Romanian Competition Council issues recommendations for boosting competition on the primary timber market

The Romanian Competition Council recently finalised its study on the primary timber market and has issued recommendations for sector development and boosting competition.

The Competition Council found that there are still significant discrepancies in the numbers reported by the various authorities (the National Statistics Institute, Eurostat and the National Forestry Inventory), for various key indicators such as forest area and average wood volume per hectare.

It also found that, despite a significant reduction in illegal tree cutting due to implemented wood tracking programs and increased penalties, illegal tree cutting remains a concern.

The Competition Council recommends:

• immediate finalisation of the national forestry inventory, which is currently only in place for an insignificant portion of the forestry fund, making it difficult to identify all owners/administrators of forests, especially those failing to comply with applicable legislation;
• modification of forestry legislation in Romania, allowing forests which do not comply with forestry-related regulations to be temporarily granted into administration (at the expense of the forest owner) to the National Company Romsilva ("Romsilva");
• certain measures aiming to curb illegal tree cutting, such as social assistance to be granted in the form of fire wood; a taxation system that penalises non-compliance with forestry-related regulations; and, increased penalties for illegal tree cutting.

It was also found that certain amendments to forestry-related regulations have generated anti-competitive effects, deeming companies uncertified for forest exploitation works and natural individuals requiring fire wood ineligible to participate in tenders organised by administrators of public forests.

The Competition Council also recommended that Romsilva (which holds a dominant position on the timber market, administering approx. 49% of the national forestry fund) register the costs of primary raw matter (timber) and the costs of processing the same, at market price in its accounting. This should prevent Romsilva from subsidising its timber exploitation costs to the detriment of other timber processing operators who do not have access to timber at zero cost (as Romsilva does).

There are two Competition Council pending investigations into possible cartels between companies active on the timber trading market, within the context of certain tenders. The investigations target market sharing, allocating supply sources, and other bid rigging conduct.

If you require any further details on this topic, please contact Cristina Popescu.