І. General prohibition
In Art. 15, para. 1 of the LPC contains a general prohibition of any type of agreements between enterprises, decisions of associations of enterprises, as well as concerted practices of two or more enterprises that aim or result in preventing, restricting or distorting competition in the relevant market. It inexhaustibly lists some of the most typical manifestations of prohibited behavior:
1. direct or indirect determination of prices or other trade conditions;
2. distribution of markets or sources of supply;
3. restriction or control of the production, trade, technical development or investments;
4. application of different conditions for the same type of contracts in respect of certain partners, whereby they are placed in an unequal position as competitors;
5. making the conclusion of contracts conditional on the assumption by the other party of additional obligations or on the conclusion of additional contracts which by their nature or according to the usual commercial practice are not related to the subject of the main contract or its implementation.
The general prohibition under Art. 15 of the LPC is identical to the prohibition under Art. 101 of the TFEU and similarly to it declares null and void all agreements and decisions falling within its scope (Article 15, paragraph 2 of the LPC and Article 101, paragraph 2 of the TFEU).
I.1. Which behavior is forbidden?
The legal forms of prohibited conduct of enterprises are three: an agreement between enterprises, a decision of an association of enterprises and a concerted practice of enterprises.
1. Agreement between undertakings
Agreements between undertakings may exist in any form of agreement or understanding between economic operators as to their market behavior. The agreement is prohibited where it restricts the freedom of undertakings to determine their own and independent behavior on the market and instead undertakes certain conduct jointly, ultimately restricting or eliminating effective competition between them.
For there to be an agreement, the statements of will of at least two companies must match. As a result of the coincidence of the wills of the enterprises, an agreement is reached between them, which is aimed at achieving an anti-competitive effect on the market. The anti-competitive effect can consist both in the fact that companies aim to restrict competition with each other and in its actual restriction (ie to show a certain anti-competitive result on the market - both real and potential). Agreements which have as their object the direct or indirect fixing of prices, the allocation of markets or customers, or the restriction of production and sales, are always intended to restrict competition between undertakings. Their potential to harm market relations and consumer interests is so strong that when such agreements exist, they do not need to have been actually implemented by their participants and have produced a specific result in order to be prohibited by law.
The agreement can have any form or name, but only its essence matters. It can be written or oral, signed or unsigned, named or unnamed, it can even be objectified in a document that has a different name, it can stand out and implicit in the activities of economic entities as their specific line of market behavior.
2. Coordinated practice between enterprises
The term “concerted practice” is legally defined in § 1, item 14 of the Additional Provisions of the LPC as coordinated actions or inactions of two or more enterprises. In practice, it is considered that concerted practice is a form of coordination between companies, which, without reaching an agreement with each other, deliberately replaces the risks of competition with practical cooperation between them.
In order to distinguish a concerted practice from a prohibited agreement, it is considered to be a form of coordination between undertakings in which, without drawing up a joint plan, they deliberately eliminate the inherent risks of competition by coordinating their day-to-day commercial conduct. Consistent practice exists when undertakings, in the absence of direct or indirect contact between them, without reaching an agreement with each other, have adopted the same self-limiting market behavior, which is not due to the objective conditions of the relevant market.
Consistent practice also differs from the usual market parallelism that exists between participants in certain markets. Market parallelism cannot in itself constitute evidence of the existence of a concerted practice between them, except in cases where no other possible explanation for their parallel market behavior can be identified.
Coordinated practice is often observed in markets with a high degree of transparency, as it reduces the incentives and willingness of market participants to compete with each other and creates conditions for coordinated or coordinated market responses.
3. Decision of an association of enterprises
A decision of an association of undertakings is a form of coordinated or concerted conduct of independent undertakings which is dictated or facilitated by an entity which does not actually carry on business in the relevant market but unites independent economic operators and aims to protect their interests, forcing them to follow certain economic behaviors, which replaces effective competition between them with cooperation between them.
In practice, it has been established that the prohibited decisions of associations of enterprises can have many different forms of manifestation - letters, orders, instructions, protocols, forecasts, recommendations, references and others, which do not necessarily take the form of "decision". The constituent or structural acts of the associations themselves, as well as the organizational documents adopted by them, can also be adopted as a "decision" within the meaning of the general prohibition.
Business associations often function as a hub for collecting and exchanging sensitive commercial information between their members. If this information includes data on prices or other commercial conditions that competitors normally keep as a trade secret, its exchange within an association of undertakings constitutes a prohibited decision of an association of undertakings. The reason for this is that the possession of such information eliminates the possibilities for self-determination of the trade and price policy of the market participants and leads to prohibited coordination of their market behavior.
I.2. Types of prohibited agreements, decisions and concerted practices
Horizontal are agreements reached between two or more undertakings operating at the same level of production or distribution of certain products. These are cooperation agreements between companies that are real or potential competitors in the relevant market. The real competitor is the one that is actually present and operating in the same relevant market, and the potential competitor is the undertaking for which there is evidence that it could make the additional investments and costs necessary to enter in a short period of time. the relevant market.
Such are agreements, for example, between producers of a product (for example: between producers of bread in a city or region, or oil, or cheese, or eggs in a country), or between undertakings offering the same service (for example: Civil Liability Insurance or Design Services).
As a rule, horizontal price-fixing or production-limiting or market-sharing agreements, as well as agreements that enable companies to maintain, acquire or strengthen their market power and thus have an anti-competitive effect, always have an anti-competitive effect. negative effects on prices, production, innovation or variety and quality of products. Horizontal agreements with a similar subject matter are considered prohibited per se, so it is not necessary to establish their real anti-competitive effect on the market.
On the other hand, there are some categories of horizontal cooperation agreements (specialization agreements; research and development agreements; research and development agreements, etc.) which, in addition to anti-competitive effects, can bring significant economic benefits. These agreements are not considered per se prohibited and should therefore be assessed with a view to their possible exemption from the general ban. The EC has adopted Guidelines for horizontal agreements, which set out the criteria for assessing the most typical types of horizontal agreements from which economic benefits can arise.
1.1. Special type of horizontal agreements and concerted practices: Cartels
In § 1, item 5 of the Additional Provisions of the LPC the cartel is defined as an agreement and / or concerted practice between two or more companies - competitors in the relevant market, aimed at restricting competition by setting prices or price conditions for purchase or sale, distribution of quotas for the production or sale or allocation of markets, including in the manipulation of public tenders or competitions, or procurement procedures.
These agreements cause the greatest damage because they directly affect the outcome of competition. Pricing and limiting production force consumers to pay higher prices for goods or services, so they do not have the desired quantities. Allocation of markets or customers limits consumers' choices and therefore also leads to higher prices or reduced production.
A cartel is a horizontal agreement between direct competitors in the relevant market. Very often it is expressed in informal (verbal) agreements to undertake certain anti-competitive behavior. A cartel is always a joint act of independent undertakings which are in actual competition with each other, since they operate at the same market level in the production or distribution of the product concerned.
An example of a cartel is the agreement of the producers of a product not to sell it below a certain minimum price or to raise their prices together by a certain percentage from a certain date, or to limit their production in order to maintain a certain price level. A cartel also exists when they agree that everyone sells in a certain territory or certain customers, and no one enters the foreign one, or agrees on who will win a public procurement procedure, and for this purpose the others participate with offers with unrealistically high prices or not involved.
Each cartel has its own internal organization, which provides for the distribution of functions and roles among the participants in the cartel. In this organization, the function of the leader enterprise can be highlighted, which often plays the role of instigator for the formation of the cartel or exerts coercion on other enterprises to join them. The role of an administrator company is often observed, which collects and concentrates all the information necessary for the functioning of the cartel agreement. Typically, this information is used to monitor participants in the cartel and to monitor compliance with cartel agreements by imposing specific "sanctions" on participants who violate those agreements. The majority of the participants in the cartel are follower companies, which most often have less market power and therefore do not oppose the cartel leader.
The distinction between the functions and the roles of the individual undertakings participating in the cartel relates to the amount of the sanction they will bear for their breach of the general prohibition. As a rule, the leader company bears the highest sanction for committing the violation. Those who have played a passive role or have only followed the leader are usually subject to lower penalties for participating in the cartel. In addition, an enterprise that has coerced other participants in the cartel to join or remain in the cartel cannot benefit from the possibility of exemption from sanctions under the CPC Program.
The other companies participating in the cartel have the opportunity to obtain exemption or reduction of property sanctions. The condition for all is to reveal their participation in the cartel and to voluntarily and actively assist the CPC in proving the violation. For more information on these options, please go to the special section or click here.
Vertical agreements are agreements for the sale of goods or services that are concluded between undertakings engaged in economic activities at different levels of production and distribution, such as contracts between a manufacturer and a distributor for the distribution of certain products. Agreements between a manufacturer of raw materials and components that are used by another company to produce a particular end product are also vertical.
Normally, vertical agreements, in which companies determine only the price and quantity of the product subject to sale, do not restrict competition. However, in some cases, the parties to vertical agreements agree on certain restrictions for the buyer or seller (so-called "vertical restrictions"), such as an obligation for the buyer not to buy goods from a competing brand (so-called "non-compete obligation"). either an obligation on the seller to sell its products only to a specific buyer (so-called "exclusive delivery obligation"), or an obligation on the seller not to sell to another buyer in a certain territory (so-called "exclusive distribution"), or to sell only to pre-defined distributors (so-called "selective distribution").
Vertical restraints can have both negative and positive effects on competition in the market, which is why they are being analyzed with a view to their possible exemption from the general ban. The EC has adopted Guidelines on Vertical Restraints, which set out how to treat vertical agreements that are not covered by the block exemption.
I.3. Violation of which provisions constitutes this conduct?
Art. 15 of the LPC
Art. 101 of the TFEU
Upon establishment of prohibited conduct by the addressees of the general prohibition - enterprises and associations of enterprises, there are grounds for realization of their administrative-penal liability due to the administrative violation committed by them under Art. 15, para. 1 of the LPC and / or Art. 101, para. 1 of the TFEU.
After the accession of the Republic of Bulgaria to the EU, the general prohibition under Art. 15, para 1 of the LPC may be applied independently or in parallel with the prohibition under Art. 101, para. 1 of the TFEU. The parallel application of Bulgarian and European law is mandatory for the CPC in all cases where it finds that the case it considers affects or may affect trade between EU Member States. The parallel application means the possibility for the CPC to establish an antitrust violation under both national and European law. And independent application of the general prohibition under Art. 15, para. 1 of the LPC, without Art. 101, para. 1 of the TFEU, is possible only when dealing with cases that have no effect on trade between EU Member States.
ІІ. Are there cases in which these types of behavior are not prohibited?
The general prohibition is inapplicable to anti-competitive behavior of undertakings whose market shares do not exceed the maximum thresholds specified in the law (the so-called "de minimis rule"), provided that their conduct does not aim or result in direct or indirect pricing, allocation markets and / or customers and limiting production and sales.
On the other hand, certain agreements, decisions and concerted practices may be considered exempt from the general prohibition, provided that they meet the requirements of Art. 17, para. 1 of the LPC and / or Art. 101, para. 3 of the TFEU, or fall within the scope of a decision of the CPC or a regulation of the EC on block exemption from the ban.
ІІ.1. For market shares of participants below certain thresholds
In order for an agreement, decision or concerted practice to fall within the scope of the general prohibition, it is necessary that its anti-competitive effect is not insignificant within the meaning of Art. 16 of the LPC (the so-called “de minimis rule”). This rule sets specific thresholds for the market shares of the undertakings participating in the agreement where it is considered to have a negligible effect on competition.
According to the rule of art. 16, para. 2 of the LPC, agreements between enterprises, decisions of associations of enterprises and concerted practices have a negligible effect on competition:
(1) if the combined market share held by the parties to the agreement does not exceed 10% of the relevant market affected by the agreement in question, where the agreement is concluded between undertakings which are actual or potential competitors (agreements between competitors); or
(2) if the market share of each of the parties to the agreement does not exceed 15% in any of the relevant markets affected by the agreement, where the agreement is concluded between undertakings which are not actual or potential competitors in any of those markets (agreements) between non-competitors).
According to Art. 16, para. 3 of the LPC, the de minimis rule does not apply to agreements, decisions or concerted practices that have as their object or effect: (1) determination of the prices for the sale of products to third parties; (2) allocation to markets or customers; (3) limiting production or sales.
ІІ.2. If they fall under the block exemption decision / regulation
Some agreements, decisions and concerted practices may be considered exempt from the general prohibition under Art. 15, para. 1 of the LPC and under Art. 101, para. 1 of the TFEU, if they meet the conditions specified in Art. 17 of the LPC, respectively in Art. 101, para. 3 of the TFEU, or are covered by a decision of the CPC, respectively by a regulation of the EC, for group exemption from the prohibition of a certain category of agreements, decisions or concerted practices.
The conditions for group exemption of certain categories of agreements from the general ban are contained in a specially adopted by the CPC decision № 55 / 20.01.2011 repealing Decision of the CPC № 119 / 08.07.2003 for group exemption from the ban of a certain type research and development contracts, Decision № 118 / 08.07.2003 on block exemption from the prohibition of certain types of specialization contracts and CPC Decision № 212 / 29.07.2004 on block exemption of certain categories of vertical agreements in the motor sector vehicles. This decision of the CPC introduces into national law the criteria set out in: Commission Regulation (EU) № 330/2010 on the application of Art. 101 (3) TFEU on the categories of vertical agreements and concerted practices; Commission Regulation (EU) № 461/2010 on the application of Art. 101 (3) TFEU to the categories of vertical agreements and concerted practices in the motor vehicle sector; Commission Regulation (EU) (1217/2010 on the application of Art. 101 (3) TFEU for certain categories of research and development agreements; Commission Regulation (EU) (1218/2010 on the application of Art. 101 (3) TFEU for certain categories of specialization agreements; Commission Regulation (EU) № 267/2010 on the application of Art. 101 (3) TFEU for certain categories of agreements, decisions and concerted practices in the insurance sector; Commission Regulation (EC) (772/2004 on the application of Art. 81 (3) of the Treaty in respect of categories of technology transfer agreements;
There are clauses which, if included by companies in these agreements, lead to the exclusion of the whole agreement from the scope of the relevant block exemption. These are clauses that aim directly or indirectly, alone or in combination with other factors, fixing prices, limiting production and sales, allocating markets and customers.
There are vertical restrictions which, if agreed, lead to the exclusion of the whole agreement from the scope of the block exemption. In this case, the probability of his individual release is also negligible. Yeah, they're like that:
- Limiting the buyer's ability to determine his selling price, without prejudice to the supplier's ability to impose a maximum selling price or to recommend a selling price, provided that prices are not reduced to a fixed or minimum selling price as a result of pressure exerted by one of the Parties or of incentives proposed by it;
- The restriction of the territory or customers to which the distributor may sell the goods or services, except in the following cases:
- the seller has reserved for himself or designated for another distributor a territory or customers;
- the ban on selling to unauthorized distributors in the so-called "Selective" distribution systems;
- the restriction on end-user sales when applied to a distributor operating at wholesale level;
- The restriction of end-user sales by retail distributors by "selective distribution" systems, as well as
- Prohibit a component supplier from selling them to end users or other repair shops that require the use of those components.
There are other types of vertical restraints which, if agreed, are excluded from the Block Exemption Regulation, but it continues to apply to the rest of the agreement. Yeah, they're like that:
- restrictions providing for a "non-compete" clause (ie not to sell competing goods or services) for a period longer than five years,
- clauses prohibiting the buyer from producing, buying, selling or reselling goods or services. However, such a clause is permissible under the following conditions:
- it is envisaged for a period of up to one year from the termination of the agreement;
- concerns competitive goods;
- refers to the same outlets from which the goods under the previous agreement are sold;
- it is necessary to protect the know-how of the supplier as well
- the restriction imposed on distributors by a "selective" distribution system not to sell goods to a specific competitor of the supplier.
II.2.1. Possibility to withdraw the block exemption
Similar to the EC regulations on block exemption, which can be revoked by the EC in specific cases, the group exemption of a certain category of agreements, decisions and concerted practices, issued by a CPC decision, can also be revoked by the CPC. According to Art. 18, para. 2 of the LPC, when the CPC establishes that an agreement, decision or concerted practice, falling within the scope of a decision for group exemption, does not satisfy the requirements of Art. 17 of the LPC, it ruled that her decision for group exemption did not apply in the specific case. In this case, the CPC does not impose the sanction provided for in the law for violation under Art. 15, para. 1 of the LPC, and indicates a term in which the parties may bring their agreement in compliance with the conditions under Art. 17 of the LPC or terminate it.
The CPC may withdraw the application not only of its own decision, but also of a regulation of the European Commission on Block Exemption, when it finds that a certain agreement, decision or concerted practice is incompatible with Art. 101, para. 3 of the TFEU effect on the territory of the country or part of it, having all the characteristics of a separate geographic market. According to Art. 18, para. 3 of the LPC, in this case the CPC rules that the relevant regulation of the EC for group exemption is inapplicable on the territory of the country, if the conditions under Art. 29, para. 2 of Regulation (EC) № 1/2003, and indicates the period within which the parties may bring their agreement into compliance with the conditions of Art. 101, para. 3 of the TFEU or terminate it.
On the other hand, only the EC has the power to withdraw the possibility of applying the block exemption of a certain category of agreements, decisions and concerted practices for the entire territory of the EU, when according to Art. 29, para. 1 of Regulation (EC) 1/2003, the EC has established that an agreement, decision or concerted practice to which a block exemption regulation applies has certain consequences which are incompatible with Art. 101, para. 3 of the TFEU.
ІІ.3. If the prohibited agreements, decisions and concerted practices individually meet certain conditions
If an agreement, decision or concerted practice satisfies the conditions for a block exemption, it shall be deemed to be exempt from the prohibition on that ground. However, if the agreements, decisions or concerted practices do not meet the requirements for block exemption, the only way to keep them prohibited is to bring them into line with the specific conditions under Art. 17, para 1 of the LPC, respectively under Art. 101, para. 3 of the TFEU. These conditions are met when the relevant agreements, decisions and concerted practices:
(1) Contribute to the improvement of the production or distribution of goods or the provision of services or to the development of technical and / or economic progress.
(2) Provide consumers with a fair share of the benefits received.
(3) They shall not impose on the participating undertakings restrictions which are not necessary for the attainment of these objectives.
(4) Do not enable participating undertakings to prevent competition in a substantial part of the relevant market.
The general prohibition under Art. 15 of the LPC, as well as Art. 101 of the TFEU, takes effect and applies ipso iure, which means that all agreements, decisions and concerted practices falling within its scope are prohibited, provided that they do not meet the conditions for exemption from the ban and no prior decision is required. of law enforcement. Conversely, agreements, decisions and concerted practices falling within the scope of the general prohibition, which, however, satisfy the conditions for exemption from the prohibition, are not prohibited, nor is a prior decision of a law enforcement authority required.
The assessment of whether and to what extent the relevant agreements, decisions or concerted practices satisfy the conditions for exemption should be carried out by the undertakings themselves. It is for them to determine whether the agreements, decisions or concerted practices in which they participate fall within the scope of the general prohibition and, if so, whether they qualify for exemption from the prohibition. And in the event of a legal dispute, the burden of proving the existence of the conditions for exemption from the ban is borne by the undertakings or associations of undertakings which invoke them.
III. How the study is conducted in cases of prohibited decisions, agreements and concerted practices
III.1. How is the proceedings before the CPC initiated?
The establishment of anti-competitive behavior of enterprises and associations of enterprises is carried out by the CPC within the special proceedings regulated in Title III, Chapter IX of the LPC - "Proceedings to establish violations and impose sanctions under Chapters three and four and Art. 101 and 102 of the TFEU ”.
The proceedings before the CPC for establishing violations and imposing sanctions for committed violations under Art. 15 of the LPC, as well as under Art. 101 of the TFEU, may be formed on the basis of: decision of the CPC on its own initiative; request of a prosecutor; request of the persons, whose interests are affected or threatened by violation under this law; request for release from sanction by the order of art. 101 of the LPC in the cases of a secret cartel.
In the decision of the CPC to initiate proceedings on its own initiative, the Commission states its grounds on which its suspicions of a violation have arisen. According to Art. 70, para. 3 of the LPC, these decisions of the CPC are not subject to appeal. The Commission can obtain information and evidence to serve as a reason for self-referrals from various sources, such as: signals from citizens and institutions, media reports, materials collected in other studies, etc.
With regard to the request of the affected person to initiate proceedings before the CPC, Art. 71 of the LPC prescribes explicit requirements regarding its content. The request is submitted in a form adopted by the CPC Decision № 274 / 08.03.2011, and must contain the information and supporting evidence provided therein. When submitting the request, a state fee is also paid, determined in the Tariff for fees collected by the CPC under the LPC, the Public Procurement Act and the Insurance Act.
Form of request for initiating proceedings
The law does not provide for special requirements and requisites for the prosecutor's request to initiate proceedings before the CPC.
Regarding the request for release from sanction by the order of art. 101 of the LPC in the cases of a secret cartel, its details and the conditions for its submission are regulated in the special CPC Program for release from sanction / reduction of sanctions in case of participation of an enterprise in a secret cartel, adopted by CPC Decision № 274 / 08.03 .2011
III.2. On-site inspections
Within the proceedings for establishing violations under Art. 15 or Art. 21 of the LPC and under Art. 101 or Art. 102 of the TFEU, the Commission conducts an investigation, exercising its powers under Art. 45 of the LPC.
Very often the CPC begins its research to establish prohibited agreements, decisions and concerted practices by conducting on-site inspections in the offices of enterprises and their associations.
The inspections are carried out by the CPC employees after obtaining a court permit from the Administrative Court - Sofia. During the inspections the CPC employees can:
- enter the premises, vehicles and other objects used by their enterprises or associations;
- review all documents and records related to the activity;
- seize or receive on paper, digital or electronic media copies or extracts from documents and records;
- seize or receive electronic, digital and forensic evidence;
- gain access to all media, including servers;
- seal for a certain period of time premises, vehicles and other objects used by the enterprises;
- take oral explanations from any representative or member of the management bodies or staff of the undertakings.
In order for the inspection to be carried out in the offices of the enterprises or associations, the law does not require their management (the executive director or the manager) or their lawyer to be present there. It is sufficient for any representative of the enterprise or association, its employee or any other person who has the right to be there or to be found on the premises during the inspection to be present.
The CPC receives assistance from the police in carrying out these inspections.
The CPC employees draw up a report on the seized evidence, which is signed by them and by a representative of the enterprise or association. If the representative of the enterprise or association refuses to sign the protocol, it is signed only by the CPC employees.
The investigation of the cases is carried out by a working team consisting of CPC employees and is monitored by a member of the Commission, who, if necessary, gives instructions to the working team.
Typically, the following methods of gathering evidence are used in the study:
- requesting information and material, written, digital and electronic evidence from participants in the proceedings or other persons and authorities;
- recording oral or written explanations;
- conducting on-site inspections;
- requesting information or assistance from other national competition authorities of EU Member States or the EC.
In the study all natural and legal persons, enterprises, associations of enterprises, state bodies and local self-government bodies, as well as non-governmental organizations are obliged to assist the CPC in order to establish the factual situation in the case (Article 46 of the LPC).
The CPC has the opportunity (Article 49 of the LPC) to keep secret the identity of a person who gave explanations or provided data on the violations. This possibility exists both before the beginning of the proceedings before the CPC and during it. It is applied when the person has grounds to believe that due to the fact that he has provided information to the CPC, serious adverse consequences will occur for him or his business. In this case, the CPC grants him "security informant status". This shall be done in accordance with the internal rules adopted by Commission Decision № 113 / 10.02.2009. in the Rules.
After gathering sufficient evidence in the case, the working team prepares a report and presents it to the supervisory member of the CPC, who notifies the chairman of the Commission of the report, who in turn resolves a closed meeting of the CPC within 14 days. completion of the study (Article 73 of the LPC). At the closed session the CPC considered the submitted report and decided on the further course of the proceedings.
In case the CPC accepts at the closed session that no violation has been committed, it shall issue a decision establishing that no violation has been committed under Art. 15 of the LPC and / or that there are no grounds for taking action for a violation under Art. 101 of the TFEU.
If, on the basis of the report of the working team, the CPC cannot form a final conclusion on the case under consideration, it shall issue an order for return of the file for additional investigation with obligatory instructions for the working team.
In the cases when at its closed session the CPC accepts that the proposal of the working team for establishing a violation under Art. 15 of the LPC or Art. 101 of the TFEU, it rules for the defendants to file a complaint alleging a violation of the law.
According to Art. 74, para. 3 of the LPC, the ruling of the CPC for filing allegations of violation is provided to the applicant and the defendants in the proceedings before the CPC, and the other participants in the proceedings (constituted stakeholders) are only notified. In the ruling, the CPC states a period of not less than 30 days in which the applicant and the respondent party have the right to submit their written objections to the allegations, and the constituted interested parties - their opinion. The term for submission of objections and opinions starts from the day of receiving the CPC ruling or from the notification about it. Along with their objections, the parties must present all the evidence they have in their support.
In order to guarantee the right to defense of the parties to the proceedings before the CPC, the CPC's ruling on the allegations of infringement also states that the parties and interested parties have the right to access the case file and be heard by the Commission. in open session.
The hearing of the parties itself is carried out in open session, which is scheduled by a resolution of the Chairman of the Commission after submission of objections and opinions on the CPC ruling on the allegations of violation. The public hearing shall be scheduled for a date set not earlier than 14 days after the expiry of the time limit for the submission of objections or opinions.
If after the hearing the CPC considers that it should amend its initial allegations of violations of the law (for example: to join allegations of new violations of the law; to join new participants in the alleged violations; to give a different legal qualification of its allegations, etc. .), The CPC issues a new ruling, which accepts and submits its new or amended allegations of a violation of the law (Article 77, paragraph 2, item 1 of the LPC).
After the hearing of the parties, the CPC again analyzed all the evidence gathered and the opinions of the parties, presented in response to the allegations of violations and during the oral hearings. As a result, the CPC may issue a decision establishing the violation of the law and the violator, imposing a property sanction on him and ordering the termination of the violation.
At this stage, the CPC may also issue a decision establishing that no violation has been committed and / or that there are no grounds for taking action for a violation of Art. 101 of the TFEU.
Depending on the subject matter of the proceedings, the CPC may also adopt a decision declaring that a block exemption decision or the provisions of the relevant EU block exemption regulation do not apply to a specific agreement. In this case, the CPC also determines the period within which the parties are obliged to bring their agreement in line with the requirements of Art. 17 of the LPC or of Art. 101 para. 3 of the TFEU or terminate it.
The respondent parties, to which the ruling was sent to file allegations of violation of the law (before the final decision of the CPC in the case), may submit a proposal to the CPC to assume obligations on their part to achieve termination of unlawful conduct (Article 75, paragraph 1 of the LPC). The CPC may issue a decision approving the assumption of the obligations proposed by the respondent parties, if through them the anti-competitive behavior of the respective enterprises will be stopped. In this case, the CPC does not establish a violation, but terminates its proceedings. After the approval of the commitments, they become real legal obligations for the respondent enterprises, and the control over their implementation is carried out by the CPC itself. If these obligations are not complied with by the respondent or if they are approved on the basis of incomplete, inaccurate, unreliable or misleading information provided, the Commission may, on request or on its own initiative, reopen the original proceedings.
The LPC explicitly limits the scope of the CPC's power to issue a decision approving commitments in cases of "grave violation" of the law (Article 75, paragraph 3 of the LPC). According to § 1, item 16 of the Additional Provisions of the LPC, “serious” is the violation that has or could have a significant and lasting impact on the competitive environment of a significant part of the national market.
The decisions of the CPC, which end the proceedings, are subject to appeal by the parties and by any third party who has a legal interest in it, before the Supreme Administrative Court within 14 days of their notification under the APC (for the parties) or publication them in the electronic register of the CPC (for third parties).
IV. What property sanctions are imposed by the CPC?
Responsibility for participating in a prohibited agreement, decision or concerted practice lies with undertakings that have agreed to adhere to a joint plan to restrict competition and / or associations of undertakings which have facilitated or facilitated the anti-competitive conduct of their members. Liability for breach of the general prohibition may also be borne by an undertaking which has only attended a meeting with its competitors and has behaved passively at that meeting.
IV.1. Determining the amount of sanctions for a violation of the law, expressed in participation in a prohibited agreement, decision or concerted practice
The pecuniary sanction for participation in violation of the general prohibition shall be determined for each enterprise in the amount of up to 10% of its total turnover for the previous financial year.
The sanction for undertakings shall be determined on the basis of the value of the revenue generated by the undertaking concerned from the sale of the goods or services affected by the infringement. The basic amount of the sanction is defined as a specific percentage of the value of sales, which is different for different gravity violations.
Based on the general practice, the CPC has adopted the following distinction of the violations of the competition rules according to their gravity:
- Mild - these are considered to be cases of vertical restrictions of competition that cover a small geographical area or affect a limited number of businesses or consumers;
- Not particularly severe - these are considered to be horizontal restrictions of competition that are not "cartels" and vertical restrictions of competition that do not lead or could not lead to market foreclosure or exclusion of competitors from the market;
- Severe - such are the cases of cartels.
The sanction of the associations of enterprises is determined depending on the thresholds set for the respective violation depending on its severity, in the Methodology of the CPC for determining the sanctions for antitrust violations.
Sanctions of undertakings and associations of undertakings also depend on the duration of the infringement. The longer the participation of the enterprise or association in the violation, the higher its sanction.
The individual amounts of sanctions for undertakings and / or associations of undertakings may be tailored to the aggravating or mitigating circumstances available. In the case of participation in prohibited agreements, decisions and concerted practices, such circumstances may be:
Aggravating circumstances are:
- Committing the same or a similar infringement found by the CPC, another national competition authority of an EU Member State or the EC;
- Failure to assist or obstruct the CPC in conducting its research or opposing the study;
- The undertaking has acted as an initiator, leader or instigator of the infringement or has coerced other undertakings to join the infringement;
- Offering or granting "compensation" or "compensation" to other undertakings for their involvement in the infringement;
- Affecting competition in related or neighboring markets; or
- Others, depending on the case.
The following may be considered as mitigating circumstances:
- Termination of the violation immediately after the intervention of the CPC, as this circumstance does not apply in the cases of cartels;
- Passive behavior of the enterprise or association, fulfillment of a very limited role in the violation or adoption of the strategy "following the leader";
- Providing effective assistance to the CPC outside the scope of the program for release from sanctions or reduction of sanctions and the obligation to assist under the LPC;
- Taking timely measures to limit the harmful effects of the violation; as well as
- Others, depending on the case.
Undertakings should bear in mind that if their participation in a prohibited agreement, decision or concerted practice constitutes a breach other than the LPC and the TFEU, the sanction thus determined shall be increased by up to one quarter.
Ultimately, after all successive calculations, the sanction for the undertaking may reach the maximum amount set by law, equal to 10% of the total turnover of the undertaking for the previous financial year.
If the company does not comply with a decision or ruling of the CPC (for example, if it does not comply with the decision to terminate the violation), according to the law will be imposed a fine of up to 10% of its total turnover for the previous financial year.
IV.2. Sanctions for breach of procedural obligations and periodic pecuniary sanctions
For the procedural violations committed by the defendants in the proceedings before the CPC, such as:
- non-fulfillment of the obligation to cooperate (a form of such non-fulfillment may be the opposition of the enterprise or the association to the on-site inspection, for which the CPC has received permission from the court);
- breach of the integrity or destruction of the seals affixed during an on-site inspection;
- untimely provision or provision of incomplete, inaccurate, unreliable or misleading information, etc.,
The CPC imposes a property sanction on the respective enterprise or association of enterprises in the amount of up to 1% of its total turnover for the previous financial year.
In this case, the CPC also sets a deadline within which the party must fulfill its obligation to cooperate or to provide complete, accurate, reliable and non-misleading information. In case of non-fulfillment of these obligations within the specified period, the CPC imposes periodic pecuniary sanctions up to 1% of the average daily total turnover for the previous financial year for each day of non-fulfillment until the cessation of illegal action or inaction (ie until the enterprise or association fulfill its obligation).
IV.3. Do companies have the opportunity to avoid paying sanctions for violations of the law?
In one of the types of violation of the general prohibition - only in case of participation in a secret cartel and if they meet certain conditions, some of the enterprises - participants in the cartel may receive from the CPC or full exemption from the sanction for this violation or its partial reduction ( so-called “Leniency”).
This possibility is provided in Art. 101 of the LPC, and the terms and conditions for this are regulated in detail in the adopted by Decision of the CPC № 274 / 10.03.2011. .
For more information on the Program and the Rules, please go to the special section or click here.
Acts that are applied in the proceedings of the CPC with subject to prohibited agreements between enterprises, decisions of associations of enterprises and concerted practices:
POLICY OF THE COMMISSION FOR PROTECTION OF COMPETITION
ON IMMUNITY FROM FINES OR REDUCTION OF FINES IN CASE OF PARTICIPATION OF AN UNDERTAKING IN A SECRET CARTEL
For more information or for submitting applications for immunity from fines or reduction of fines call
Veselina Kamenova on tel.+ 359 2 9356 210
Emona Peshevska on tel. + 359 2 9356 138
fax + 359 2 935 6153
email: [email protected]
or write to the following address:
Commission for Protection of Competititon
18 Vitosha Blvd., 1000 Sofia
І. Why is the policy on immunity from fines or reduction of fines in case of participation of an undertaking in a secret cartel necessary?
The Law on Protection of Competition (LPC) defines cartels as an agreement and/or concerted practice between two or more undertakings, competitors on the relevant market, aimed at restricting competition through price fixing or fixing pricing conditions for purchase or sale, allocation of production quotas or sales or allocation of markets, including in rigging of public bids or tenders or public procurement award procedures.
Participation in a secret cartel is considered an infringement of Article 15 of the LPC and of Article 81 of the EC Treaty when the cartel affects or may affect trade between Member States.
Participation in secret cartels is considered one of the gravest infringements of competition rules. The undertakings involved in cartels can seriously damage the interests of customers because through the cartel they can increase the prices of goods and services, limit supplies and restrict the choice of customers. In a long-term perspective the presence of cartels on the market leads to reduced competitiveness of the economy as a whole, ineffective distribution and use of resources, as well as to reduced opportunities for ensuring employment.
The LPC as well as the Methodology for setting fines under the LPC, envisage the highest sanctions for participants in secret cartels. Cartels are qualified as „grave” infringements of the LPC. The basic amount of the sanction in case of participation in a secret cartel has been set as up to 10% of the value of sales of the goods or services affected by the infringement. Other factors are taken into account in setting the basic amount of the sanction as well (incl. the duration of the infringement, aggravating or mitigating circumstances, the basic amount of the sanction shall be set with an increase for deterrence of up to 25% of the basic amount if the cartel is an infringement of Article 81 of the EC Treaty). Set in this way, the total amount of the imposed sanction may reach 10% of the total turnover of the undertaking in the preceding financial year.
The society has stronger interest in revealing and terminating cartel activity rather than in imposing a sanction on the specific infringer.
Due to this reason the LPC provides undertakings participating in a secret cartel, which reveal to the CPC their cartel activity and provide the required evidence, the opportunity to be granted immunity from fines or to benefit from a significant reduction of the fines to be imposed for infringements of competition rules committed by them. In this way, the CPC improves its chances for revealing and terminating cartel activity that leads to significant damage to the well-being of customers and to the economic development.
The above mentioned opportunity and the specific conditions for its application have been defined in Article 101 of the LPC as well as in the Programme on immunity from fines or reduction of fines and the Rules on its application adopted by CPC Decision No. 112 of 10 February 2009. The LPC, the Programme and the Rules on its application form the legal basis of the CPC policy on immunity from fines or reduction of fines in case of participation of an undertaking in a secret cartel.
The LPC, the Programme and the Rules on its application ensure the full correspondence of the Bulgarian policy on immunity from fines or reduction of fines in case of participation of an undertaking in a secret cartel with the model programme adopted by the European Competition Network.
ІІ. Nature of the CPC policy on immunity from fines or reduction of fines in case of participation of an undertaking in a secret cartel
In brief, the Policy envisages the following measures:
Just one undertaking is given the opportunity to be granted immunity from sanction for its participation in a secret cartel – this is the first undertaking which confesses to the CPC involvement in a secret cartel and provides the required information and evidence. The LPC envisages two opportunities for that.
The first opportunity for an undertaking to be granted immunity from fines is when it, prior to other cartel members,confesses to the CPC its involvement in a secret cartel and submits such explanations and evidence about the activity of the cartel that will allow the CPC to request court authorisation to carry out inspections in the offices of the other cartel members.
If the first opportunity has not been used and the CPC has not granted to another undertaking a conditional immunity from fines (prior to carrying out an inspection or prior to having collected sufficient evidence to seek a court authorisation to carry out an inspection) and if the CPC, at the time of the submission of the evidence, has not collected sufficient evidence to prove the infringement, an opportunity for full immunity from fines for its participation in the cartel shall be given to the first undertaking of the cartel members which manages to submit sufficient evidence the will allow the CPC to prove the infringement.
In all cases, the undertaking shall immediately end its involvement in the cartel and shall cooperate fully, genuinely and voluntarily with the CPC on a continuous basis throughout the entire procedure. At the same time, the undertaking shall not disclose any of the content of the application for immunity from fines submitted to the CPC.
An undertaking which has forced the other cartel members to get or stay involved in the cartel shall not be granted immunity from fines.
The undertakings which do not meet the requirements for immunity from fines may be gtranted reduction of fines up to 50% of the basic amount, if they submit to the CPC evidence of significant importance for proving the infringement. The assessment whether a specific evidence is “of significant importance to prove the infringement” shall be made by the CPC relative to the evidence already collected in the procedure at the time of submission of the evidence. In this aspect, both the quality of submitted evidence and the time of submission to the CPC have an important role to play: the first undertaking of this group may be granted a reduction of the fines from 30% to 50%, the second – from 20% to 30%, and the next – from 10% to 20%.
In order to be granted reduction from fines, the undertaking shall cooperate with the CPC throughout the entire procedure, shall end its involvement ion the cartel and shall not disclose the fact that it is teking part in this Programme.
ІІІ. What do undertakings have to do in order to be granted innumity from fines or reduction of fines?
The initiative for application of the Proframme on immunity from fines or reduction of fines is entirely in the hands of the undertakings.
The undertakings which are involved in a secred cartel and would like to end their involvement may use the opportunities offered by the Programme on immunity from fines or reduction of fines. Those undertakings, as well as any other interested parties in this relation, may may get in touch with the contact persons appointed by the CPC in relation to the application of the Programme. The undertakings may establish initial anonymous contact with the CPC in order to obtain detailed explanations on the content and conditions for participation in the Programme.
The actual participation in the Programme, however, is not ananymous. In order to be included in the list of undertakings which would like to be granted immunity from fines or reduction of fines in relation to a given case, the undertakings shall submit a standard application for immunity from fines or reduction of fines supported by evidence. The application shall be submitted to the CPC via the contact persons, and not in the general records directorate of the CPC.
All applications for immunity from fines or reduction of fines and the information and evidence enclosed relating to one and the same alleged cartel, shall be reviewed and assessed in the consecutive order in which they were received and registered in the CPC. Therefore it is of significant importance for undertakings to assess carefully and in a timely manner the positive effects of their participation in the the Programme before another member of the same cartel has left them behind.
In case the undertaking needs additional time to complete the application for immunity from fines and reduction of fines with evidence, it shall submit a standard market application and shall duly justify the reasons which make the granting of a period of time necessary. On the basis of a discretionary assesment made on case-by-case basis, the CPS Chairperson with a ruling may grand a period of time for the underaking to complete the application for immunity from fines or reduction of fines. If the undertaking submits all information and evidence required for immunity from fines, with all required data and evidence, before the expiration of the set period of time its position in the consecutive order of submission of applications shall be preserved and it shall be deemed that the undertaking has submitted its application on the date on when the period (the marker) was granted.
In submitting the application, supported by evidence, the undertakings shall receive a confirmation of receipt of the application, indicating the date of its submission. If at the time of submission of the application, the information and evidence submitted with the application are considered to be sufficient to fulfill the conditions for immunity from fines, the CPC Chairperson shall grant conditional immunity from fines to the undertaking by written order, respectively – conditional reduction of fines for its involvement in the cartel – subject of the proceedings. The final immunity from fines or reduction of fines shall be granded to undertakings with a final decision adopted by the CPC at the end of the proceedings in accordance with the overall analysis of all evidence and the extent to which the undertaking has met all conditions in the course of the proceedings.
Where the cartel comprises an infringement of Article 81 of the EC Treaty, the GD Competition of the EC is particularly well-placed to investigate the case and the undertakings may, upon their own judgement, submit a summary application for immunity from fines.
ІV. Contact CPC
For more information about the conditions and application of the Policy on immunity from fines or reduction of fines in case of participation in a secret cartel as well as for submission of Applications for immunity from fines or reduction of fines get in touch with the CPC contact persons at
tel./ fax + 359 2 986 3153
or at the following address:
Commission for Protection of Competititon
18 Vitosha Blvd., 1000 Sofia
V. Applicable Legislation
- Article 15 of the LPC and Article 101 of the TFEU
- Article 101 of the LPC
- Programme on Immunity from Fines or Reduction of Fines in case of participation of an undertaking in a secret cartel (Leniency programme)
- Rules of implementing the Programme
- Application for immunity from fines and / or reduction of fines and Guidelines for its completion
- Marker Application and Guidelines for its completion
- Summary application for immunity from fines and Guidelines for its completion