Bulgaria in process of changing its Protection of Competition Act

Bulgaria

On 5 February 2021, the Bulgarian Parliament adopted the first reading of a Bill on the amendment of the Bulgarian Protection of Competition Act (PCA).

When passed, the Bill will implement EU Directive 2019/1 (the ECN+ Directive), which was promulgated to ensure that national competition authorities enjoy the resources, independence and powers to better enforce EU competition rules.

The Bill will also transpose EU Directive 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food-supply chain.

The key changes proposed in the Bill include:

  • The term of the seven commissars of the Bulgarian Competition Protection Commission (CPC) will increase from five to seven years, and panel members can be appointed for subsequent mandates. Current CPC members will continue their mandate if Parliament approves the extended term.
  • The Bill gives the CPC broader powers to investigate infringements and enforce anti-trust rules, including: seeking information and cooperation from national authorities or EU member-state authorities that are responsible for the enforcement of consumer protection rules; summoning individuals to obtain verbal or written explanations. Notably, the CPC will now be able to inspect private homes, vehicles and any premises belonging to company directors and employees if it is suspected that relevant information and documents are stored there.
  • Rules on CPC assessment and approval of “concentrations” (i.e. transactions in which two or more previously independent entities come under common control) will be amended. In particular, the CPC will apply the SIEC test (i.e. significant impediment of effective competition), which is also applied by the European Commission. Concentrations will be assessed under broader criteria including: the structure of the affected markets; the market position and the economic and financial power of the participants before and after the concentration; the existing alternatives for choosing suppliers and clients in the affected markets; expected technical and economic progress as a result of the concentration that could benefit consumers; legal, administrative, economic and other barriers to market entry; any other other relevant circumstances. The concern is that such broadly worded criteria for assessment of concentrations may give too much power to the CPC to intervene.
  • The concept of abuse of a ‘stronger bargaining position’ will be deleted. Introduced in 2015 as art. 37a of the PCA, the concept was applied in all sectors of the economy. Under this, economically dependent partners were often able to claim anti-competitive behaviour on the part of contractual partners even if they did not enjoy a dominant position in their respective market.
  • The PCA will contain a new chapter dealing with unfair commercial practices concerning the agricultural and food supply chain. In terms of trading practices, two groups will be prohibited.The first group will include “absolute bans” on imposing payment terms that exceed 30 days after the delivery of products; short-term (i.e. less than 30 days) cancellation of ordered perishable products; unilateral amendment of the purchase terms by the buyer; imposing additional fees on a supplier, which are not related to the purchase of agricultural or food products. The second group includes practices that are permissible if agreed upon in clear and unambiguous terms in the supply agreement, such as the return of unsold products that the buyer has not paid for or paid the cost of their disposal; imposing fees on the supplier as a condition for the storage, product placing and offering of products, or for the advertising activities of the buyer. The new rules would apply to suppliers and buyers in the food and agricultural sector with an annual turnover that meets the thresholds set down in the Bill.
  • Buyers of agricultural and food products (e.g. retail chains) can face penalties of up to 5 percent of their annual turnover for the previous financial year for breaking any of the rules specified above.

The Bill’s second parliamentary review is pending. Discussion points between first and second reading include the extended mandate of the CPC panel and the proposal that new rules dealing with unfair trading practices in the agricultural and food supply chain apply only to companies meeting certain thresholds.

For more information on this draft legislation and how it could affect your Bulgarian business, contact your CMS partner or local CMS experts: Nevena Radlova and Anna Tanova-Atanasova.