In February 2021, the Bulgarian Parliament adopted a major amendment to the Law on Protection of Competition (LPC). More than a hundred provisions were amended or newly introduced, making this change arguably the largest since the initial adoption of this law in 2008.
The main drivers of the change were the need to implement the ECN+ Directive and the efforts of the government to address the tensions between the big retail chains and local suppliers. Along with that, some finetuning of the merger control rules was implemented, including the introduction of the SIEC test for evaluating concentrations, and a good number of procedural and country-specific adjustments.
In fact, the existing Bulgarian legislation was already meeting, to a very large extent, most of the requirements of the ECN+ Directive, such as the independence requirements, the powers of the National Competition Authority (NCA) to inspect business premises, requests for information, finding and termination of infringements, interim measures, the power of the NCA to impose fines, the availability of a leniency program, etc. Some of the newly introduced rules, however, were perceived as real game-changers, especially in anti-trust-related risk analysis and management.
One such was the introduction of parental liability. Pecuniary sanctions for cartels, prohibited agreements, and abuses of a dominant position may be imposed not only on the infringing entity, but also on the person that exercises control over it, or the person that has acquired its assets, as a result of a transformation in which the infringing entity has ceased to exist, or on the economic successor of the activity through which the violation has been committed.
Another one was the structure and mechanism of collection of pecuniary sanctions imposed on associations for violations of Article 101 TFEU (Treaty on the Functioning of the European Union) and the respective Article 15 of the LPC related to the activities of their members. On one hand, the monetary risk was increased incomparably in such situations, by determining the basis for calculation as the cumulative amount of the turnovers of all members of the association operating on the affected market. On the other hand, in case the association fails to pay, which would quite certainly be the case every time, the members of the association should fund this liability and, if they do not, the NCA would be entitled to collect the amount from any undertaking which had a representative sitting on the management or controlling bodies of the association. If there is still an outstanding amount, the authority can collect it from any one of the other members of the association operating on the affected market.
These rules represented a disturbing development as they could be seen as departing from basic principles of Bulgarian national law regarding administrative liability. The situation, however, was exacerbated by the scope of applicability of these new rules. Despite the rule of Article 2(2) of the ECN+ Directive that the directive would cover the application of the national competition law only where it was applied in parallel to Articles 101 and 102 TFEU in the same case (with the explicit exception of the situations of Article 31(3) and (4) only concerning access to investigation files), the new amendment can apply to cases of application of national law only, which goes well beyond the purposes and applicability of the directive.
In the field of consumer goods supply, the government’s analysis showed that the concept of “abuse of stronger bargaining position,” introduced as a separate chapter in the LPC in 2015, did not work as expected, as in about 80 percent of the cases these rules were invoked in situations which had nothing to do with the initial purpose of the regulation. This finding came as no surprise because the specific regulation was very broadly formulated and easily applicable to any disbalanced commercial relation. Still pursuing the initial purpose of addressing the mismatch of the market power of retail chains and their smaller suppliers, the new amendment replaced the chapter on abuse of bargaining position with an entirely new one – Unfair Trading Practices in The Chain of Supply of Agricultural and Food Products, implementing Directive (EU) 2019/633 of the European Parliament and of the Council.
It remains to be seen how this new regulation will work in practice, but it is already obvious that, even if the proposed bill claimed that this amendment was seeking a better tool to pursue the initial legislative purpose, it already falls short because of its narrower scope, i.e. the supply chain of foods and agricultural products only.
By Svetlin Adrianov, EY Law Leader for Bulgaria, Albania, and North Macedonia
This Article was originally published in Issue 8.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.