology Both decisions are appealed before the and Oncology). Main arguments of the Administrative Court. Ministry of Health were: price fixing (offering same prices in public procurement procedures organized by University Hospital Montenegro for Radiology and Oncology, Skopje) and Restrictive agreement on the sharing of quantities. relevant market of trade of Based on analysis of the received footwear documentation, the CPC initiated 5 misdemeanour proceedings for possible bid rigging among several drug wholesalers for 5 different drugs (with generic names: docetaxel, etoposide, topotecan, anastrazole and bicalutamide). During the infringement proceedings, public procurement procedures of all four hospitals in Macedonia that procured the above mentioned drugs were analysed. The CPC took into account that the Bureau for Medicines regulates the price for each drug. The regulated wholesale prices are maximum prices and regulated retail prices are fixed prices. The CPC used indirect evidence only and no dawn raids were performed. The main evidence was the fact that the involved companies during the public procurement Credit: freedesignfile.com offered the same price (up to two decimals) for the drug they bid although according to The Agency for Protection of Competition the public procurement procedure the offers Montenegro has initiated proceedings with are submitted in closed envelopes and the the aim of determining the existence of acts bidders could not know the price of the that have or may have as its object or competitors till the public opening of the effect prevention, restriction or distortion of bids. The CPC considered that in this case it competition, pursuant to Article 8, 8
Prohibited agreements paragraph 1, item 6 of the Law on Croatia protection of competition, on the market of production and sale of shoes/ trade of Marinas cartel footwear, against the company for the manufacture and trade “Šafran” doo, and the Limited Liability Company “Obuća Minja“ doo, Berane. In the proceedings, it was found that certain provisions of the Agreement on the use of the trademarked brand “Šafran” which prevent resale by the buyer, made between “Šafran” doo., Bar and “Obuća Minja” doo, Berane, had as their object or effect the prevention, restriction or distortion of competition in the relevant Marina Punat market, and that they were prohibited and Credit: Yacht Rent, flickr consequently null and void. In November 2014 the notice of established facts and In the proceedings against the Adriatic circumstances (Statement of Objections) International Club, Tehnomont, Marina was adopted and delivered to the parties in Šibenik, Ilirija from Biograd, Marina the proceedings. After that with decision of Hramina from Murter, Shipyard and Marina the Agency of December 2014 the from Betina, Marina Punat, Marina contracting parties were prohibited further Dalmacija and Marina Borik from Zadar and application and enforcement of the above the Croatian Chamber of the Economy, that provisions of the Agreement on the use of was opened following the initiative of the the trademarked brand “Šafran” and from undertaking Aba Vela, the Croatian preventing resale by the buyer. It was also Competition Agency (CCA) established that forbidden “Šafran” doo., Bar to identify and the representatives of the marinas who to coordinate and supervise on the market participated in the meeting of the Croatian the application of the sales price of its Marina Association under the aegis of the customers to the final consumers for Croatian Chamber of the Economy products Šafran. The Agency ordered that (Chamber) in October 2012 exchanged no later than seven (7) days of receipt of information about future pricing policies for the Decision, Šafran should inform by berthing services. The participants in the written notice all their customers by meeting announced that in 2013 they would delivering a copy of the operative part of not raise the prices of their services Decision of the Agency, and proof of whereas these who “would raise the prices, execution of the order to the Agency. would do so merely by the percentage of Šafran acted in accordance with the orders inflation in Croatia”. Although the CCA did of the Decision and submitted a proof with not establish the existence of an explicit regard to this. agreement among the participants on the price increase, it has been established that strategic information on future pricing had
been exchanged. Given that in this particular case sharing of strategic data took place under the aegis of the professional association within the Chamber whose members were also present at the
meeting, the CCA conducted the proceeding also against the Chamber. It concluded that the Chamber was held responsible for the participation in the agreement. However, taking into consideration that no activity of
the Chamber had been found that would have facilitated the sharing of the sensitive data between the members of the Credit: freedesignfile.com association or constituting a prohibited 9
agreement, the CCA decided to impose a third persons. The security officers rates symbolic fine on the Chamber. With (labour costs) make a major part in the decision of March 2015 the parties to the total cost of the personal protection security prohibited agreement in duration from 25 service provider whereas the operating October 2012 to 31 March 2014 were fined costs of each and every provider differ in in the total amount of 2.26 million Kuna practice, thus, it is impossible for different (cca 297 763 EUR). undertakings to bear the same operating costs. In addition, the CCA found that the majority of undertakings that took part in the meeting had also bidden in tender procedures that followed the meeting with the same, agreed price, which was the evidence that the agreement had been implemented in practice. Therefore, the CCA imposed to the members of the personal protection cartel a fine in the total amount of 5.33 million Kuna (cca 700 657 EUR).
Serbia
Serbian Competition Authority Marina Borik launched antitrust investigation Credit: Miloš Špirko, Panoramio into medical sector
Croatia In July 2015 the Serbian Commission for Personal protection cartel Protection of Competition has, ex officio, opened antitrust investigation into possible
anticompetitive practice in the market The Croatian Competition Agency (CCA) related to the service of dialysis for conducted a proceeding against the patients, for which there are no facilities for personal protection firms Sokol Marić, AKD- treatment in medical institutions provided Zaštita, Securitas Hrvatska, Klemm by the Republic Health Insurance Fund Sigurnost, Bilić-Erić, V GRUPA and Arsenal- (RHIF). The investigation is opened against Ivezić, and found that on 23 October 2013 two undertakings, Fresenius Medical Care they participated in a meeting where they Srbija and Medicon and their specialized agreed on the minimum price of the hospitals for dialysis, which are according to personal protection security services available information, the only private amounting to 32.52 Kuna (cca 4.28 EUR) medical centers that have the necessary per hour. In its decision from April 2015, facilities to provide that kind of services in the CCA found that the agreement reached the Republic of Serbia. during this meeting had all the features of a cartel agreement. Undertakings that Public hospitals provide dialysis treatment participated in the meeting are direct for patients with kidney disease, insured by competitors and although they differ in the Republic Health Insurance Fund, but their market power they agreed the since the capacitates in these hospitals are minimum cost of an hour of personal limited, RHIF was obliged to organize protection service in certain amount as the tenders procedures to find private medical minimum profitability level. The CCA centers with adequate capacity, which established that the agreement concerned would be able to provide these treatments constituted an infringement of competition for insured patients. rules in the personal protection market in In the period from 2008 till 2012, the period from 23 October 2013 to 17 concerned undertakings have participated January 2014. The CCA did not accept the in consortium, joint tenders were submitted position of the cartel members claiming and, consequently, there was no that they were merely “consenting” on the competition on the relevant market. After wages and rates, and not agreeing on the the cessation of joint participation, these price of the service that would be offered to 10
Prohibited agreements undertakings have participated Croatia independently in tenders procedures, but the Commission has suspected that certain Orthodontists society fined for facts and circumstances could indicate that price setting they have continued to coordinate their participation in public procurement for The Croatian Competition Agency (CCA) dialysis treatment. Based on the above, the initiated a proceeding on 2 September 2013 Commission has reasonably assumed the and established beyond doubt that the price existence of infringement of competition on list adopted by the Croatian Orthodontic the ground of joint tendering and/or Society (COS) containing minimum prices concerted practice concerning participation for orthodontists' services, which was in public procurements organized by the published on the web site of the COS, Republic Health Insurance Fund for contained the list of orthodontist services provision of dialysis services to persons and the related minimum prices. By the insured under RHIF. adoption of the “Minimum prices for The Commission will, for the first time, orthodontists’ services” price list, the examine consortium in antitrust Croatian Orthodontic Society (COS) investigation, which could have an impact concluded a prohibited agreement in force on further Commission’s practice since the from 1 October 2010 until 9 October 2013. issues of tendering procedures, consortium This decision of the COS was considered the and bid-rigging are on the highest infringement of competition rules by the importance for the work of the Commission. CCA and in June 2014 it imposed a Before this case the Commission has symbolic fine amounting to 150 000 Kuna adopted several decisions on individual (19 736 EUR). When imposing the fine for exemption of consortium agreement, and the contested conduct of the COS, the CCA has recently published the Opinion on took into account the fact that under the implementation of Article 10 of the Law on legislative act in force setting the minimum Protection of Competition (restrictive price for the provision of dental and agreements) in public procurement orthodontic services is allowed, the fact procedures. In that Opinion, the that the price list was not binding for the Commission stated that agreements on members of the association and that they joint participation in public procurement were not sanctioned if they did not observe procedures will not be considered as the price list. Subsequently, on 5 March restrictive agreements if, inter alia, none of 2015 the High Administrative Court of the the parties to agreement could not, Republic of Croatia confirmed the claim filed individually, participate in public by the COS and overturned the decision of procurement procedure pursuant to the CCA. Given that there is no ordinary requirements laid down in tender legal remedy against the ruling of the High documentation; that the exchange of Administrative Court the CCA had resorted business sensitive information between to an extraordinary legal remedy and competitors is restricted to the respective decided to seek the State Attorney’s Office public procurement procedure and applies of Croatia to re-examine the legality of this only to information necessary for drawing controversial ruling of the High up a bidding and execution of agreement Administrative Court. It is the position of and that the agreement does not contain the CCA that the High Administrative Court provisions on prohibition of competition, in the recital of its ruling challenged the restricting or preventing tendering of very concept of a prohibited agreement parties to agreement in other public stipulated under the Competition Act and procurement procedures, whether acting the EU acquis. Following the proposal by individually, as members of consortium or the CCA, in September 2015 the State as members of subcontractor group. Attorney’s Office of the Republic of Croatia filed a request for extraordinary examination of legality of the decision of the High Administrative Court.
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Bulgaria The CPC sanctions „Sofiyska voda” AD with 2.5 million EUR for abuse of dominant position
Credit: Janet Ramsden, flickr
With Decision 698 of 27 May 2014 the Bulgarian Commission on Protection of Competition (CPC) imposed a pecuniary sanction amounting to 4 800 600 BGN (2 454 508 EUR) on “Sofiyska voda” AD for abuse of dominance on the market of water, sewerage and wastewater treatment services on the territory of the Municipality of Sofia for accruing a default interest rate on ex-officio calculated liabilities during the months when actual reading of water metering devices is not made. This conduct impairs consumers’ interests and imposes unfair trading conditions on them. According to the General Terms and Conditions of “Sofiyska voda” AD the consumers should pay each month for water supply and sewerage services, but the measurement of the water actually consumed is carried out once every three months. For each of the two months without real metering of the water consumption, “Sofiyska voda” AD calculates the amount based on the average monthly water consumption according to the previous two reports. The final bill, which is prepared at the end of the three month period, sets the total amount of used water, but not the exact quantity of water consumed each month. At the same time, the Terms and Conditions of Purchases of “Sofiyska voda” AD reproduce the rule of Art. 86 of the Law of Obligations and Contracts that in case of non-performance of a monetary obligation, the debtor shall be liable for damages to the amount of the interest accrued from the date of default. Therefore the water operator charges default interest on forecast amounts of water and not only on actually consumed. This behaviour of the defendant company directly harms consumers as far as the payment obligations for the first two reporting months have not been established in size and the liability for compensation for delay presumes exactly calculated value of the service which is actually used.
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Abuse of dominant position
Bulgaria The CPC concluded that the central heating suppler abuses its dominant position on the The CPC sanctioned central market of heat cost allocation services by heating supplier for abuse of introducing economically unfounded prices dominant position for the companies providing heat cost allocation services with the result that they
are unequal in terms of their costs and in charging a different rate of return.
Croatia Water supply and sewage operator challenged to abuse a dominant position Based on the initiative of the undertaking Brunat d.o.o., the Croatian Competition Agency (CCA) adopted a decision to start the proceeding against the undertaking Vodoopskrba i odvodnja d.o.o. (VIO) from With Decision 641 of 14 May 2014 the Zagreb for alleged abuse of a dominant Bulgarian Commission on Protection of position in the provision of services relating Competition (CPC) imposed а sanction to water meter and telemetry devices amounting to 61 881 BGN (31 639 EUR) on installation and the measurement of water Toplofikacia Sofia for abuse of dominance. consumption data for billing and reporting, in the territory of Zagreb, Samobor, Sveta The proceedings were initiated ex officio Nedjelja and the municipality of Stupnik. following information from the Supreme The CCA contested provisions in the Administrative Prosecution Authority. The General and Technical Conditions (GTC) first investigative measure undertaken by adopted by the same undertaking in July the CPC was to conduct an inspection at the 2013 due to which previously liberalised premises of Toplofikacia Sofia. market was foreclosed. After interim Toplofikacia Sofia is the only central heating measure ordering the undertaking VIO to suppler in the city of Sofia and temporarily cease-and-desist the simultaneously provides heat cost allocation application of the challenged provisions services. According to the Bulgarian Energy under the GTC, VIO on its own initiative Act clients in multi-apartment buildings offered the commitments aimed at shall select a company for carrying out heat restoring effective competition. The CCA cost allocation services and then notify the accepted the commitments made by VIO by central heating suppler for their choice. A decision of 28 October 2014 considering written contract is concluded between the that the revised GTC re-opened the heating supplier and the heat cost relevant market and enabled the alternative allocation company. The price of the service operators who had been providing these should be composed of expenses for the services before the challenged provisions service and economically substantiated rate entered into force to continue providing the of capital return. services concerned whereas potential The economic analysis in the case shows alternative operators have been given free that the unilateral determination by access to the market. At the same time, the Toplofikacia Sofia of absolutely identical final consumers have been given the prices for all participants in the market of possibility of freely choosing the operator heat cost allocation services eliminates who would provide the services of water price competition and affects consumers’ meter reading and billing. After the receipt welfare by lowering quality of services and of the decision of the CCA, VIO visibly depriving consumers from the possibility to displayed on its homepage the CCA's choose the service provider which would decision and the consolidated text of the offer them more favourable price. GTC for water supply containing the revisions according to decision of the CCA. 13
Croatia Agrokor/Mercator merger
Konzum supermarket Credit: Macic7, Wikipedia
On 24 March 2014 the Croatian Competition Agency (CCA) assessed the concentration between the undertakings Agrokor d.d. Zagreb, Croatia, and Poslovni sistem Mercator d.d. Ljubljana, Slovenia, as conditionally compatible and accepted commitments offered by the undertaking Agrokor. The measures had to be fulfilled by the parties to the concentration in order to eliminate the anticompetitive effects of the concentration on the basis of which Agrokor acquired controlling interest over the undertaking Mercator. The relevant product market is grocery retail market and the relevant geographic market covers the territory of Croatia. In Croatia, Agrokor committed to divest a total of 96 stores from the combined retail network of Konzum (owned by Agrokor) and Mercator whose total turnover makes up for almost 60 per cent of the turnover of Mercator in the year 2012. Structural measures were primarily aimed at the City of Zagreb and the Zagreb County where Konzum had been a market leader prior to the concentration and where the implementation of the concentration would have produced the most significant negative effects. Consequently, Agrokor committed to divest 26 stores on the territory of the City of Zagreb and 19 stores on the territory of the Zagreb County. Agrokor which is also a producer of food and beverages committed itself to behavioural remedies worked out to protect Mercator’s suppliers and to enable entry or expansion of competing undertakings on the shelves of Konzum. Besides that, Agrokor committed to ensure in Konzum hypermarkets and supermarkets during a period of not less than three years from acquisition of the controlling interest over Mercator the shelf placement of 30 percent for at least three competitors in the product segments where the producers from the Agrokor group hold a high market share (above 40 percent). The conditions for that should not be less favourable than the ones applied by Konzum in the relevant product segment to the competitors of these suppliers in its own retail network. The compliance with the commitments is monitored by a trustee who was appointed by the CCA based on the proposal of Agrokor. The Initial Report and the First Report of the trustee on the implementation of the structural divestment remedies and the behavioural remedies were accepted by the CCA. Until the date of the conclusion of the Report on 15 January 2015 Agrokor divested 30 out of 96 outlets foreseen in the decision. According to CCA’s opinion, the implementation of measures for removing the negative effects of this concentration indirectly leads to positive effects on competition and consumer interests that would not occur in the absence of this concentration. 14
Mergers
Croatia competition would be decreased. Therefore, this concentration could be permitted only HT/OT-Optima Telekom merger with fulfilment of very strict measures for elimination of possible negative effects of Having in mind all concrete factual, legal the concentration on competition in the and economic circumstances, and after market of provision of electronic legal and economic analysis of the relevant communication services in fixed networks in market conducted, in March 2014 the Croatia. Thus, the CCA accepted the Croatian Competition Agency (CCA) decided measures and conditions submitted by HT. to clear under certain conditions Duration of the concentration of HT and concentration by which Hrvatski telekom Optima is limited to a period of four years (HT) acquires control over Optima telekom starting with HT’s control acquired over in the procedure of pre-bankruptcy Optima. Upon the expiration of the four- settlement. During the assessment of year period the concentration is concentration, the CCA accepted the “failing automatically terminated, without the firm defence” of Optima and determined possibility of extension. Every six months, that in the case of Optima's exit from the or more often if necessary or if ordered by market, competition structure on the the Agency, the independent trustee must relevant market would be distorted. submit to the CCA a written report on the Although there is a relatively big number of implementation of measures and alternative operators at the market present commitments for the conditional approval on the specific retail and wholesale levels, of concentration. In August 2014, the First that market is asymmetrical and not well Report of the trustee was submitted to and structured. Implementation of this accepted by the CCA, while subsequent concentration would lead to further reports have followed in regular six-month asymmetry and the existing level of intervals.
Headquarters of T-Hrvatski Telekom in Zagreb Credit: Wikipedia
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Albania the conclusion of the analysis of the retail mobile telephony market, in order to Albanian Competition Authority enforce the market regulation solutions for gives recommendations following preventing market exits that would have a Vodafone Albania SHA investigation long-term impact on competition. The Competition Commission also recommended that AKEP carry out an analysis of the retail mobile telephony market to address the competition concerns in that market by taking specific regulatory measures for reducing the emphasized differentiation between on-net and off-net call tariffs applied by Vodafone. AKEP should also monitor the fulfilment of Vodafone Albania’s public commitment to equalize the tariffs of on-net and off-net calls. Following the Competition Commission Credit: Dru Bloomfield, flickr recommendations, AKEP included in the Mobile Telephony Market Analysis document In January 2014 the Albanian Competition a more detailed analysis of the retail mobile Authority concluded the in-depth telephony market, in order to more investigation proceedings into the retail effectively regulate that market. The data mobile telephony market against Vodafone show that Vodafone has reduced the Albania SH.A. termination tariffs in other networks and has increased the number of (off-net) The analysis of the behaviour of the national minutes included in the flat-rate undertaking under investigation showed monthly package for Vodafone Card that the strategy that the operator followed subscribers. caused concerns with regard to competition in the respective market and negative effects on competition in the long run vis-à- Bulgaria vis smaller competitors through the application of price differentiation to on-net CPC advocates for amendment of versus off-net calls. An analysis of similar anticompetitive regulations cases shows that price differentiation of on- concerning the activity of net versus off-net calls can be used by independent valuers large operators as a tool to foreclose the market for smaller operators which might even risk exiting the respective market, and With Decision 1525 of 9 December 2014 that is a concern for the good functioning of the CPC adopted an advocacy opinion the market in the longer run. analysing the compliance with the competition rules of the regulatory Vodafone publicly committed to equalize framework of independent valuers in the tariffs for on-net and off-net calls. In its Bulgaria. Decision the Competition Commission came to the conclusion that Vodafone Albania In Bulgaria everyone who wants to be a behaviour was not abuse of its dominant valuer should pass an exam before the position during the investigation period, but Chamber of Independent Valuers in the strategy that the undertaking had Bulgaria which is the only organization that implemented caused concerns with regard has the right to organize such exams. This to competition in the longer run, and it, has led to foreclosure of the market for a therefore, gave several recommendations period of about 3 years because the to the market regulator (AKEP). Chamber has not organized exams. That is why the CPC suggests the trainings and The Competition Commission decided to exams to be organized by other recommend that the Electronic and Postal organizations and not by the Chamber Communications Authority should take which should be obliged to enter in the interim and immediate measures, prior to 16
Advocacy register of independent valuers everyone of taxi services to be repealed. In an who has passed such an exam. advocacy opinion adopted with Decision The valuers in Bulgaria can work in only 251 of 18 March 2015 the CPC stated that one company. Besides at least one of the the minimum and maximum prices restrict managers of such a company must be a competition. valuer. According to the CPC these Despite the advocacy opinions which the regulations unnecessarily limit the valuers’ CPC adopted in 2007 and 2010 the freedom to organise their own production maximum prices of the taxi services were process and to choose their organisational introduced in 2011 and since 2014 the form. municipal councils have the power to There is a requirement for the valuers to determine also minimum prices of taxi present annual report for their activity to services. the Chamber. The CPC reckons that this In its advocacy opinion of March 2015 the creates risk of exchange of sensitive CPC reiterates its position on the information within an association of anticompetitive nature of the minimum and undertakings. maximum prices of taxi services. If a valuer does not perform an activity for 3 years he/she is deleted from the register The CPC explains that price competition is and cannot apply for re-entry for one more one of the basic means to compete and the year. The CPC considers that there should introduction of minimum prices leads not be such a sanction in cases when there directly to restriction of price competition. is no infringement and it is not related with The purpose of the minimum price is to the protection of consumers’ interests. guarantee quality or security standards. But the minimum price in itself cannot be a The CPC also suggested the abolition of the guarantee of quality which can be achieved possibility of the Chamber to adopt by direct quality control. Instead the quality Methodology for pricing of the valuers’ of services can be ensured by means of services. The CPC stated that this is a enhanced control on the requirements for restriction of competition in the form of the automobiles and the drivers. The CPC price regulation and if adopted such states also that the minimum prices methodology can represent prohibited prevent the new entrants that would like to decision of an association of undertakings. apply strategy for market entry based on lower prices. Thus the minimum prices Bulgaria protect the existing market participants and especially the ones that are ineffective. It CPC opposes to price regulation also removes the incentive for finding more of taxi services innovative and effective ways to offer the service which would lead to lower prices for the consumers. Although the maximum price is meant to protect consumers the CPC reckons that it can be used as a way of coordination of a price increase in the taxi sector which may lead to prices very close to the maximum. The CPC recognizes the importance of the consumer protection but it highlights that the increase of the prices will harm consumer interests more seriously. Besides the maximum prices can lower the incentive Taxis at Sofia Airport for offering higher quality service. The CPC Credit: Apostoloff, Wikimedia commons states that the consumers cannot be protected by the maximum prices. They The Commission on Protection of should be protected by raising their Competition (CPC) suggested the provisions awareness of prices and the ways for of the Automobile Transport Act that handling a complaint. empower the municipal councils to determine minimum and maximum prices 17
In addition the CPC advocates for abolition satellite operators have to pay the of the power of the municipal councils to televisions in order to transmit these set the maximum number of taxis as this is programs. a barrier for entry into the market which The CPC came to the conclusion that the does not bring any positive results. described model of digitalisation has led to an outflow of interest to digital terrestrial Bulgaria television and that there is not enough content to be transmitted by multiplexes. It CPC adopts advocacy opinions assumes that the strengthening of cross- on digital terrestrial television platform competition between the media, and advertising in public radio expected as a result of the digitalisation, and television has not occurred, nor have new undertakings entered this market despite the increased capacity for broadcasting of On 24 March 2015 radio and television content. the CPC adopted The CPC finds therefore that it could be advocacy opinions argued that the main objective of the on the legal digitalisation, namely to effectively use the framework spectrum available, to provide better regulating must quality and program diversity for the carry obligations benefit of the consumers, has not been introduced for the achieved to the expected degree. purposes of the switchover from The CPC therefore proposes to the analogue to digital competent state authorities to review the terrestrial television current model of digitalisation. It considers (digitalisation) in that a balanced solution is necessary in Bulgaria (Decision order to provide consumers with the 279) as well as on advantages of free and paid access to radio the regulations and television content. concerning the In Decision 280 the CPC concluded that due advertising time in to the factual failure of the fund “Radio and public radio and Television”, foreseen in the Bulgarian Radio television which is and Television Act, and provided that the restricted compared state subsidy is insufficient for the effective to advertising in performance of the public functions of the commercial radio TV tower Kopitoto near Bulgarian National Television (BNT) and the and television Sofia Bulgarian National Radio (BNR), an (Decision 280). Credit: Preslav, Wikimedia commons additional financing, e.g. by advertising, In Decision 279 the CPC analysed the legal may be necessary. However, it considers provisions introducing must carry that the allowed advertising time in public obligations for the operators of cable, radio and television shall be restricted in satellite and terrestrial transmission comparison to commercial radio and platforms. According to the relevant legal television in order to avoid framework certain public programs have to overcompensation of public service media be transmitted by all operators of which could constitute a breach of the platforms, whereas, for the purposes of the principle of competitive neutrality and a digitalisation, an obligation to transmit prohibited state aid. certain commercial programs exists The CPC proposes to the competent state exclusively for the operators of multiplexes. bodies to introduce a mechanism for The last mentioned obligation applies only if objective control over the funding, the ratio the televisions wish their commercial between state subsidy and allowed programs with must carry statute to be advertising time in public radio and transmitted via multiplexes. In this case television as well as over the effective they have to pay for the transmission spending of the state subsidy for service. On the other side, the cable and performing the public media services. The 18
Advocacy
CPC believes that the control shall be possess the required knowledge and carried out by a competent state body and experience will be no longer able to provide not by BNT and BNR. the specified reserved tasks of the attorneys. The proposed granting to the attorneys of Bulgaria the right to carry out certification services The Draft Law for Amendment of (certification of the signatures and the the Attorney Act establishes content of private documents and contacts, which are not subject to registration; anticompetitive rules certification of the signatures and the content of proxies, etc.) in parallel with the notaries may create legal uncertainty. These functions contravene the attorneys’ profession, as the attorneys are called upon to protect the private interests of the persons. The draft proposes additional rules with regard to the existing minimum prices of the legal services, set by an ordinance of the Supreme Bar Council. According to the CPC the introduction of minimum prices leads to direct restriction of the price competition on the market. The minimum Court House in Sofia prices may hamper the market entry of new participants and are not a guarantee for the
quality of the services. With Decision 353 of 22 April 2015 the CPC adopted opinion regarding the provisions of The CPC also stated that the ban on the the Draft Law for Amendment of the advertising of the legal profession is Attorney Act. unjustified and hampers the effective competition on the market. The CPC’s decision established that the proposed centralization of the procedure for The proposed prohibition for the attorneys examination of the candidates for attorneys to take the position of an executive before the Supreme Bar Council constitutes member of the board of directors of a joint a barrier for entering the market. It may stock company restricts the right of the lead to an unfair examination process as undertakings to freely determine their the examiners are attorneys, who are organisational form. actually active on the market. Besides the With regard to the abovementioned the CPC proposed higher requirements for proposes the removal of the draft law registration at the Supreme Bar Council provisions which may restrict the free without an examination – only candidates competition on the market of legal services. holding academic title in law or who have more than 10 years of attorney practice, may restrict the entering to the market of practitioners holding the same educational background and experience as the attorneys, already active on the market of legal services. The CPC expressed the opinion that the rule proposing a non-exhaustive list of services which can be provided exclusively by attorneys (for example giving oral and written consultations and statements on issues of law, preparation of complaints, drafting of notary acts, testaments, proxy, Credit: Sascha Kohlmann, flickr etc.) is restrictive. Thus the persons who 19
Bosnia and Herzegovina Competition in Electronic Communications
In recent period, one of the most dynamic topics at the European courts has been the sector of telecommunications, to be more precise, issue of overlapping competencies between competition authorities (ex-post regulation) and electronic communications authorities (ex- ante regulation) regarding telecommunication cases, and, due to that, rising tensions among them. Because of liberalization of telecommunications market in the EU, and new technological development, it was necessary to revise the existing regulatory framework in the EU. In that regard, telecommunications sector is becoming more and more challenging as well as demanding in terms of regulation from the competition point of view, and there is an increasing need to deal with it substantively and in due time in order to keep up with the latest developments to be incorporated into daily regulative practice, as the number of cases regarding operators was getting bigger across EU, and worldwide. As a result of this global trend, the Council of Competition of Bosnia and Herzegovina has been having a growing Sarajevo number of cases dealing Credit: Gabriel Hess, flickr with the telecommunications sector in the past three years, both in the area of concentrations and anticompetitive behavior. Therefore, it was important to improve and update the practice in this field. The newly created situations required not only closer cooperation between the Council of Competition of Bosnia and Herzegovina and Regulatory Agency for Communications of BiH, but also bringing new publications dealing with the latest trends at the EU market in this field. To that effect, the EU funded Project “Support to the Implementation of Competition Regulations in BiH and Further Strengthening of Competition Policy (including Component on State Aid)” issued in June 2015 a publication ”Competition in Electronic Communications – Protection ex-ante and ex-post” aimed at providing assistance in everyday practice of the CoC while dealing with telecommunication cases but also raising awareness on these issues among the members of wider publicity, since one of the primary goals of the Project is to strengthen cooperation between the state regulators for the purpose of better functioning of telecommunications market from both perspectives, competition and communications. The publication is composed of two chapters dealing with general aims of competition law applying in the sector of telecommunications, aims of telecommunications regulation and its application, telecommunications and consumer protection, ex-ante and ex-post interventions, inclusion of competition authorities and sectoral regulators in appraisal of agreements contrary to competition etc. Also, the publication is a valuable and referential document, to be distributed to telecom companies as well as academia, thereby giving support to decision makers in BiH in their efforts to bring closer BiH to the EU policies as well as the best practices of the EU member states, and to serve as a manual for the newly employed in sector regulators and competition authorities, finally leading to better market regulation in BiH.
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Institutional Macedonia Kosovo Memorandum for cooperation Current situation in Kosovo with Ministry of Interior Competition Authority
According to the provisions of the Law on The Kosovo Competition Authority was Protection of Competition, the Commission established on 6 November 2008, whose for Protection of Competition while doing mission is to implement the Law on inspections (dawn-raids) should be assisted Competition, which entered into force in by the Ministry of Interior. In this regard, in 2010 and which has been amended in 2014 May 2015 the Commission for Protection of so as to further align Kosovo legislation Competition and the Ministry of Interior with the EU acquis. signed a memorandum for cooperation in The Kosovo Competition Authority (KCA) order for further promotion and was reorganized and includes a decision- strengthening of the mutual cooperation making body, the Competition Commission, and for successful and efficient enforcement and its Secretariat, administrative and of the legal competences. The Commission investigation body. for Protection of Competition and the The Competition Commission has not been Ministry of Interior, based on mutual operational since November 2013 due to confidence and respect, shall mutually delays in the appointment of four out of five cooperate and support in order for members whose mandate has come to an exchange of information, experience, end. In the absence of a quorum (at least knowledge, education and specialization of three members) of the Competition stuff in the field of their competence. The Commission, the KCA has not been able to cooperation will be in the following fields: fulfil its mandate. At the same time from 29 . Determining mutual programs and April 2015 the Kosovo Competition projects; Authority has remained without any . Exchange of methodologies, data, member, by 5 as should be. information and experience, The Secretariat is composed of civil including lectures, discussions, servants, who are professional, supportive educational seminars, etc.; and investigative staff. The Secretariat as . Providing necessary conditions for an administrative body is in charge by law training (human, space, technical, to carry out monitoring and investigation of material); cases to ensure fair and effective . Determining mutual teams of competition in the market. The Secretariat lecturers; carries out its activities through the . Realization of trainings of trainees; operation of 11 officials of 18 which are . Preparation of working materials for allowed by the budget. Lack of space, training; delays in appointment of commission . Preparation of legal and bylaw precludes hiring other officials. The regulations, working guidelines and Secretariat under the organizational chart procedures and consists of two departments and an office: . Exchange of books, publications and The legal and administration department, other materials. Department for Market surveillance and The cooperation will be realized through State Aid Office. exchange of data and information and organization of mutual events (meetings, The KCA is still hosted in the premises of lecturers, discussions, seminars, trainings) the Assembly which puts serious constraints on which external experts of certain field on its activities. can participate, if needed. In view of a future Stabilization and The CPC hopes that this Memorandum for Association Agreement, substantial efforts cooperation will help the Commission for are needed in these areas. Issues related to Protection of Competition to implement and staffing, facilities and training need to be enforce the Law on Protection of addressed as a matter of priority. Competition successfully.
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UNCTAD The new global strategy of UNCTAD to deliver capacity-building and technical assistance on competition and consumer policies and laws
On the basis of the experience gained from the work under COMPAL for Latin America in the last 12 years as well as other regions such as the work under AFRICOMP and Asian countries, the Secretary-General of UNCTAD launched the global strategy in Lima on 5 May 2014. This new strategy is meant to cover competition and consumer protection policies for all regions of the world; therefore, COMPAL has now stands for “Competition and Consumer Protection Policies for All”. One of the capacity building and technical assistance programmes of UNCTAD was established under the name “COMPAL” which provides assistance to Latin American countries since 2003. The regional programme has since become an UNCTAD model of regional cooperation for capacity-building on competition and consumer protection policies and has established itself as the platform in Latin America for knowledge sharing and peer learning and as a model for South–South cooperation. The Programme has succeeded in significantly strengthening legal and institutional frameworks and has managed to place competition and consumer protection policies on the national and regional agendas. Concrete achievements of COMPAL II include the adoption or reform of competition and consumer protection laws and their subsequent enforcement, advice and training for the set-up of competition authorities and the enlargement of the Programme from 5 to 15 members. A second external evaluation of COMPAL in 2012 concluded that it was a successful, worthwhile programme that had made clear contributions to institutional development in Latin America. The evaluation further recommended that UNCTAD should replicate COMPAL in other regions such as the Middle East and North Africa, the Balkans, the Commonwealth of Independent States and ASEAN. With this in mind, UNCTAD launched two programmes in the ASEAN region (“Consumer protection matters”) and the Middle East and North Africa Region based on the experience in Latin America as well as other regions. In addition, COMPAL III was initiated in Latin America in March 2015. The regional initiative will achieve a self-sustained programme with the aim of consolidating the acquired capacities of the relevant stakeholders and strengthening regional cooperation on competition and consumer protection laws and policies using an integral approach. The areas of the intervention of our new Global strategy are the national, regional and global components. To ensure partner countries’ buy-in and commitment to UNCTAD, all activities will be planned and implemented with the involvement of their competition and consumer protection agencies, as well as other national, regional and global networks where appropriate. The objective of the national component is to strengthen the competition and consumer protection systems in the partner countries. Work under the national component will be entirely demand driven and focused on each country’s needs. The needs assessments will review all the components of a country’s competition and consumer protection system. This will cover constraints to competition in specific sectors, considering both business conduct that restrains competition and government policies that burden competition. Based on the findings of the assessments, each country will develop an action plan, setting out its intervention priorities. These plans will be aligned with the strategies of the competition and consumer protection agencies to ensure coherence. The regional component has two main objectives: to promote peer-to-peer learning between competition and consumer protection agencies and to identify and address international competition and consumer protection issues that require regional collaboration. In addition, regional activities provide an effective avenue for involving other non-partner countries. Involving additional countries in the regional component adds momentum and visibility to the programme, and broadens its impact. Experience from the previous two COMPAL phases found that regional peer-to-peer learning is an extremely effective tool for building the capacity of 22
International cooperation competition and consumer protection agencies. It enables those agencies that are more advanced to support and mentor the weaker agencies, which benefits both groups and develops relationships between the agencies which will outlast the programme, ensuring sustainability. UNCTAD will also encourage the more developed agencies to play a leadership role and take responsibility for developing the capacity of the less advanced agencies. An example is the COMPAL School for Competition and Consumer Protection under COMPAL III, which provides training for representatives from competition and consumer protection agencies in all COMPAL countries. As companies and value chains become increasingly international, competition and consumer protection issues often need to be addressed at the regional or global level. Countries have to work together to identify cartels and other anticompetitive behaviour, and develop coherent regulatory responses. The objective of the global component is to promote learning between regions by sharing best practice and to identify and address global competition and consumer protection issues. Direct interactions between partners from different regions are valuable for sharing experiences, building networks, identifying areas of common interest and establishing collaborative initiatives. UNCTAD will therefore seek to arrange global meetings back to back with other events, such as the IGE, OECD events and the World Trade Organization Aid for Trade meetings, to allow partners to meet at a manageable cost. In addition, UNCTAD will compile information tools and best practice guides as a public resource for all participating countries to use. UNCTAD has already established a virtual library where it will continue to make these resources available. Key documents and executive summaries will be translated into English and, where appropriate, into other United Nations languages. As more countries adopt sound competition principles and enforcement techniques, there will be “soft” convergence towards best current practices. This will reduce the costs to business of compliance with increasingly harmonized enforcement standards, encouraging trade and investment to the benefit of developing countries. UNCTAD will work with other multilateral institutions to continue to build consensus on appropriate competition law and policy principles in developing as well as developed nations. UNCTAD interventions will be assessed and their impact evaluated through a number of tools that are also required for all forms of government action when imposing or reducing costs on businesses, the voluntary sector or the public sector. They are a central element of the Government’s objective to regulate only where necessary and reduce the burden of regulation on business and the voluntary sector. One of the recommendations of external evaluators was that COMPAL has provided an opportunity for a large, thematic global strategy in competition and consumer protection. The previous phases of COMPAL had demonstrated that a large, long-term intervention provided a level and continuity of support that delivered considerable change across regions. There is, therefore, a significant opportunity for replicating and scaling up this approach in other regions. Hence, the main areas of the Global strategy are as follows: . Technical assistance for competition and consumer protection policies and regulations – the aim is to enhance the effective capacities of developing countries to adopt and implement competition and consumer protection programmes. . Creating an enabling environment for the private sector – the aim is to assist the private sector in beneficiary countries in building up sustainable capabilities by meeting international norms and standards and by creating a competitive environment without unnecessary bureaucratic burdens. . Competition neutrality – the aim is to assist Governments in adopting both competition neutrality and appropriate frameworks for enforcing competition law. . Follow-up and impact assessment of activities – to address some of these challenges, UNCTAD carries out peer reviews as well as other country reports which identify weaknesses, strengths and areas of improvement. These recommendations are incorporated in annual capacity-building activities extended to peer-reviewed countries and reported to the IGE on Competition Law and Policy. . Expanded regional focus – in order to effectively facilitate the accession of new members into the Programme and to respond to different needs and circumstances, tailor-made policy advice and capacity-building activities will be extended to beneficiary countries. 23
th 5 meeting of the Sofia Competition Forum
13 – 14 November 2014
The 5th meeting of the Sofia Competition Forum took place on 13-14 November 2014 in Sofia. Welcoming addresses were delivered by Mr. Petko Draganov – Deputy Secretary-General of UNCTAD, Mr. Petko Nikolov – Chairman of the Bulgarian Commission on Protection of Competition and the Minister of Economy Mr. Bozhidar Lukarski. Mr. Draganov spoke about the importance of competition policy which should form a key element of the development policy, and stressed that UNCTAD has always considered competition as inseparable from development. Mr. Draganov noted the need to implement the norms of competition in a gradual manner taking into account the specific characteristics and stage of development of individual countries. Mr. Nikolov mentioned the recently published Comparative overview of Balkan competition regimes which revealed the most challenging and problematic areas of work for the countries in the region and explained that this meeting of the Forum would deal with two of them – inspections on spot and procedural fairness. Mr. Lukarski welcomed the Forum participants and expressed the support of the Ministry of Economy for the initiative as well as his appreciation that UNCTAD was one of the founders of this project.
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SCF meeting
The main topic of the first day was “Inspections on spot”. Ms. Carolyn Galbreath, Consultant and Former Member and Director Cartels Enforcement at the Irish Competition Authority mentioned the main facts about cartels which formed a continuum – signs of violations, information, evidence and proof, and the sources for facts about a cartel – public information, government information, complainants, whistleblowers, and immunity and leniency applicants. Dr. Michael Saller, Bundeskartellamt said that that more than 50% of the cases in Germany were based on leniency applications but in order to start receiving them, the agency must build up a strong reputation. Other sources of information include anonymous informants, tender procedures, market participants, market research and economic studies, and finally dawn raids. Mr. Jan Nuijten of DG Competition stressed that the agency should have serious doubts and that no chance missions should be attempted so as not to undermine the authority’s credibility and prestige. He also pointed out that preparation of the inspection was the key to its success, both in terms of content, as well as legally. Ms. Barbara Seelos from the Austrian Competition authority said that sometimes even an anonymous complaint could suffice to obtain a court warrant given that specific and detailed description of the alleged infringement was provided and the suspicion was sufficiently substantiated. She mentioned that it was very important to prioritize what to search for during inspections. Mr. Masanori Fukamachi, Japan Fair Trade Commission described the investigation process of the authority and explained that there were 2 types of investigation procedures – administrative and criminal. The JFTC can search private homes in case of suspicion of evidence but not private persons. It was explained that in order to conduct an inspection under a criminal investigation, the authority needed a court warrant, in contrast with administrative investigations. After the end of the first plenary session the participants were split into different groups in order to solve a hypothetical case on dawn raids. At the end of the session, the project team presented the preliminary findings of the replies to the questionnaire on inspections on spot in the Balkan jurisdictions. The meeting continued on the next day with the topic “Procedural fairness in inspections on spot”. Mr. Russel Damtoft from the US FTC pointed out that at the investigative stage the key points were transparency and engagement with the parties, protection of confidential information and timing of investigations. Mr. Sergio Sinovas, Spanish competition agency said that more than 50% of dawn raids in Spain were based on leniency applications, while the rest were based on ex-officio investigations, and sometimes media publications provided sound enough evidence for carrying out inspections. He explained that the authority used sealed envelopes in case of doubt whether certain documents were protected by legal professional privilege. Mr. Daeyoung Kim from the Korea Fair Trade Commission said that dawn raids were carried out following a decision by the authority and a court warrant was not required. But the KFTC was not empowered to give compulsory orders to parties and had to rely on their consent to cooperate. Mr. Pascal Cardonnel from the European Court of Justice began by introducing the European Convention on Human Rights (ECHR) and the EU Charter for Fundamental Rights which provided protection identical or greater than under ECHR. The document became binding in 2009 with entry into force of the Lisbon Treaty and explicitly stated that the EU must comply with the ECHR. The rights contained in the Charter and Convention could be organized in three directions – the duty of the enforcer to make their case (burden of persuasion); the duty of the adjudicator to ensure a fair trial (right to be heard, independence, impartiality, and equality of arms) and additional rights in criminal matters – protection against self-incrimination and
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against searches and seizures. When it came to inspections, the ECHR ensured the compatibility of administrative measures with the right to privacy. Ms. Carolyn Galbreath said that in order to minimize disruption during inspections, agencies should have clear policies and guidelines for carrying out inspections, as well as clear communication to management and staff at the beginning of the inspection. After that the participants continued with the discussions in breakout sessions concerning procedural fairness when preparing and conducting inspections on spot and preliminary and subsequent judicial control of on-site inspections. The meeting continued with Workshop on the interface between competition and consumer policies which included also representatives of consumer authorities from the West Balkan Peninsula. In an opening statement, Mr. Petko Draganov, Deputy Secretary-General of UNCTAD said that time had come to assess the relevancy of the Guidelines adopted in 1985. He pointed out that since the adoption of the Guidelines a lot had changed and markets had become more globalized, tariffs and other impediments to free trade had been removed, massive changes in technology had taken place, and a range of services had been privatized. As regards the creating of synergies between competition and consumer protection agencies in the Balkans Mr. Piotr Adamczewski from the Polish Office of Competition and Consumer Protection shared the experience of the agency in applying competition and consumer policies. It allowed for having a broader view of the two policies taking into account the interconnections and synergies between them. But this model had some disadvantages as well. First, stakeholders did not understand the main focus of work of the Office – whether it was competition or consumer policy. Also, it required more resources and keeping abreast of existing and new legislation. Mr. Gianluca Sepe from the Italian Competition Authority spoke about the ability of consumer policy to remedy some potential sub-optimal outcomes of competition regimes, and about the ability of well-informed consideration of competition concerns to enhance consumer policy choices. Mr. Hassan Qaqaya, Chief Competition and Consumer Policies Branch, UNCTAD, commented from the UN point of view that there were two cornerstone documents – the UN Guidelines for Consumer Protection and the UN Set of Principles on Competition, which reinforced each other and in their objectives made references to the other policy. The decision to group both policies into a single agency was country- specific but in case of combined functions, a problem of prioritization could arise. Mr. Qaqaya explained that the work on the revision of the UN Guidelines for Consumer Protection began in 2010 during the UN Review Conference. A proposal was made to adopt a principle-based approach based on voluntary principles rather than prescriptive rules. The participants also discussed issues with regard to the capacity building and support to beneficiary Balkan consumer protection agencies. Mr. Gianluca Sepe said that the main objective of a capacity-building program in the area of consumer policy should be to give consumers choice and voice. He shared his observation that a common mistake was to pick up legislative frameworks which had worked well in other countries and simply implement them in a different legal environment. The second issue, according to Mr. Sepe, was that consumer law and policy most of the time interacted with sectoral regulation. Mr. Adamczewski said that a successful capacity building program consisted of three key components – independent administration body, reasonable funds and educated staff. At the end of the session, Mr. Pierre Horna from UNCTAD presented the COMPAL platform. The program was developed in 2002 and became an efficient platform for cooperation aimed to improve the functioning of markets through a holistic and inclusive approach to reinforcing competition and consumer protection policies. 26
SCF meeting
th 6 meeting of the Sofia Competition Forum
29 May 2015
The 6th meeting of the Sofia Competition Forum took place on 29 May 2015 in Sofia. Welcoming addresses were delivered by Ms. Angelina Mileva, Deputy Chairperson of the Bulgarian Commission on Protection of Competition, Ms. Meglena Kuneva, Deputy Prime Minister for European Policies Coordination and Institutional Affairs, Ambassador Rayko Raytchev, Director General for Global Affairs, Ministry of Foreign Affairs, Mr. Petko Nikolov, Chairman of the Bulgarian Commission on Protection of Competition, and the Acting Head of Competition and Consumer Policies Branch at UNCTAD – Mr. Juan Luis Crucelegui. Ms. Meglena Kuneva expressed her satisfaction with the fact that the forum had become a tradition and over a short period of time it had been able to affirm itself as an effective platform for cooperation and exchange of experience between Balkan competition authorities. She assured the audience that the Government of the Republic of Bulgaria attached high importance to the Sofia
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Competition Forum as it recognized the role the competition policy could play in supporting efficiency and stimulating economic growth. Ambassador Rayko Raytchev underlined the importance of UNCTAD in creating synergies and harmonization in the area of competition law and policy. He pointed out that the SCF was a project whose main objective was to provide effective assistance in institutional building and improve the effectiveness of the competition authorities of the countries of the Western Balkans. The Ambassador emphasized the usefulness of the project in raising the visibility and international prestige of Bulgaria and particular its leadership role in the field of capacity building for efficient competition policy enforcement in the Western Balkans. Mr. Juan Luis Crucelegui outlined the coming challenges, first of which the need to set up a comprehensive long-term regional program to contribute to CPC’s capacity building programs, conference and training activities for the Balkan countries, including the provision of study tours for professionals. The second point referred to the necessity of furthering mutual cooperation, especially where relevant CPC activities should benefit from UNCTAD worldwide competition network and the CPC might support UNCTAD national competition program in particular in the training of trainers’ courses. The third aspect addressed the need to set up an on-line database on competition cases in order to exchange information on the latest developments in competition and exchange publications, reports and publicly available information. Mr. Petko Nikolov expressed his satisfaction in seeing that SCF has become more of collaborative platform instead of standard educational centre where more advanced countries simply share their knowledge with their younger counterparts. The first project on comparative overview of the Balkan competition regimes provided an exhaustive analysis of the legal frameworks in the region and serves as a basis for well-informed discussions on topics of common concerns. The project was highly successful and was followed by second initiative aimed to compare the legal framework especially in the field of on-the-spot inspections. He also announced the launch of a new initiative – an annual newsletter that would include publications from the SCF beneficiaries with regards to enforcement practice and major developments in their legal systems. The first main topic was “Procedural fairness in competition cases”. Mr. Pierre Horna, COMPAL Global coordinator, UNCTAD pointed out that the participants were on a very good track to get a convergence on the practices. Despite the differences in legislations, interesting observations were made on the overall application of the principles. Mr. Andrej Krašek, Director of the Slovenian Competition Protection Agency pointed out 21 steps foreseen in Slovenian competition legislation before imposing a fine. This extreme protection causes a very lengthy procedure and creates of legal uncertainty. Ms. Natalie Harsdorf Enderndorf, Deputy Managing Director, Austrian Competition Authority, commented on the sanctioning power of the EC that required strict respect for the rights of the defendant. She focused on two tools used at different stages of competition proceedings – inspections and settlements and presented examples, while stressing that inspections, widely applied in Austria since 2011, are the most effective tool in proving cartels. Ms. Enderndorf pointed that small and medium companies hesitate to cooperate with the authority so an ex officio investigation is necessary. Mr. Renato Ferrandi, Italian Competition Authority addressed three major points: the transparency about the agency polices and standards; the start of the formal investigation, and the investigation and the final decision. Ms. Sabine Zigelski, Senior Competition Expert, OECD Competition Division, commented that even though the number of jurisdictions with competition law has increased drastically, the experience in international cooperation is rather lean. Relatively few jurisdictions with a large case number have cooperated internationally. The reasons are legal limits and the
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SCF meeting different legal standards in the various jurisdictions though in theory there are confidentiality waivers of dealing with problems of international cooperation. Judge Julia Todorova, Sofia Administrative Court, discussed the European and Bulgarian legal frameworks and some relevant judgments in competition cases. The competition authorities of Bulgaria, Croatia and Serbia shared their experience concerning procedural fairness. Mr. Pierre Horna, COMPAL Global coordinator, UNCTAD, said that on the basis of the experience gained from the work under COMPAL for Latin America in the last 12 years, the Secretary General of UNCTAD has launched the GLOBAL COMPAL in Lima (Peru) on 5 May 2014. This new strategy was meant to cover competition and consumer protection policies for all regions of the world; therefore the new meaning of “COMPAL” is “Competition and Consumer Protection Policies for All”. Mr. Sergei Tsivkach, Competition Development Foundation, presented the Ukrainian NGO that brings together Ukrainian and international competition experts. Their task is to identify competition restriction issues on markets, create working group, organize meetings and draft resolution with recommendations to Ukrainian authorities. The second main topic of the meeting was “Interrelation between public and private enforcement of competition law”. Mr. Filip Kubik, Policy Analyst, Private Enforcement Unit, DG Competition, introduced the development of the case law concerning damages and in particular the Damages Directive 2014/104/EU. The Directive has two complementary goals: to help victims of antitrust infringements get compensation; and to optimize the interplay between public and private enforcement. Ms. Catarina Anastácio, Legal Advisor of the Cabinet of the President, Portuguese Competition Authority said that there is a risk that the development of private enforcement jeopardizes the attractiveness of leniency programs. The leniency application increases the risk of a successful damage claim by the victims of an infringement against the leniency applicant as it concerns the access to evidence and scope of leniency applicant’s liability. Ms. Natalie Harsdorf Enderndorf, Deputy Managing Director, Austrian Competition Authority, introduced the Austrian jurisprudence in this field of damage claim proceeding where the court has awarded for the first time damages to the customers of cartel members in 2007. Ms. Liliana Eskenazi, Competition Lawyer, Allen & Overy LLP, introduced the main challenges faced by the injured parties. The Damages Directive provides solutions for the limitation period, jurisdiction and access to evidence and quantifying harm. At the same time there are gaps as it comes to causal link and financing. Mr. Hassan Qaqaya, Strategic Advisor on Competition and Consumer Policy, Adam Smith International, spoke about the collective consumer redress in the EU member states. Collective redress in general is a field of the law where European regimes have been quite different. Some European states have rules on class actions with some resemblance to the US Class action; others have procedural tools only allowing collective litigation similar to class actions in regards to the protection of consumers. Prof. Bernardo Cortese, Professor of EU Law at the University of Padua Law School, pointed out possible discrepancy between Pfleiderer case and the private enforcement directive. The Professor expressed his doubts whether Art. 6.6 of the Directive is fully in agreement with the principles. He said that the interest of people that suffered loss to claim damage from the infringer must be balanced with the rights of the Commission to keep secrecy of the national competition authority/ the leniency application. The SCF report “Comparative overview of the Balkan competition jurisdictions in the field of inspections on spot” was endorsed. At the end of the meeting the new initiative to issue the SCF Newsletter that you are reading now was presented.
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Competition authority Albania
Year of establishment b) The turnover of all companies The Albanian Competition Authority started participating together in domestic market, its activities on March 1, 2004. The is more than 400 million lek and the Competition Authority is a public institution, turnover of at least one enterprise, in the independent in performing its duties. domestic market, is more than 200 million lek. Competition law Law No. 9121, dated 28.07.2003, “On Maximum sanction envisaged in law Protection of Competition”. The purpose of Competition Commission imposes fines of the law is to protect free and effective up to 10 percent of the annual turnover of competition in the market, as a public the preceding financial year for each the good. enterprise that violates the law. http://caa.gov.al/uploads/laws/Law_nr_912 Structure 1_date_09.05.2012.pdf Chair Competition Commission Competences Cabinet of Commission Prohibited agreements Secretariat: Abuse of Dominant Position General Secretary Control on Concentrations 2 Specialized Departments and 1 Sector: Sector Inquiries Market Surveillance and Investigation Competition Advocacy Department; Legal, Investigation and Procedures Department, and Study and Recent reforms in the competition law Analyses Sector Law No. 9121 of 28 July 2003 “On 1 general directorate – Human Resource Competition Protection” was amended in and European Integration Department 2010 aiming to achieve further approximation with the EU legislation and Number of the members of the to improving its practical implementation decision-making body The Competition Authority consists of the Notification regime for exemption of Competition Commission as the decision- agreements making body, composed of five members Yes elected by the Assembly of Albania for a Control on concentrations notification term of five years. The Chairwoman as such threshold is elected by the Assembly for the same The concentrations of companies are term. notified to the Authority to obtain Total Number of employees authorization if, in the last financial year 37 (thirty-seven) employees in total. before the concentration: a) The turnover of all the companies Address together in the international market is more Rruga Sami Frashëri 4, Fourth Floor, Tirana than 7 billion and the turnover at least of 1001 one enterprise, in the domestic market, is Tel: + 355 (0) 4 223 4504 more than 200 million lek. Website: www.caa.gov.al 30
Competition authority at a glance Interview with Prof. Dr. Lindita Milo (Lati) Chairwoman of the Albanian Competition Authority
imposing sanctions; gives opinions to the Parliament on competition-related issues; gives recommendations to public administration and NGOs on competition.
What is the level of the competition culture in your country? How does your authority try to raise the awareness of the competition rules? Albanian employed a free market economy at the beginning of 90’s. With this respect a most challenge of ACA is fostering the culture on competition among business and consumer community through enforcing and penalizing law’s infringements and utilizing various instruments. There are considered a number of activities to
increase the competition culture, including Prof. Dr. Lindita Milo (Lati) the workshops in various districts were organised with representatives from the Prof. Dr. Lindita Milo (Lati) is the local government and the business Chairperson of the Competition Authority community; publications were made and since July 2006. She holds the Ph.D. in submitted to university libraries; and Accounting (1996) of the University of particularly, increasing the decision-making Tirana, Albania and Ph.D. in Economics transparency to public as a whole. (2001) of the Staffordshire University, United Kingdom. In which sectors do you focus your antitrust enforcement? What was the greatest challenge for Telecommunication, insurance, energy, your authority in the recent years? transport, road fuel market, bid ringing in The main challenge of the Albanian the public procurement, and other sectors Competition Authority was the treatment based on the complaints addressed. with professionalism and objectivity the cases identified and examined, increase the Which are the most common types of efficiency through investigative procedures, antitrust cases in your country? consolidation of independency and Abuse of the dominant position, prohibited professional profile of the ACA’s staff agreement, “naïve cartels”. member, drafting a new National Competition Policy planned to be completed What are the priorities of your this year and continuing the approximation authority for the next years? of the secondary legal framework in line with EU Standards. Priorities of ACA for the years to come are determined on the basis of the principle of Do you think that your authority has continuity issues in responding to market sufficient powers? concerns addressed, complaints of market operators or customers or transmitted by Based on the best practices in EU, Albanian the media, accomplish the competition law provides the sufficient Recommendations of the Evaluation Report powers to ACA’s officials. They have full to law enforcement, policy competition and competences to undertake any investigative the functioning of the Competition procedures such as request for information, Authority, prepared by international experts dawn raids, search and seizure in the for UNCTAD. undertakings’ premises, interviews, 31
Council of Competition of Bosnia and Herzegovina
Year of establishment Maximum sanction envisaged in law 2001 10% of value of the total income of the concerned undertaking
Competition law Structure Competition Law http://bihkonk.gov.ba/en/category/legislati Board of councilors – 6 persons on Expert service – 11 persons Assisting staff – 9 persons
Competences Number of the members of the Prohibited agreements decision-making body Abuse of Dominant Position Merger Control 6 Competition Advocacy
Total Number of employees Recent reforms in the competition law 26 First Competition Law was adopted in 2001. However, it was not fully in line with acquis, and, therefore, new Competition Law was Address adopted in 2005. Amendments to the Law Radiceva 8/4 took place in 2007 and 2009. 71000 Sarajevo
Bosnia and Herzegovina
Notification regime for exemption of agreements Website Yes www.bihkonk.gov.ba
Control on concentrations notification threshold 100 million BAM (cca. 50 million EUR) at the world market and each 8 million BAM (cca. 4 million EUR) at the market of BiH, or if the joint share in the relevant market exceeds 40%.
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Competition authority at a glance
Interview with Ms. Maida Campara Chairwoman of the Council of Competition of Bosnia and Herzegovina
Do you think that your authority has sufficient powers? Yes. The Competition Act is to the greatest extent approximated with legal regulations and standards of EU, and, therefore, the Council of Competition disposed of powers which are common for most of competition authorities.
What is the level of the competition culture in your country? How does your authority try to raise the awareness of the competition rules?
The level of competition awareness is not satisfactory. Many things should Maida Campara additionally be done in order to make it Chairwoman of the CoC more efficient. However, we continuously put our efforts in order to make it so. Ms. Campara graduated from the Faculty of Law, University of Sarajevo in 1999, which In which sectors do you focus your was followed by passing her Bar Exam. In antitrust enforcement? 2006 she started to work at the Council of Competition and in 2010 she became its The highest frequency of cases was in the member. telecommunications sector.
There are six members of the CoC, and Which are the most common types of each year, the Council of Ministers antitrust cases in your country? nominates the Chairman/Chairwoman of At beginning, most of the cases dealt with the CoC for a period of one year upon the concentrations, whereas in last 3 or 4 years proposal of the CoC. there is an increase in the number of cases dealing with abuse of dominant position and What was the greatest challenge for restrictive agreements, compared to the your authority in the recent years? number of concentrations control cases. The Competition Act envisages deadlines within which cases on prohibited What are the priorities of your competition behaviour must be finalized, authority for the next years? which are extremely short considering the The CoC works on amendments to the complexity of the substance and they are existing Law, and it is going to be one of six months for prohibited agreements, the most significant activities in the next three months for individual exemption, four period of time. Besides, there is a plan for months for abuse of dominant position and internal structure to be changed aimed at three for assessment of concentrations. capacity building.
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Croatia Positive effects of insurance sector probe
One of the most important instruments available to the competition agencies in promoting competition is market research. On the one hand, it represents a source of information and the possibility of a deeper insight into the functioning of specific markets and is as such, after detection of unlawful market conduct, the basis for acting ex officio. On the other hand, market research can often induce a fine correction of behaviour of undertakings participating in the study. This was the case in the market research of compulsory insurance in the Republic of Croatia. The main objective of this research conducted by the Croatian Competition Agency (the Agency, CCA) was to determine all of the relevant facts relating to the premium systems and price lists of compulsory motor insurance applied by insurance companies. The legislative and enforcement framework were examined, as well as the formation of price premiums of compulsory motor insurance. Furthermore, the aim of the research was to examine possible obstacles in the market because of which the market deregulation has not brought the expected strengthening of competitive pressure, fall of prices, the development of new products and services and increase in consumer welfare. The research included all 15 insurance companies active in the market of compulsory motor insurance, as well as the Croatian Insurance Bureau (CIB) as an association of insurance companies. Then, during 2014, the Agency initiated proceedings against the CIB and its 12 members, and although in 2015 it issued a decision establishing that these undertakings did not distort competition, it was the opening of Agency’s proceedings that directly contributed to the drop in price and the actual market liberalization: at the level of 2014 compared to 2013 there was a significant decline in gross written premiums of compulsory motor vehicle liability insurance of up to 590 million kuna, with growth in the number of insurance policies by 1.6 percent and the retention of existing, and the entry of new competitors in this market. Thus, the level of competitiveness of the market has been maintained and increased, with pronounced positive effects on end-consumers and the economy as a whole. In the course of the proceeding the CCA established that the CIB performs activities of general and common interest based on a separate law in the area of insurance activities and issuance of a motor insurance certificate at the national level. Membership in the CIB is mandatory. It is a regulated industry falling under the scrutiny of the specific regulator – Croatian Financial Services Supervisory Agency (HANFA). Based on all the facts established in the proceeding carried out by the CCA there was no evidence that the decision to revoke the power of Generali Insurance to issue a motor insurance certificate (“Green Card”) constituted a prohibited agreement either by object or by effect. The object of this decision was not to distort competition but it was inspired by the advertising activities undertaken by Generali Insurance that had been, in the view of the CIB and its members, unlawful and inappropriate. These promotional activities contravened with the provisions of the Insurance Act, which was also established in the decision taken by HANFA that ordered Generali Insurance to rectify the said irregularities. On the other hand, this decision did not produce any anticompetitive effects. Namely, since 1 July 2013 the prior approval of HANFA is not any more necessary for setting up of the insurance price lists. Consequently, insurance conditions and premiums changed due to powerful liberalization and strengthening of competition in the third party motor insurance market. In its decision, the CCA noted that it is not the task of the competitors or the trade organization (CIB), to control the operation of any of their competitors. If the parties concerned thought that Generali Insurance had breached laws and regulations, they should have reported these infringements to HANFA as the regulatory authority in charge. Although the statute of the CIB empowers the board to revoke the right of any member to issue a Green Card, the CCA holds the view that these powers cannot be used for the sanctioning of the activities that are not directly related to the Green Card issuance. Hence, the CIB and its board
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Success stories that is made up of the representatives of all undertakings engaged in third party motor insurance should refrain from imposing sanctions on its members. In this sense, in its decision HANFA ordered the CIB to regulate the procedure for issuance of Green Card and withdrawal of this power for its members. A timely reaction of the CCA and HANFA in this concrete case, particularly the proceedings opened and carried out by the CCA, definitely speeded up the liberalization process in the compulsory motor insurance market and lowered the price of insurance.
Bulgaria Advocacy opinion removes restriction of competition in wholesale trade of medicines
In February 2011 the CPC adopted opinion concerning Regulation requiring the producers/importers of medicines to declare the wholesalers who will deliver the medicines reimbursed by the National Health Insurance Fund to the pharmacies. The CPC found that the requirement has the following anticompetitive effects: - The producer/importer has the possibility to unilaterally influence the competition in wholesale trade in medicines restricting the access of licensed wholesalers to the market of medicines reimbursed by the state. As a result the wholesalers don’t have incentives to offer better terms of delivery and payment to the pharmacies. - The regulation contravenes the Law on medicine products in human medicine as it doesn’t allow a wholesaler to buy medicines reimbursed by the state from another wholesaler unless they are both declared by the producer/importer. Thus the competition in the wholesale trade of a certain medicine reimbursed by the state is restricted only to those that are indicated by the producer/importer. As a result the regulation creates prerequisites for increase of the market concentration. - The pharmacies are restricted in their choice as they can choose to buy the medicines only from those wholesalers that are declared by the producer/importer. The CPC found that the existence of those provisions, restricting competition is not justified by the reasons for their introduction. The legislation envisages strict requirements regarding the storage of medicines and mechanisms designed to ensure control at all levels of the economic chain from the producer of medicinal products Credit: Rodrigo Senna, flickr to consumers. Effective control by the competent authorities is the main mechanism to ensure the legal import of medicinal products, their quality storage and retention of their pharmacological action. At the same time the regulation is not applied to medicines in free sale, for which it is also important to be stored properly in order to protect public health. Other means can be used to inform the pharmacies about the wholesalers that offer a certain medicine without restricting competition. The CPC proposed the analyzed provisions to be amended in a way that doesn’t restrict competition and doesn’t give possibility for their application in a way which could lead to the same effect. As a result of the opinion of the CPC the requirement the producers/importers of medicines to declare the wholesalers who will deliver the medicines reimbursed by the National Health Insurance Fund to the pharmacies was abolished.
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Competition Policy and the Sustainable Development Goals (SDGs)
Pierre M. Horna Competition and Consumer Policies Branch at the United Nations Conference on Trade and Development (UNCTAD) The expressed views are personal and may not represent the view of the authority
Competition enhances efficiency, promotes innovation and leads to wider product choice and better quality, thereby improving consumer welfare. Competition policy may play a significant role in achieving sustainable and inclusive growth and development. This article looks into how competition policy and law could foster such goals. Competition policy is complementary to other government policies. Therefore, it should not be developed in isolation from economic, social and environmental realities and needs of a country. Competition policy and law could address challenges faced in these areas; and, when appropriately designed and effectively implemented according to the circumstances of a country, they may contribute to sustainable and inclusive growth and development. The role of Competition Policy within the Post-2015 Sustainable Development Agenda (SDA) The post-2015 SDA are intergovernmental negotiations that will adopt sustainable development goals (SDGs) and means of implementation necessary for achieving them. The Synthesis Report of the Secretary-General on the post-2015 SDA states: Sustainable development must be an integrated agenda for economic, environmental and social solutions. Its strength lies in the interweaving of its dimensions. This integration provides the basis for economic models that benefit people and the environment; for environmental solutions that contribute to progress; for social approaches that add to economic dynamism and allow for the preservation and sustainable use of the environmental common; and for reinforcing human rights, equality, and sustainability. Responding to all goals as a cohesive and integrated whole will be critical to ensuring the transformations needed at scale.1 The post-2015 SDA is expected to be transformative, that is, it should transform economies, societies and the ways to tackle climate change with a view to making “patterns of growth more inclusive, sustained and sustainable”2 and to present a set of sustainable development goals (SDGs) and means of implementation necessary for achieving them. At the National level, governments will need to integrate these SDGs into their policies and laws and take measures towards achieving them. In this connection, competition policies should complement other industrial and trade policies that are definitely necessary but not sufficient on their own to achieve sustainable and inclusive growth and development. For instance, as competition disciplines firms' behaviour, it will prohibit dominant firms from seeking to maintain or obtain monopoly rents, which go against the idea of sustainable and inclusive growth and let firms make unfair profits at the expense of consumers and potential competitors. High and anti-competitive profit mark-ups have been found to prevent growth, productivity and employment creation.3 The case of South Africa shows this clearly. The steel and chemicals industries in South Africa are internationally competitive. These are highly concentrated industries composed of national champions which have faced no domestic competitive pressure during the apartheid regime. Although they have been among the best performing manufacturing sectors in the country, they failed to supply competitively priced intermediate inputs to downstream industries.4 The
1 United Nations (A/69/700), The Synthesis Report of the Secretary-General on the post-2015 sustainable development agenda, The road to dignity by 2030: ending poverty, transforming all lives and protecting the planet. 2 United Nations (A/69/700), The Synthesis Report of the Secretary-General on the Post-2015 Sustainable Development Agenda, The road to dignity by 2030: ending poverty, transforming all lives and protecting the planet, paragraph 54. 3 Roberts, S., 'Competition Policy, Competitive Rivalry and a Developmental State in South Africa’, in O. Edigheji ed. Constructing a Democratic Development State in South Africa: Potentials and Challenges, HSRC Press, Pretoria, 2010. 4 Roberts, S., Patterns of industrial performance in South Africa in the first decade of democracy: The continued influence of mineral-based activities, 2007, Transformation 65: 4-34. 36
Expert’s comments lack of domestic competition in the steel and chemicals industries prevented the establishment of links between the former and the downstream industries in a way that contributes to overall industrial and economic growth, and development of the country. (a) Prioritization of sectors that is essential for the poor and the economy Setting priority sectors would allow the competition agency to focus its resources to dealing with possible anti-competitive practices in those priority sectors. For instance, if the policy defines agriculture as a priority sector, this may contribute to the elimination of anti- competitive practices in that sector, thereby ensuring fair prices for consumers and producers, which would then improve their living standards. Indeed, agriculture is a sector that is often subject to special treatment by competition laws and other sectorial laws due to its multi-dimensional nature. Agriculture involves economic activities that have both social and environmental dimensions. It provides livelihood for an important segment of the population in both developed and developing world. Furthermore, weaker bargaining power of smallholder farmers vis-à-vis providers of inputs such as fertilizers and agrochemicals, as well as buyers of their produce requires special attention of competition policy. To eliminate such imbalance, farmers organize themselves in cooperatives, which may facilitate collecting, processing, and marketing of their products; negotiate prices with buyers on their behalf; enable them to purchase inputs at lower prices; and provide them with access to credits and other financial services. The UNCTAD study on Mexico's Agricultural Development,5 which includes an analysis of competition issues in the corn production and commercialization in Mexico, recommends the strengthening of existing associations or cooperatives of small corn growers and supporting the establishment of new associations and cooperatives in order to deal with imbalanced bargaining power vis-à-vis buyers; as well as unequal competition vis-à-vis large corn farms. (b) Complementarity with other government policies For instance, on the environmental dimension of sustainable development, no one would deny the need for research and development, eco-innovation and eco-friendly technologies. Competition policy may be designed so as to promote such businesses while environment policy may provide incentives to eco-friendly production processes, green sectors and products. However, such policies or incentives should neither be used as disguised protectionism nor to unnecessarily distort competition in the market. One objective of competition policy is to ensure efficient and well-functioning markets, which are crucial in promoting innovation and new technologies. Therefore, it is recognized by some countries that efficient environmental policy requires a strong competition policy implementation, which does not allow firms to abuse their market power or exclude competition in order to stimulate more innovation; does not approve anti-competitive mergers for the sake of innovation; and at the same time does not discourage horizontal or vertical cooperation between firms to engage in joint research and development, and eco-innovation activities.6 Summing up, Competition Policy will have a cross-cutting role within the integrated approach enabled by the SDA as it: . increases competitive market pressures and corrects market failures that may lead firms to become more efficient, increase innovation and widen consumer choice and product quality. . leads to firms producing healthier, safer, environmentally responsible and more ethical and equitable products, in order to satisfy the demands of more discerning and conscientious consumers. . supports equitable outcomes, alleviating poverty and indirectly promoting sustainable and inclusive development. . aligns business practices, especially those of big business, which can play a central role in determining the development path of a nation.
5 UNCTAD, Mexico's Agricultural Development: Perspectives and Outlook, United Nations, New York and Geneva, 2014. 6 Knut Eggum Johansen, Director General, Norwegian Competition Authority, Sustainable Development and Competition Policy, Presentation at the European Competition Day, Paris, 18-19 November 2008 available at http://www.konkurransetilsynet.no/ImageVaultFiles/id_1460/cf_5/Sustainable_Development_and_Competition_Policy. PDF. 37
TV rights in football
Petar Gradinarov Chief Expert Competition Law and Policy Directorate Commission on Protection of Competition (Bulgaria) The expressed views are personal and may not represent the view of the competition authority
Football is the most popular sport in Europe. As such it attracts the attention of a great number of people which in turn attracts serious interest of the TV companies. The tendency of increased importance of football broadcasting finds its financial expression in the growing amounts that the TV companies are ready to pay. The most impressive example is the deal for 5.14 billion pounds (about 7 billion euro) for the broadcasting rights of the English Premier League for 3 seasons starting 2016/20171. The TV rights are also important income in the budgets of the football clubs. The growing importance of the TV rights in football goes together with anticompetitive problems in their sale. With regard to this it would be interesting to answer the question when the sale of TV rights can lead to prevention, restriction or distortion of competition. Most anticompetitive problems concerning TV rights in football are related to their collective sale on behalf of the clubs taking part in a certain championship. It is reckoned that thus the clubs conclude an agreement which could prevent the competition that would arise between them if they sell the broadcasting rights for their matches individually. But is the individual sale of TV rights for broadcasting of football games better for competition than the collective one. The restrictions of competition coming from the collective sale of TV rights in football are described in the decisions of the European Commission (EC) in cases UEFA Champions League2, German Bundesliga3 и FA Premier League4. The EC notes that in the absence of the joint selling agreement the football clubs would set such prices and conditions independently of one another and in competition with one another. This is based on the understanding that the matches in a given football championship or tournament are separate from each other and the ownership of a football club’s own matches could not go beyond to an extent where it must be held that all clubs have an ownership share in the whole league as such and in each individual match5. The arguments of the EC seem logical as an entity shouldn’t have rights over something that it doesn’t take part but whether it really doesn’t take part. The answer to that question depends on whether the product that is offered for TV broadcasting is a separate football match or the championship as a whole. The individual sale by each club of the broadcasting rights of its matches suggests that these matches are viewed as something separate and independent. At the same time they are part of a football championship with a certain number of teams and standings are formed on the basis of the results. Consequently it is logical the rights for broadcasting of a championship to be considered as one product. It has to be taken into account that the participants in a championship are different every year due to the typical regulation of relegation of the last teams in the standings and their replacement by the first teams from the lower division. Consequently the participants in the agreement for collective sale of TV rights are also different. Thus it is questionable whether a football club which has been in lower division during the concluding of the agreement really has participated in its concluding. This contradiction is another indication that the product that the football clubs sell is the TV rights for a championship as a whole and not the separate matches.
1 Sky and BT retain Premier League TV rights for record £5.14bn, The Guardian, Owen Gibson, 10 February 2015. 2 Decision of the EC of 23 July 2003 in case 37.398 Joint selling of the commercial rights of the UEFA Champions League. 3 Decision of the EC of 19 January 2005. in case 37.214 Joint selling of the media rights to the German Bundesliga. 4 Decision of the EC of 22 March 2006 in case 38.173 Joint selling of the media rights to the FA Premier League. 5 UEFA Champions League, paragraph 119. 38
Expert’s comments
In the decision in case UEFA Champions League the EC takes the position that the football championships can exist without a joint selling arrangement for the sale of the TV rights and gives examples of national championships where the rights are sold individually by each club.6 Yes, this is possible, but what is the result of this, who wins from this and whether someone wins at all. In the top 5 championships (England, Germany, Spain, Italy, France) only in Spain till season 2016/2017 the rights for broadcasting of the matches of the championship are sold individually by each club. Credit: givemesport.com As a result Barcelona and Real Madrid have taken more than half of the revenues7. There are objective reasons for that – Barcelona and Real Madrid are two of the most popular clubs in the world, the best players play there but this could have negative effect on the Spanish football clubs including on Barcelona and Real Madrid. This polarization lowers the interest in the Spanish championship in comparison to the other top championships as the intrigue about the champion is usually limited to two teams. It should be noted that the essence of competition – the more effective market participants to get higher income is not eliminated in the collective sale of TV rights as after that the revenues are allocated between the clubs on the basis of criteria like standings (England, Germany, Italy), number of broadcasted matches (England), number of supporters (Italy) and population of the relevant city or town (Italy).8 The EC notes that as a result of the collective sale of rights those that want to buy them have one single source of supply.9 This means that the individual sale of TV rights should be better for the TV companies. But taking into account that the audience is interested in the championship as a whole the TV companies have to negotiate with every club separately which would increase the transaction costs and would lead to real chaos. Though the EC reckons that the collective sales of TV rights in football are prohibited agreements under Art. 101 (1) TFEU its decision in the case UEFA Champions League shows that these agreements fulfill the conditions of Art. 101 (3) TFEU. Though the collective sale of rights has many advantages and is more favourable to competition there are circumstances when the collective sale of TV rights could lead to prevention, restriction or distortion of competition. These circumstances can be seen in the conditions and the commitments imposed in the EC’s decisions in cases UEFA Champions League, German Bundesliga и FA Premier League. The sale of the TV rights for a long period of time could restrict competition as the market is foreclosed for that period. But what period is too long? If it is too short it could favour TV companies that already have broadcasted football as they have the necessary equipment while the new entrants have to make the necessary investments. So this period should be enough but not longer than the necessary for the return on investments. According to the EC the period shouldn’t be longer than 3 years. But this term may not be universally applicable as not all national football championships can generate great revenues. Measures should also be taken to prevent a TV company to have exclusive rights. However this depends on the demand and can’t be realized for football championships where there aren’t at least two companies willing to buy the TV rights. The collective sale of TV rights comes not from the decisions of the football clubs but from the perception of the audience and hence of the TV companies of the championship as a whole as the product. That’s why the collective sale shouldn’t be regarded as anticompetitive per se. There are not universal criteria when it is anticompetitive as the characteristics of the specific markets should be taken into account. Finding the best solution in a specific case would ensure effective competition resulting in maximum benefits for the football clubs, the TV companies and the audience.
6 UEFA Champions League, paragraph 131. 7 La Liga seeks collective TV rights deal to close gap on Premier League, The Guardian, 11 April 2013. 8 The Bundesliga TV Rights and their Place in Europe, Gard Lid Aabakken, bundesligafanatic.com 9 UEFA Champions League, paragraph 114. 39
Dominance approach to standard-essential patents: the enforcement leverage
Ljiljana Pavlic Member of the Council Croatian Competition Agency The expressed views are personal and may not represent the view of the competition authority
The antitrust treatment of standard-essential patents has been a topic of discussion for some time. A large portion of the modern literature on economic growth focuses on technological innovation, its determinants as the driving force behind the evolution of markets and undertakings. Undertakings prosper through the interplay of a vital, open society focused on work and knowledge, which leads to increased productivity, the creation of new technologies and the pursuit of change. Their key advantage lays in invention and know-how, such powerful levers that tip the balance of economic power. Inventions are made real in our lives through the goods and services we consume. Standards have been created by standard-setting organizations in the interest of promotion of innovation and new technologies. Patent licensing terms should be fair, reasonable, and non- discriminatory (FRAND). Standard-essential patents (SEP) could be disputatious since a patent that is inevitable to the use of a standard can provide its holder with pivotal leverage power in negotiations with users of the relevant standard that wish to employ that standard. This is where antitrust kicks in. European Commission dealt with several cases where owners of SEPs pursued to ban competitors’ products from the market on the principle of their SEP. In April 2014, the European Commission adopted its final decisions in two landmark cases referring to SEPs. In its decisions the European Commission has determined that in the standardisation framework, where the SEPs holders have committed to license their SEPs on FRAND terms, it is anti- competitive to seek to exclude competitors from the market by seeking injunctions on the basis of SEPs if the licensee is willing to take a licence on FRAND Motorola LTE chipset terms. It accepted binding Credit: ubergizmo.com commitments proposed by Samsung not to seek injunctions in relation to SEPs where certain conditions are met, and adopted a decision declaring that Motorola had infringed Article 102 TFEU by seeking and enforcing injunctions against Apple in relation to SEPs. At the same time, while those cases were still ongoing, the Düsseldorf District Court decided to resort to the preliminary reference mechanism by sending request to the European Court of Justice (ECJ) concerning SEP issues. The case that triggered the request was national case in which Huawei Technologies sought an injunction against ZTE after the two undertakings failed to reach a licensing agreement on FRAND terms for a patent essential to the LTE wireless broadband technology standard. Huawei owns a patent titled Method and apparatus of establishing a synchronisation signal in a communication system that is essential for the Long Term Evolution standard for 4G LTE technology. ZTE markets products that operate on the basis of the Long Term Evolution standard, thus using patent owned by Huawei, without
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Expert’s comments paying a royalty to Huawei. Huawei brought an action for infringement against ZTE before the referring court, seeking an injunction prohibiting the infringement. The German court asked for the European Court of Justice to rule on whether the action brought by Huawei constitutes an abuse of that undertaking’s dominant position. In its judgement1, European Court of Justice recalled the fact that the right to bring an action for infringement forms part of the rights of the proprietor of an intellectual-property right, with the result that the exercise of such a right, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute an abuse of a dominant position and that abuse only exists in exceptional circumstances. The fact that patent is essential to a standard and that SEP status was only obtained in return for silicon wafer (used in the production of microcontrollers and microprocessors) a promise to licence those patents on FRAND Credit: JamesIrwin, flickr terms, the ECJ recognized as exceptional circumstances. The ECJ made clear that in those circumstances, and having regard to the fact that an undertaking to grant licences on FRAND terms creates legitimate expectations on the part of third parties that the proprietor of the SEP will in fact grant licences on such terms, a refusal by the proprietor of the SEP to grant a licence on those terms may, in principle, constitute an abuse within the meaning of Article 102 TFEU. Under Article 102 TFEU, the proprietor of the patent is obliged only to grant a licence on FRAND terms. The European Court of Justice in its judgement reasoned that although the irrevocable undertaking to grant licenses on FRAND terms given to the standardization body by the proprietor of an SEP cannot negate the substance of the rights guaranteed to that proprietor, ... it does, none the less, justify the imposition on that proprietor of an obligation to comply with specific requirements when bringing actions against alleged infringers for a prohibitory injunction or for the recall of products. The ECJ further explained what specific requirements are and what are the steps patent holder must follow before blocking competitors in order to avoid 102 TFEU liability. The SEP holder cannot sue before giving notice or holding prior consultations, even if the competitor has already used the patent. It has to present a specific, written offer for a licence on FRAND terms. It is up to the alleged infringer to respond to that offer or send counter-offer. In case of no agreement, the parties may, by common agreement, request that the amount of the royalty be determined by an independent third party. According to the ECJ, the alleged infringer cannot be criticised either for challenging, in parallel to the negotiations relating to the grant of licences, the validity of those patents and/or the essential nature of those patents to the standard in which they are included and/or their actual use, or for reserving the right to do so in the future. Consequently, the ECJ held that a SEP owner can’t sue for an injunction without giving the alleged infringer prior notice, even if the alleged infringer has already used the patent. The ECJ moreover specified that, in the case at issue, since there are more than 4700 SEPs included in the standard, a company might produce devices that use a SEP without being aware of it. Albeit the European Commission took decision prior to the ECJ’s ruling, the European Commission can be content for taking bold step forward in the so-called “smartphone patent wars” field. With ruling outcome that SEP-holders may be abusing dominance, the European Court of Justice gave strong endorsement to the Commission’s approach in Motorola and Samsung cases where was established that seeking SEP-based injunctions against a willing licensee can constitute an abuse of a dominant position.
1 Judgment of 16 July 2015 in Case C‑170/13 Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GmbH 41
Acquisition of minority shareholdings: Is the White Paper of the European Commission a step towards more effective EU merger control?
Radina Aleksandrova Senior Expert Competition Law and Policy Directorate Commission on Protection of Competition (Bulgaria) The expressed views are personal and may not represent the view of the competition authority
In 2015 the EU merger policy celebrates its 25th anniversary1, which makes it a prominent occasion to discuss the recent developments in the field of EU merger control. In the White Paper “Towards more effective EU merger control”2 (WP) the European Commission (EC) proposed to extend the merger control rules to acquisitions of minority (non-controlling) shareholdings. This proposal led to a significant debate. The Commission received 92 submissions3 from a large variety of stakeholders during the public consultation, which lasted from 9 July 2014 to 17 October 2014. As the EC states in paragraphs 24 and 25 of the WP, effective and efficient competition policy requires appropriate and well-designed means to tackle all sources of harm to competition and thus consumers. Currently, the Merger Regulation only applies to concentrations. These are defined as acquisitions of control by one or more person(s) or undertaking(s) over one or more other undertakings or parts of undertakings.4 When the acquisition of a minority shareholding is unrelated to an acquisition of control, the Commission cannot investigate or intervene against it under the current Merger Regulation. The EC correctly noticed in the WP5 that several types of competition concerns can arise when a minority shareholding is acquired. These concerns are based on similar theories of harm to those relevant for acquisitions of control and, in general, require that the transaction significantly increase market power. The concerns are also proven by the experience of European Commission the competition authorities of the United Kingdom, Germany and Austria, which have the competence to review the acquisition of minority shareholdings and intervened against such deals where they raised competition concerns. Furthermore, after the public consultation it can be concluded that the majority of the public authorities of the Member States agree that the anticompetitive effects of the acquisitions of minority shareholdings may constitute a problem which should be addressed. This is also the lesson the Ryanair/Aer Lingus I case6 taught us. In this case, the Commission had no jurisdiction to review Ryanair's minority shareholding in Aer Lingus that it had acquired previously, which the UK Competition Commission did. However, the big question that remains, is which is the most effective and most proportionate solution of the problem called acquisitions of minority shareholdings. In this respect the views expressed during the public consultation on the WP diverge. Some of the public authorities
1 Entry into force on 21 September 1990 of the first EU merger regulation – Council Regulation 4064/1989 of 21 December 1989 on the control of concentrations between undertakings, 1990 OJ L257/13. 2 COM/2014/0449 final. 3 Summary of replies to the public consultation on the WP, download under http://ec.europa.eu/competition/consultations/2014_merger_control/index_en.html 4 See Art. 3 of Regulation No. 139/2004. 5 See item 3.1.1. “Theories of harm” of the WP. 6 Case COMP/M.4439 – Ryanair/Aer Lingus I, Commission decision of 27 June 2007, confirmed by the General Court in Case T-342/07 Ryanair v Commission [2010] ECR II-3457. 42
Expert’s comments welcomed the initiative to extend the merger control rules to acquisitions of minority shareholdings. Some other public authorities would welcome a deeper analysis of the costs and consequences, since they consider that a very large number of transactions would be caught under the proposed system, and seek further clarifications on certain procedural aspects of the proposal. A minority of public authorities consider that the Commission has not fully justified the need for the reform, nor whether the anticompetitive effects resulting from the acquisition of non-controlling minority shareholdings can be addressed through the antitrust rules of Articles 101 and 102 TFEU. This view is shared by a majority of private stakeholders that do not consider that there is an enforcement gap which makes a new regulation necessary, as the most potentially problematic cases of minority shareholding acquisitions can be dealt with by the existing rules.7 I agree with the Commission that Articles 101 and 102 TFEU are not the perfect tool to address the problem with minority shareholdings acquisitions which raise competition concerns as the acquisition deals are rather related to concentrations between undertakings than to the prohibitions of cartels and abuse of dominance. The WP clearly states the three, in my opinion, essential principles for the system of controlling acquisitions of minority shareholdings: capturing the potentially anti-competitive acquisitions of non-controlling minority shareholdings; avoiding any unnecessary and disproportionate administrative burden on companies, the Commission and national competition authorities; fitting with the merger control regimes currently in place at both the EU and national level.8 However, the proposed “targeted transparency system”, which would require parties to self- assess whether an acquisition of minority shareholding creates a “competitively significant link” (CSL) and if so, to submit an information notice to the EC, raises many questions and doubts about the fulfillment of the mentioned leading principles, especially on the proportionality of the proposed measures. Firstly, the definition of the CSL as an acquisition of a minority shareholding in a competitor or vertically related company, if the acquired shareholding is either around 20% or between 5% and around 20%, but accompanied by additional factors, seems to be not sufficiently clear for undertakings in order to self-assess if an information notice to the EC is required. Especially the additional rights that qualify shareholding acquisition between 5% and 20% need to be further clarified, e.g. in guidelines. Concerning the proposed option for the Commission to investigate a transaction, whether or not it has already been implemented, within a limited period of time (4 to 6 months) following the information notice, I assume that in many cases this would lead to voluntary notifications in order to obtain legal certainty. Though, this is contrary to the principle aiming to avoid any unnecessary and disproportionate administrative burden on companies and the Commission. Therefore, it should be clearly defined in which cases and within which timeframe the EC will be empowered to start an investigation and the undertakings would be therefore required to submit a full notification. This could provide more legal certainty and make voluntary notifications not the rule, but an exception. With regard to the consistency with existing control mechanisms, a notification system would reach the highest consistency, as it upholds the ex ante one-stop mechanism and imposes a stand still obligation. However, the proposed “targeted transparency system” still provides for consistency with national ex ante control systems, as the national competition authorities would be able to request a referral before the implementation of the acquisition within the envisaged waiting period of 15 days. Summarizing, it can be concluded that the proposal of the EC to extend the merger control rules to acquisitions of minority shareholdings is a step towards more effective EU merger control. However, further steps will be necessary to achieve effective and efficient competition policy on that issue. As the Commissioner Vestager said, “Any system for the control of minority shareholdings at EU level would need to be carefully designed. Otherwise we risk adding too much red-tape that would not be justified by the number of cases that we could take on… What counts is that the new rules – when they are introduced – work well and are proportionate to the problem.”9
7 Paragraphs 3-5 of the Summary of replies to the public consultation on the WP. 8 Paragraph 42 of the WP. 9 “Thoughts on merger reform and market definition”, Speech of Commissioner Vestager on 12 March 2015. 43
Fresh from the Shelves – Welcome the OECD Competition Assessment Toolkit Volume 3
Sabine Zigelski Senior Competition Expert OECD Competition Division, Paris
The expressed views are personal and may not represent the view of the authority
All of the beneficiaries of the Sofia Competition Forum (SCF) have the assessment of laws and regulations as part of their regular tasks.1 Competition authorities are particularly well placed to investigate and assess if a draft law or an existing regulation imposes unnecessary restrictions on competition. The analysis focuses on phenomena we know quite well – barriers to entry, number of market participants, information asymmetries, factors facilitating collusion etc. The OECD Competition Assessment Toolkit offers comprehensive guidance for a systematic analysis of new or existing laws and regulations. The newest addition to the Toolkit, volume 3, incorporates a rich amount of experience that has been collected during large projects in Greece2 and Mexico3, where a number of sectors have been fully and systematically analysed using the methodology lined out in toolkit volumes 1 and 2.4 The analysis was undertaken by OECD experts together with national experts and led to a large number of recommendations to policy makers. In the case of Greece, 72 % of the recommendations were directly adopted by the government, more are to follow.5 Based on a conservative estimate, the expected amount of benefits from implementing recommended changes will be around € 5.2 bn.6 The rationale for conducting and advocating Potential GDP gains by 2060 from product competition assessment is straightforward. market reform (per cent) Product market deregulation can be considered one of the most important drivers for growth. OECD estimates show the potential long-term benefits of removing regulatory barriers to competition. In the chart, the size of each bar shows the effect on GDP of product market reform. The potential is particularly substantial for non- OECD countries (about 30%), but also for some European countries where the effect on GDP would be about 20%. Toolkit Volume 1, the Competition Source: OECD Product Market Regulation Database. Assessment Principles, gives examples for https://stats.oecd.org/index.aspx?DataSetCode=PMR# the benefits of competition, provides an introduction to the Competition Checklist and shows ways for governments to assess competitive effects of their policies. It is of a rather general nature and explains the need for competition assessment to policy makers and non-competition experts. It can provide competition authorities advocating their efforts in competition assessment with explanatory materials and a narrative. This volume is supplemented by a companion volume 2, Competition Assessment Guidance, which provides detailed technical guidance on key issues to consider when performing competition assessment, as well as providing several sample competition assessments. It will help regulators to incorporate competition assessment and in
1 SCF Special Project: Comparative Overview of the Balkan Competition Regimes, p. 41. 2 More on the work in Greece: http://www.oecd.org/daf/competition/greececompetitionassessment.htm 3 More on the work in Mexico: http://www.oecd.org/daf/competition/mexico- strengtheningthecompetitionandregulationframework.htm 4 Link to Vol 1 -3 of the Toolkit: http://www.oecd.org/daf/competition/assessment-toolkit.htm 5 www.imf.org/external/pubs/ft/scr/2014/cr14151.pdf 6 See Greek Report, FN 2. 44
Expert’s comments spotting potential barriers to competition when drafting or revising laws. Both volumes will be released in an updated version later this year. All volumes are based on the Competition Checklist and they explain its rationale and application: Competition Checklist Further competition assessment should be conducted if the proposal has any of the following 4 effects: (A) Limits the number or range of suppliers For example by the grant of exclusive rights, establishing licence, permit or authorisation processes, limiting the ability to provide a good or service, significantly raising cost of entry or exit by a supplier or by creating geographical barriers to competition. (B) Limits the ability of suppliers to compete For example by limiting the sellers’ ability to set the prices, by limiting freedom of suppliers to advertise or market goods and services, by setting standards for product quality that provide an advantage to some suppliers over others or that are above the level that some well-informed customers would choose or by significantly raising costs of production for some suppliers relative to others. (C) Reduces the incentive of suppliers to compete For example by creating a self-regulatory or co-regulatory regime, by requiring or encouraging information on supplier outputs, prices, sales or costs to be published or by exempting the activity of a particular industry or group of suppliers from the operation of general competition law (D) Limits the choices and information available to customers For example by limiting the ability of consumers to decide from whom they purchase, reducing mobility of customers between suppliers or by fundamentally changing information required by buyers to shop effectively. The new Toolkit Volume 3, the Operational Manual for Competition Assessment, contains very practical guidance and a step-by-step guide for performing competition assessment: For step 1, guidance on how to select sectors Steps in Competition Assessment for examination, map legislation and identify key policies is given. Step 2 describes the screening process in more detail. In step 3 the identified policies in need of closer examination have to be fully understood, including the market conditions and the regulatory environment and changes of the market conditions over time. Different options for developing alternative options, like international comparisons or better use of economic incentives are described. This will enable step 4, selecting the best option. Here various qualitative and quantitative methods are introduced, including tables with value estimates for mean price impacts for moving towards a more pro-competitive regulation. This leads to step 5, the recommendation. The options have to be ranked and recommendations have to be presented to policy makers and in the end an implementation process should follow. An evaluation of the policy change will help to further improve the selection and decision making process, step 6. All along, volume 3 provides numerous examples for the practical implementation process. In short, volume 3 summarises all the learning on processes of the already conducted OECD projects and of many other projects and can thus be extremely helpful for anyone conducting similar analyses. Currently, a competition assessment project with Romania is underway.7 The OECD offers trainings to competition law officials and/or regulators on the use of the Toolkit. If you are interested in trainings or in conducting a competition assessment project with the support of the OECD, please contact Federica Maiorano ([email protected]), Sean Ennis ([email protected]) or Ania Thiemann ([email protected]).
7 More on the work in Romania: http://www.oecd.org/daf/competition/romaniacompetitionassessment.htm. 45
Inspections on Spot
The SCF report “Comparative overview of the Balkan competition jurisdictions in the field of inspections on spot” was endorsed at the SCF meeting on 29 May 2015. The report is based on the information provided by 8 jurisdictions members of the SCF – Albania (ALB), Bosnia and Herzegovina (BIH), Bulgaria (BUL), Croatia (CRO), Kosovo (KOS), Macedonia (MKD), Montenegro (MNE), and Serbia (SRB).
The main conclusions of the report are as follows:
I. Legal requirements The legal requirements under the surveyed Balkan competition regimes concerning inspections on spot converge in many aspects. All Balkan competition authorities are authorized to carry out inspections at the premises of any legal entities and natural persons performing economic activities. Under almost all Balkan competition regimes the formal authorization has to specify the legal basis and the purpose of the inspection as well as the addressees and objects of the inspection. Only under half of the Balkan competition regimes the timeframe to carry out an inspection on spot is determined in the authorization decision and the persons empowered to conduct the inspection are specifically designated. The main differences are related to the power to inspect non-business premises as well as to the art of the inspection authorization.
Content of the decision authorizing the inspection
II. Preparation of inspections Some of the competition authorities of the region have adopted internal rules regarding the Presence of a Forensic IT expert preparation of the inspections and they are confidential. In every case an inspection team is designated, which consists of a team leader and team members, experts at the authority. Although there are no special requirements regarding the team members, the presence of a Forensic IT expert is usual in most of the jurisdictions. Usually the preparatory process of the inspection includes designation of an inspection team, gathering of information, preparation of the required 46
Special report documents, internal briefings. The police officials, who assist the experts during the inspection, are given general information of the undertakings, the place and time of the inspection. As a general measure for preserving the secrecy of the inspection in most of the jurisdictions the members of the inspection team are informed of the inspection and provided the necessary information shortly before the inspection itself.
III. Powers during inspections The SCF members are generally well equipped with the necessary powers during inspections. The main differences concern the power to seize evidence stored on mobile phones and the collection of evidence pointing to another infringement. In some of the SCF members these powers are missing, not explicitly envisaged or questionable. Some of the authorities do not have the power to enter non-business premises.
Powers during inspections
IV. Assistance by the police or other public enforcement authorities It appears from the above that although only two Balkan competition authorities have signed cooperation agreements with the police so far, it is feasible that in near future the rest SCF members will also enforce such agreements for intensified cooperation with the police.
V. Applicable limitations in inspections on spot The majority of SCF members have various limitations applicable in inspections on spot. The large majority of the competition authorities are making efforts to protect the privacy of the undertaking’s employees, to preserve the secrecy of the lawyer-client communications under the LPP and to avoid procedures that can lead to self-incrimination.
VI. Treatment of evidence The large majority of the Balkan competition authorities have adopted appropriate measures for treating evidence in such a way as to preserve its authenticity and veracity. For collecting evidence, most authorities can seize originals and make copies. In some jurisdictions, it is required to justify the reasons to seize the originals while in others the original documents cannot be detained beyond certain period. Availability of forensic equipment VII. Treatment of digital/ forensic/ electronic evidence Despite the availability of legal possibility to seize digital/ forensic/ electronic evidence only half of the SCF members have the necessary equipment to do this in practice. The importance of this type of evidence is growing 47
and ensuring possibilities to actually seize forensic evidence can be crucial for a successful inspection on spot and hence for the effective enforcement of competition rules.
VIII. Sanctions for non-compliance with the inspection Types of sanctions All SCF members have possibility to impose sanctions for non-compliance with an inspection defined in their competition laws. The main difference appears to be with regard to the types of sanctions that can be imposed. Only in BUL, ALB and MNE the competition authorities have the possibility to use periodic penalty payments in order to ensure compliance with the inspection. Taking into account that sometimes this type of sanction could ensure compliance with the inspection more quickly it is essential for the competition authorities to have possibility to impose also periodic penalty payments in case of non-compliance with the inspection.
IX. Judicial control There is a high degree of convergence between the Balkan competition jurisdictions with regard to the judicial control of the actions carried out during inspections, as only the final decisions of the Competition Authorities, but not their separate inspection actions can be Judicial review of the decision challenged before the competent administrative authorizing the inspection on spot courts, also on the ground of LPP and/or privacy infringement. This does not apply only to one competition regime. Another similarity is that almost all Balkan competition laws provide for legal remedies against the sanctions imposed for non-compliance during inspections. Furthermore, none of the SCF members’ competition laws provides for claiming damages caused as a result of an inspection, as this matter is often regulated in other legal acts. The main difference between the surveyed competition regimes concerns the judicial review of the decision authorizing an inspection.
X. International cooperation in the field of inspections Most of the competition authorities of the region are empowered to cooperate with other competition jurisdictions in the field of inspections on the basis of their national legislation on protection of competition or cooperation agreements. All of them may conduct inspections on behalf of other competition jurisdiction and may be assisted by experts from the authority, requesting the inspection. The jurisdictions have different powers as for example to exchange evidence with other competition authorities. However, although there are legal grounds for international cooperation in the field of inspections, this tool has not yet been used by the competition authorities from the Balkan region.
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