Bulgaria is a member of the European Union, and therefore, Article 102 of the Treaty on the Functioning of the European Union (TFEU) is directly applicable.
On a national level, the Competition Protection Act (CPA) contains provisions (in Articles 21 and 37a) prohibiting abuses of certain degrees of market power: dominant position and stronger bargaining position (i.e., relative market power), both applicable to all kinds of undertakings regardless of their ownership or industry sector.
Competition law in Bulgaria is publicly enforced by the Competition Protection Commission (CPC), which has adopted a multitude of secondary acts dealing with various procedural and statutory issues, such as assessment of market position, setting of fines, providing parties with access to files, protection of confidential information and review and approval of commitments offered by undertakings.
The CPA applies to undertakings entrusted by the state to provide services of general public interest, to the extent the performance of their public tasks is not impeded and competition is not affected to a significant degree (Article 2, Paragraph 1, item 3 of the CPA). The Energy Act contains a similar provision addressed to undertakings active in the transportation or distribution of electricity, heat energy or natural gas. These provisions, however, have little practical importance, since we are not aware of a case in which such an undertaking has been relieved of its responsibility for breaching the competition rules on such a ground. On the contrary, such companies have been sanctioned for abusing their dominance in many cases.2
II YEAR IN REVIEW
In 2019, the CPC initiated four new investigations of alleged abuse of dominant position (the number of proceedings commenced in 2018 being the same), as well as seven new investigations of alleged abuse of stronger bargaining position (compared with three proceedings in 2018). All of them started upon client, supplier or competitor complaints.
Energy and media sectors remained hot areas of the antitrust enforcement.
The CPC finally completed its investigation against the National Electricity Company (NEC), started back in 2015 on the complaint of several RES producers and resulted in two fines in total of 315,612 leva for infringements of Article 21 CPA.3 NEC, being a subsidiary of Bulgarian Energy Holding, is the public supplier, active on the wholesale segment of the regulated market. NEC purchases electricity from various producers, including from renewables, at regulated or preferential price. According to the rules on the balancing market, the energy producers were required to participate in balancing groups, and those that had purchase agreements with NEC were members of NEC's balancing group. Each producer was required to submit a forecast about its hourly production, and if the actual production deviated from the forecast, the producer would pay imbalances (shortage or surplus). It was established that NEC unilaterally changed the forecasts submitted by the producers in its balancing group, thus making them pay for imbalances. Moreover, NEC adopted a methodology on the allocation of costs of imbalances among the members of its balancing group, which allowed NEC to charge the producers from its group costs for imbalances higher than those actually charged on the group as a whole by the transmission system operator. Higher imbalances for the producers resulted in higher revenues for NEC, whose behaviour was qualified by the CPC as exploitative.
In the past year the CPC closed another important investigation. This concerned the marketing policies of Nova Broadcasting Group EOOD (Nova) and Net Info AD regarding the 'cross-media discounts', namely discounts provided to advertisers and advertising agencies for purchasing advertisements in more than one medium (e.g., TV, radio, print, internet).4 The case started following the complaint of several providers of digital services, including online advertising, which alleged that cross-media discounts impede competition on the online advertising market by inducing the advertisers to buy both products (TV and online advertising) from one supplier rather than separately. It was claimed that both parties were engaged in a prohibited agreement and, at the same time, abused their dominant positions. The CPC rejected the first claim on the grounds that Nova exercised control over Net Info, which disqualified both companies as independent undertakings.5 The claim for abuse of dominance was also rejected but following an analysis of both markets – TV and online advertising, which showed that neither of both companies held a dominant position. Importantly, the decision of the CPC acknowledged the strong presence of global online platforms, such as Google and Facebook, in the Bulgarian online advertising market, and, therefore, a finding of dominance on the part of a local company appears quite unlikely at the current stage. With regard to the TV advertising market, the CPC confirmed its position from previous cases,6 namely that it is an oligopolistic market, where the two major players compete intensively against each other, but neither of them dominates the market. Even though the CPC did not analyse the 'cross-media discounts' and their impact on competition on the merits, the CPC decision is important for the whole industry, applying similar forms of discounts.
In terms of judicial review, the importance of economic expertise in complex antitrust cases was confirmed by the much-anticipated decision of Supreme Administrative court on CEZ Group appeal against the CPC decision imposing a total fine of 2.19 million leva on two of its Bulgarian companies for obstructing the liberalisation of the Bulgarian energy market.7 While the court of first instance entirely upheld the antitrust authority's decision,8 the court of cassation took the view that the establishing of all the relevant facts and circumstances of the case required an expert opinion to be heard and, therefore, returned the case back to the minor court for a new review on the merits.9 In performance of these mandatory instructions, the court on the merits appointed an expert who was, in fact, invited to replace the economic analysis of the CPC by answering questions related to, inter alia, market definition, market shares and barriers to entry.10 It is yet to be seen whether the opinion of the independent expert will lead the court to legal conclusions different from those in the appealed decision.11
Information about pending cases and imposed fines in 2019 is summarised below.
Investigations of abuse of dominance pending at the CPC
|Sector||Investigating authority||Conduct||Case opened|
|Aviation/Aircrafts||CPC||Abuse of dominance unspecified||November 2019|
|Machinery||CPC||Abuse of dominance, unspecified||December 2019|
|Medical devices (hearing aids)||CPC||Abuse of dominance, unspecified||September 2019|
|Heating energy||CPC||Abuse of dominance, unspecified||April 2019|
|Energy||CPC||Refusal to provide access to the distribution grid/refusal to supply electricity. SO issued||March 201612|
CPC decisions in the past year with imposed fines for abuse of dominance
|Sector||Investigating authority||Conduct||Imposed fine|
||315, 612 leva|
III MARKET DEFINITION AND MARKET POWER
In terms of market definition, the CPC follows its methodology on assessment of the market position, and defines the product and geographical market by analysing the interchangeability on the supply and demand sides. In bTV v. Nova,13 the main tool used for this purpose was questionnaires addressed to clients of the investigated undertaking. The CPC also acknowledges the small but significant non-transitory increase in prices test, and in BACCO v. Electricity Distribution Networks Operators,14 the division of two services into separate markets was justified by the difference in the price (in addition to other factors).
Language-related markets (such as media) are traditionally considered as national. In the energy sector, market definition often follows the scope of the licence. Useful guidance may also be found in the market analysis, which the CPC issued following its sector inquiries. However, the market definition accepted by the CPC in one case is not legally binding in subsequent cases dealing with the same service or product.15
To the extent the market definition is a matter of economic analysis, it is quite difficult to be challenged in court, and even when a court is prepared to reverse a CPC decision, it tends to do it for reasons not related to market definition.
Article 20 of the CPA lists the factors considered by the CPC in the assessment of whether a company holds a dominant position as follows:
- market share;
- financial resources; and
- the ability to access the market, technological development and commercial relations with other undertakings.
A company is dominant if, owing to any or all of these factors, it is independent from its competitors, suppliers and clients and therefore able to impede competition in the market.
Market share is a primary indicator, even though there is no statutory threshold for dominance. According to the CPC's practice, such finding is unlikely if the market share is below 40 per cent. Market shares are assessed in the light of the particulars of the relevant market. For this purpose, the CPC explores the market structure and the degree and effectiveness of competitive pressure exercised on the undertaking by its competitors, suppliers and clients. The importance of the market share is higher in markets with significant barriers to entry. However, in bTV v. Nova, even a market share of above 60 per cent was not considered as enough evidence for dominance in an oligopolistic market with high entry barriers because of the strong competitive pressure exerted between the two main market players.16 On the contrary, in Techem,17 Techem was found dominant in the individual measurement and allocation of heating energy market even with a market share of less than 50 per cent because of its market share combined with vertical integration, economies of scope and the incompatibility of its installed measurement devices with competitors. In Swissport v. Sofia Airport,18 the court disagreed with the CPC that Sofia Airport was not dominant in the market of ground-handling services, considering its high market share (above 50 per cent) and the ability to cross-subsidise the ground-handling operations from other sources of revenues owing to its monopoly position of an airport operator.
In Fast Pay v. CEZ group,19 the CPC analysed additional factors such as alternative sources of supply, barriers to entry and expansion, network effects and incentives for exercising market power.
The CPA explicitly states that the dominant position may be occupied by more than one undertaking; however, the concept of 'joint' or 'collective' dominance has not yet been developed in practice.
The majority of cases of established abuses of dominance concern companies in a monopolistic or almost monopolistic position owing to exclusive licences for providing certain services in a given area (e.g., in the energy sector) or operating essential facilities (such as the majority of utilities,20 including ownership of a bus station) or natural monopolies (e.g., collective management organisations). This trend can be explained by the difficulties encountered in proving a dominant position in a market where some competition still exists, which can only be overcome by a high-profile economic analysis. It must be noted that that the dominant position on a certain market does not automatically make the company dominant 'per se' on each and every market and in each and every capacity it might participate.21
For the purpose of establishing a stronger bargaining position, the CPC explores the structure of the relevant market and the particular commercial relationship:
- the degree of dependency between the parties thereto;
- the nature and the difference in scale of their business; and
- the existence of alternative trading partners, sources of supply, distribution channels and clients.
The concept of relative market power is relatively new22 and is particularly important for companies operating in oligopolistic markets with few strong competitors, where none is individually dominant, but each can exert some market power towards clients or suppliers.23 Therefore, the prohibition of abuse of stronger bargaining position is more relevant for vertical relationships than for horizontal relationships.24
In A1,25 the CPC found the leading mobile telecommunications operator in Bulgaria (one of three) to be in a stronger position than Handy Bulgaria, an independent distributor of its services. In Cable Operators v. bTV and Nova,26 Nova and bTV27 were both found to be in stronger positions towards four regional cable operators distributing their TV channels.28 However, in Piero 97,29 this position was rejected for bTV towards its client and major advertising agency, Piero 97. In another case, the company operating the Kaufland30 chain of hypermarkets was found relatively dominant towards one of its suppliers.31
The CPC and Bulgarian courts have acknowledged that it is the abuse and not the dominant position itself that is prohibited.32
Abuse of dominance is defined as unilateral behaviour of a dominant undertaking that may prevent, restrict or impede competition in a relevant market, as well as affect consumer interest. In order to establish abuse, the CPC is required to prove the existence of:
- an undertaking;
- the dominant position of such undertaking in a relevant market;
- unilateral behaviour; and
- actual or potential anticompetitive effect of the behaviour also affecting consumer interest.
Article 21 of the CPA mirrors Article 102 of the TFEU to a great extent, by listing the most common forms of abuse, which is non-exhaustive:33
- the direct or indirect imposition of purchase or selling prices or other unfair trading conditions;
- the limitation of the production, trade or technical development to the detriment of consumers;
- the application of different conditions to certain clients for equivalent transactions, thereby placing them at a competitive disadvantage;
- concluding contracts subject to acceptance by the other party of supplementary obligations or to the conclusion of additional contracts that, by their nature or according to common commercial usage, have no connection with the object of the main contract or with its performance; and
- the unjustified refusal to supply goods or to provide services to actual or potential customers in order to impede their economic activity.
The CPC's understanding of 'unilateral' behaviour is somewhat flexible. In Bulgartransgaz,34 the CPC took the view that the contracts for gas transportation and supply were not unilaterally imposed by the dominant company because the draft contracts were published on its website and the clients were provided with the opportunity to provide comments on them. This was sufficient for the CPC to reject the allegations against Bulgartransgaz, regardless of the fact that not all proposals for changes were accepted and included in the individual contracts. The CPC justified the refusal of the dominant company to accept some of the proposals with the need for the dominant company to ensure equal treatment of all clients, restricting its ability to include different terms and conditions in the contracts with different clients. In previous cases, the CPC qualified contracts in a unified form (often as general terms and conditions), drafted by the dominant party, as unilaterally imposed. In CEZ group,35 the CPC qualified the behaviour of the exchange of information between companies within the same economic group as unilateral.
Even if the behaviour meets all the criteria for abuse, it cannot be prohibited if the dominant company provides 'objective justification'.
The CPC often refers to the classic definition for abuse as the objective concept developed by the Court of Justice of the European Union in Hoffmann La Roche.36 However, the CPC and courts do not have a consistent understanding of the meaning of this notion. The CPC relies on the objective concept in order to reject the relevance of the subjective intentions behind the behaviour,37 while the court refers to it38 in the context of the requirement for a link between the behaviour of the dominant undertaking and the negative impact on competition and consumers to exist.39
The CPC does not make a clear difference between a restriction of competition by object and an effects-based approach in its practice, and has applied the as-efficient-competitor test (AEC test) only once – in a case relating to fidelity rebates40 and, in general, tends to follow a stricter form-based approach without a developed coherent theory of harm and with less economic evidence.
In order to qualify certain behaviour as abusive, the CPC is not required to prove an actual negative effect on competition; rather, it is sufficient to establish a potential for competition to be distorted.41
Abuse of a stronger bargaining position is defined as acting in bad faith (i.e., without objective economic justification) to the detriment of the interests of the weaker party and consumers. The CPA42 gives examples closely resembling some of the forms of abuse of dominance:
- an unjustified refusal to supply;
- the imposition of unreasonably burdensome or discriminatory conditions; and
- an unjustified termination of business relations.
ii Exclusionary abuses
The CPC defines exclusionary abuse as unilateral behaviour aimed at distorting effective market competition by executing competitive foreclosure, creating barriers to entry in order to limit potential competition or to limit competitors' expansion, or imposing competitive constraint on the dominant company.43
The CPC has little practice in predatory pricing, which can be attributed to the existence of a similar prohibition in Chapter VII of the CPA on unfair competition, which is applicable to all undertakings, regardless of the degree of their market power. Under Bulgarian law, selling below cost can be a violation of the prohibition of abuse of dominance and a special form of unfair competition, at the same time. In investigating unfair competition, the CPC is not required to prove a dominant position and therefore it is used by competitors as a shortcut to making a complaint.44
One of the very few cases in this area is regarding the alleged predatory pricing of the ground-handling services of Sofia Airport EAD,45 which started in 2012 following a complaint by the company's competitor, Swissport Bulgaria. The case was subject of judicial review twice.46 During the last review before the court of first instance, the appellant Swissport Bulgaria surprisingly withdrew its appeal, and as a result the CPC decision, declaring no infringement, entered into force.
Despite the lack of recent precedents, the CPC acknowledges 'margin squeeze' as one of the possible forms of pricing abuse through the imposition of high prices.47 However, the CPC generally tends to address the issue of high prices as exploitative excessive pricing rather than as an exclusionary abuse.
In the past decade, the CPC faced fidelity rebates in two cases without finding infringements. In bTV v. Nova,48 the CPC sent an SO to bTV, a leading national free-to-air TV operator, for applying retroactive rebates to its TV advertising clients in consideration for a guarantee of a 100 per cent share of their TV advertising budget (a form of exclusive dealing). In this case, the CPC applied the AEC test for the first time, in order to prove that bTV's behaviour could foreclose a competitor as efficient as the dominant company. Eventually, the CPC changed its view on bTV's market position because of the oligopolistic structure of the market, and therefore found no abuse.
Liberalisation of the energy markets at retail level was the focus of a landmark antitrust case initiated in 2013 and completed in 2017.49 The CPC sanctioned the local companies of the CEZ and EVN groups for applying a strategy aimed at leveraging their market position as incumbents of the regulated market to the competitive retail market, which has freely negotiated pricing. The on-going liberalisation of the energy markets allows clients to switch from the regulated to the free market by replacing their public supplier with a trader. Once the client enters the free market, it can choose its supplier from almost 90 licensed retailers. Both CEZ and EVN were present in the regulated and free electricity markets. According to the CPC, both groups discriminated traders outside the group by refusing them access to historical data about clients' hourly consumption, which the groups had collected during their operations on the regulated market, and which was at the disposal of the traders within the group. Further, it was alleged that the groups also applied various practices aimed at preventing clients from switching to the free market or at least delaying such a process. The CPC did not apply the doctrine of the single economic entity,50 and, owing to the difference in the geographic dimensions of the markets (the free market was national, while the regulated market was limited to the licensed area), failed to prove dominance of the groups' traders operating in the broader market. Therefore, it sanctioned only the incumbents – the network operators, CEZ Razpredelenie Bulgaria AD (CEZ group) and EVN Bulgaria Elektrorazpredelenie EAD (EVN group), and the companies supplying electricity at a regulated price, CEZ Electro Bulgaria AD (CEZ group) and EVN Bulgaria Electrosnabdyavane EAD (EVN group), which were found liable for an abuse benefiting related traders51 and, therefore, reaffirming the understanding that the abuse may take place in a market different from the market in which competition is affected. However, the theory of harm in this case was not completely consistent: the companies were sanctioned for applying a strategy aimed at keeping their clients in the regulated market, and, at the same time, benefiting the traders within the group operating in the free market (the two aims excluding each other).
Against the background of the pending investigation, in 2016, the CPC began another investigation52 into the same companies on the basis of similar allegations but related to a later period of time. Both investigations run in parallel and finished with contradictory decisions.53
The provision of Article 21(c) of the CPA explicitly lists discrimination (i.e., applying dissimilar terms to equivalent transactions) as a possible form of abuse of dominance. Similarly, Article 37a, Paragraph 1 of the CPA provides that imposition of discriminatory conditions on the weaker party can be an abuse of stronger bargaining position. The practice shows that the CPC tends to apply this rule too broadly, encompassing not only transactions with companies that are competitors, placing some of them at a competitive disadvantage, but also contracts with end consumers,54 as well as various forms of factual behaviour.55
iv Exploitative abuses
In RES producers v. NEC56 the CPC referred to the exploitative abuse as a type of abuse that allows the undertaking to benefit from its behaviour in a way it would not be able if there was effective competition.
Exploitative abuses remain the most common type of abuse in the practice of the CPC, even though sometimes the difference between exclusionary and exploitative abuse is not obvious. In ViK Dobrich v. Energo-Pro,57 the CPC sanctioned the electricity supplier Energo-Pro Sales for termination of supplies to one of its business customers – a water-supply and sewage company, ViK Dobrich.58 Regardless of the fact the case appeared as a classic example of 'refusal to supply' conduct, the CPC analysed the behaviour of the dominant company within the framework of an exploitative abuse given the absence of competition in the downstream market (water supply within a given territory) that might be affected (ViK Dobrich was a monopolist in that market).
In another case, the CPC sanctioned an electricity distribution network operator (being an essential facility) for delaying a client's access to its network and consequently to the downstream market, delaying the production of energy from renewables. The CPC mostly qualified the behaviour of the dominant company (i.e., impeding the accession to the network) as an imposition of unfair trading conditions (a kind of exploitative abuse) rather than as constructive refusal to supply. According to the CPC, the network operator exploited its monopoly in order to achieve non-justified financial benefits by transferring expenses, which they would normally bear, to the clients. The CPC went further by stating that this behaviour may also prevent potential competitors from entering the market as an indirect result and, therefore, may also have exclusionary effects.59
Recently, the CPC approved commitments offered by the local heating company Toplofikatziya Sofia to address allegations of imposing unfair trading conditions regarding the connection of clients to its heating network.60 The contractual clauses alleged to be unfair required the clients to construct the facilities necessary to connect to the network at their own cost and thereafter to allow the heating company to use such facilities for free for the purpose of providing its service. Once the ownership of the connection facilities was transferred to the heating company, the latter compensated the clients for by delivering heating energy of the same value to them. Such set-off mechanism was not acceptable to the construction companies, which were not able to benefit from the free heating energy delivered to the inhabitants of the completed buildings.
In the past five years, the CPC has sanctioned several companies for excessive pricing:
- cemetery's sole provider of funeral services;61
- the owner and exclusive operator of a bus station;62 and
- three operators of electricity distribution networks.63
Aurubis Bulgaria, a local subsidiary of the world leader in copper recycling, was also investigated for excessive pricing in the production and wholesale of sulphuric acid market; however, after considering the objections against the SO, the CPC expanded the geographic market and could not, therefore, prove a dominant position.64
The approach of the CPC depends on the particular product or service in question. Investigating bus station services, the CPC analysed whether the pricing factors applied by the owner of the bus station (transport scheme and time of service) were relevant for the costs of the service. With regards to the rental price of energy distribution network pylons, the CPC investigated whether the costs for maintenance and service of the pylons were fully accounted as costs for the regulated service and, as such, were covered by network charges or appropriately allocated between various activities (regulated and non-regulated services). In all cases concerning excessive pricing, the accounting of the investigated undertaking is of great importance because this is necessary in proving the particular costs included in the price of a product or service and the relevance of those costs. The lack of objective pricing methodology or using irrelevant pricing factors by themselves may lead to a finding of infringement.
Relying on the common understanding that the competition authorities should not act as price regulators, the CPC often orders undertakings to terminate the infringement without specific remedies or further guidelines on how to comply. This creates significant uncertainty and difficulty in achieving post-decisional compliance. Sanctioned companies asked for clarification of the reasons underlying such CPC decisions, but these were not provided. While the sanctioned companies were waiting for the CPC to provide the requested clarifications, the court reversed the infringement decisions.
V REMEDIES AND SANCTIONS
The CPC is entitled to impose sanctions, as well as behavioural and structural remedies. The undertakings can also offer commitments, at an earlier stage (within the deadline for submission of response to the allegations in the SO). As a general rule, sanctions are imposed on the undertakings that committed the abuse and, in exceptional cases, on individuals.
The CPC has adopted a methodology on setting fines, which categorises infringements by gravity, into three groups: light, medium and heavy, taking into account factors such as type (exploitative or exclusionary), coverage (national, regional or local) and effect (capable to foreclose the market or exclude competitors, or both).
The base amount of the fine is calculated as a percentage of net revenue from sales of the affected products or services generated during the last year of participation in the infringement, in the following range.
|Gravity of infringement||Abuse of dominance||Abuse of stronger position|
|Light||Up to 5 per cent||Up to 2 per cent|
|Medium||Up to 8 per cent||Up to 5 per cent|
|Heavy||Up to 10 per cent||Up to 10 per cent|
In abuse of dominance cases, the base amount is multiplied by the number of the years of duration of the infringement. The fine can be further increased or decreased by 10 per cent in the case of aggravating or mitigating circumstances and increased by another 25 per cent if the infringement is under Article 102 of the TFEU. In any event, the fine cannot exceed 10 per cent of the annual turnover of the undertaking for the preceding financial year (including all products and services).
Sanctions for abuse of stronger bargaining position are calculated on the basis of the total revenue from the sales of the relevant product or service instead of on the revenue from the particular client on whom the abuse has been committed.65
ii Behavioural and structural remedies
Remedies and interim measures are more a theoretical option in Bulgaria. In practice, the sole remedy regularly applied by the CPC is ordering the undertaking to end the infringement.
The CPC can initiate investigations on its own initiative; however, the majority of cases are triggered by complaints by clients or competitors. Investigations are not limited in time. Most cases are completed within two to three years; however, some cases have been of longer duration.66 The CPC follows different procedures depending on whether it is investigating abuse of dominance or abuse of stronger bargaining position.
i Common features of both procedures
The CPC has the power to conduct dawn raids in business premises and of motor vehicles, during which it can take all kinds of evidence, such as documents, emails, databases, including those that are not directly related to the subject of investigation.67 Legal privilege is not respected for in-house lawyers.
During the investigation, the CPC sends requests for information and evidence to the relevant authorities (sector regulators) or companies (e.g., clients and competitors), including the undertaking being investigated and the complainant (as the case may be). Any addressee is obliged to respond because the failure to cooperate (including by providing incorrect, incomplete or misleading information) may entail a fine of up to 1 per cent of their total annual turnover for the preceding financial year. Persons providing information to the CPC have the right to protect their business secrets.
The CPC does not tend to exercise its powers to impose interim measures, but is entitled to impose daily fines in order to stimulate undertakings' compliance. These fines vary depending on the case, and may reach 5 per cent of the preceding year's average daily turnover.
Decisions in most cases are issued shortly after the hearing and can be appealed by the affected parties before the administrative courts in two instances. Following changes in the Administrative Procedural Code, effective since 1 January 2019, appeals against CPC decisions are reviewed by a court of first instance with no previous experience of competition cases.
ii Specifics of the investigation for abuse of dominance
Before imposing a sanction, the CPC is required to issue an SO expressing its preliminary findings and to provide the undertaking with an opportunity to defend. Investigated undertakings are entitled to respond in a time period, set by CPC, which cannot be less than 30 days, and can also opt for a hearing at an open session. An SO does not prejudice the proceedings and the CPC can decide that the company was not dominant or that abuse was not committed. Parties have access to the file during the whole period of response to the SO. During the same period, undertakings can offer commitments, save for heavy infringements, and such proposal does not prejudice the right to object to the SO.
The CPC may approve the commitments through a decision, which is silent on the issue of whether there was an infringement. The proposed commitments are consulted within the parties to the proceedings only (and not publicly). Once approved, commitments become binding on the undertakings, which must comply under the threat of a sanction. Noncompliance, reported by a third party or established ex officio, may also result in resuming the investigation.
Unlike other jurisdictions, in Bulgaria, closing investigations with commitments is still more an exception than a rule.68
iii Specifics of the investigation for abuse of stronger position
In investigations into abuse of stronger position, no SO is issued and the investigated company receives a copy of the complaint (if any). Parties have access to the file after being summoned for the hearing, which is a mandatory step that usually takes place one week in advance of the hearing.
VII PRIVATE ENFORCEMENT
Private enforcement in Bulgaria is still an underdeveloped area regardless of the implementation of the EU Damages Directive69 through amendments to the CPA,70 effective since the beginning of 2018. Even before the amendments, parties were entitled to claim damages in follow-on cases; however, the relevant court practice is very limited71 and mainly includes discontinued cases owing to the lack of the CPC's final decision on the abuse.72
Under Bulgarian law, any person affected by a competition infringement is entitled to full compensation encompassing the actual damages suffered and loss of profit plus statutory default interest calculated from the date the harm occurred. Bulgarian law does not allow claims for punitive damages, neither does it take possible fines imposed by competition authorities into account.
Article 105(4) of the CPA provides that the CPC's decisions regarding infringement are binding on the courts and the infringer, and thus facilitates follow-on claims where claimants only need to prove damages. The court may consult the CPC regarding the calculation of damages and is entitled to award compensation even if the precise amount of the damages is not established.73
Special rules regarding access to evidence, pass-on defence and joint and several liability apply to claims based on abuse of dominance. Obstructing other parties' access to evidence may entail fines74 that are significantly higher than those applicable in the ordinary civil litigation.
Claims for compensation are reviewed by the civil courts, while decisions of the CPA are appealed before the administrative courts. This is another obstacle in stand-alone claims: civil judges have no experience in establishing competition law infringement.
VIII FUTURE DEVELOPMENTS
The health and economic crisis surrounding the covid-19 outbreak will inevitably have an impact on antitrust enforcement in 2020. The CPC already joined the common position of the European Commission and the European Competition Network75 and stated it would closely monitor the markets of foods, pharmaceuticals and sanitary products, such as masks and sanitisers, for any anticompetitive practices, including excessive pricing. While the CPC seems to be prepared to take a more lenient approach to certain forms of cooperation, it would not hesitate to enforce competition law rigidly against any abuse of market power.
Against the background of economic recession, it could be expected that Article 37a CPA would be employed even more intensively as an important tool for dealing with the issues of misused economic dependence.
The fuel markets will also remain in focus, especially considering the significant fluctuations in the petrol prices on the international stock exchanges during the pandemic.76
The final outcomes of some major antitrust cases in the energy sector are still expected,77 and it is yet to be seen whether any of them will contribute to such long-awaited development of the private enforcement of competition law in Bulgaria. The admissibility of stand-alone claims after the implementation of the EU Damages Directive appears to be an unsettled issue, which invites clarifications from the Supreme Court of Cassation.
In terms of legislative changes, Bulgaria would need to take the necessary steps for the implementation of the ECN Directive.78 Considering the past experience and the lack of official information on whether this process has been started, implementation is likely to be delayed.79
1 Kremena Yaneva-Ivanova is a senior associate and Georgi Spasov is the managing partner at Spasov & Bratanov Lawyers' Partnership.
2 See, for example, CPC Decision No. 1510, 21 December 2017; CPC Decision No. 1475, 14 December 2017; CPC Decision No. 1476, 14 December 2017.
3 CPC Decision No. 833, 18 July 2019, appealed at the Administrative Court of Sofia – Region under administrative case No.1111/2019.
4 Nova Broadcasting Group AD and Net Info AD were represented in that case by the authors of this review.
5 At the time the CPC decision was issued, Net Info was under the joint control of Nova Broadcasting Group AD (a majority shareholder) and two other independent undertakings. Shortly after, CPC cleared the acquisition of sole control over Net Info by Nova Broadcasting Group EOOD.
6 In 2018 CPC issued a report on its inquiry into the media sector. One of the conclusions in this report was that the TV broadcasting and TV advertising markets had oligopolistic structures and no individually dominant company. CPC Decision No. 717, 28 June 2018.
7 This case was also discussed in the previous edition of this Review.
8 Decision No. 15629, 13 December 2018 and Decision No. 13130, 29 October 2018, of the Supreme Administrative Court's three-member panel.
9 Decision No. 7729, 22 May 2019 under administrative case No.1320/2019 of the Supreme Administrative Court's five-member panel (chaired by the Chair of the Supreme Administrative Court).
10 The admissibility of this expertise was strongly objected to by the CPC.
11 During the preparation of this edition, the court issued decision No.423 dated 30 April 2020, which was entirely in favour of CEZ Group.
12 The investigation was resumed after the CPC decision was cancelled by the Supreme Administrative Court.
13 Case No. CPC/712/2011.
14 Cases Nos. CPC/449/2013, CPC/450/2013 and CPC/451/2013.
15 CPC Decision No. 313, 7 March 2019, containing a market analysis of the fuels markets adopted following a sector inquiry is the most recent example of its inconsistent approach to market definition. In this analysis, the CPC defines the retail markets of different types of fuel as regional within the boundaries of a 10-minute drive within city areas and a minimum of a 20-minute drive in rural areas, while, in a commitments decision adopted in 2017 following a cartel investigation, the same markets were defined as national. See CPC Decision No. 318, 28 March 2017, Section IV.1.2. The CPC's view on the geographic dimensions of the retail markets were objected to by the investigated undertakings.
16 CPC Decision No. 842/2013, 11 July 2013, under case No. CPC/712/2011.
17 CPC Decision No. 870, 4 November 2015, under case No. CPC/626/2014.
18 Decision No. 3304, 23 March 2016, under administrative case No. 1906/2016, of the Supreme Administrative Court's five-member panel.
19 Case No. CPC/869/2017.
20 For example, the water and sewage supply company within a certain area. See CPC Decision No.1314, 5 December 2019.
21 Even though CEZ Electro was dominant in its capacity of electricity supplier within its licence territory, CPC rejected the same company being dominant in its capacity of client in the market of cash payment services. CPC Decision No.508, 18 April 2019.
22 Introduced through supplements to the CPA in 2015.
23 In bTV v. Nova, the CPC found that the relevant market was highly competitive, regardless of its oligopolistic nature (close to duopoly). Owing to the strong competition between the market players with the highest market share, individual dominance was denied and therefore the concept of abuse of stronger bargaining position appears to be a more appropriate approach in challenging the behaviour of these companies. In Fast Pay v. CEZ group, the complainant Fast Pay used this concept to bypass the requirement to prove dominance. Shortly after the CPC rejected its claim based on Article 21 CPA (Decision No. 508, 18 April 2019), Fast Pay filed a new complaint, this time based on Article 37a CPA – case No.1033/2019. Even the world giant Apple Inc was alleged to have abused its stronger bargaining position towards its client – the Bulgarian telecommunication incumbent and one of the three mobile operator bTC. bTC, however, withdrew the complaint shortly after filing, and the case was closed (case No. 604/2019).
24 Originally this prohibition aimed to regulate the relations between the large chains of supermarkets such as Metro, Billa and Kaufland, and their suppliers.
25 Case No. CPC/653/2018.
26 Case No. CPC/610/2016.
27 bTV Media Group and Nova Broadcasting Group are leading media groups in Bulgaria with the most-viewed TV channels and a joint market share exceeding 90 per cent in some markets.
28 The CPC decision has been partially reversed by the first-instance court upon appeal because the CPC's assessment of the TV operators' market positions was based on irrelevant data (the audience share and ratings of the TV channels' advertising market, rather than of their content distribution market, were used as performance indicators). Further, the CPC failed to consider the strong competition between the TV operators, with each being an alternative source of supply to the other towards the cable operators. See Decision No. 3810, 15 March 2019 of the Supreme Administrative Court's three-member panel, upheld by Decision No. 15672, 19 November 2019, under administrative case No. 8224/2019 of the Supreme Administrative Court's five-member panel.
29 Case No. CPC/126/2017.
30 Case No. CPC/378/2016.
31 The CPC decision has been reversed by the court upon appeal owing to procedural defects, including deficiencies in the economic analysis used to demonstrate the stronger bargaining position and failure of the CPC to prove the alleged difficulties for the supplier to switch to alternative trading partners among Kaufland's competitors. See Court Decision No. 4572, 27 March 2019 of the Supreme Administrative Court's three-member panel, upheld by Decision No. 16044, 26 November 2019 under administrative case No. 6379/2019 of the Supreme Administrative Court's five-member panel. The CPC resumed the review of the case in line with the mandatory instructions of the court. Case No.CPC/1032/2019.
32 Decision No. 6985, 5 June 2017, under administrative case No. 2659/2017 of the Supreme Administrative Court's five-member panel.
33 Decision No. 15629, 13 December 2018, under administrative case No. 1262/2018 of the Supreme Administrative Court's three-member panel; Decision No. 1082, 29 January 2015, under administrative case No. 4734/2014 of the Supreme Administrative Court's three-member panel.
34 Case No. CPC/1082/2017.
35 Case No. CPC/305/554/2013.
36 CPC Decision No. 641, 14 May 2014.
37 CPC Decision No. 399, 12 May 2015; CPC Decision No. 1576, 20 November 2013; CPC Decision No. 506, 8 May 2013.
38 Judgment of the Court, 13 February 1979.
39 Decision No. 6985, 5 June 2017, under administrative case No. 2659/2017 of the Supreme Administrative Court's five-member panel; Decision No. 10524, 12 October 2015, under administrative case No. 9059/2015 of the Supreme Administrative Court's five-member panel.
40 Case No. CPC/712/2011.
41 CPC Decision No. 1133, 22 December 2016; CPC Decision No. 1475, 14 December 2017.
42 Article 37a, Paragraph 1 of the CPA.
43 CPC Decision No. 425, 19 May 2015.
44 In 2018, the CPC imposed two fines for unfair competition on companies selling below cost.
45 Case No. CPC/1074/2012 (first review), case No. CPC/145/2016 (second review).
46 In the first appeal, the court disagreed with the CPC on the lack of dominance and referred the case back to the CPC with mandatory instructions. The CPC conducted a second investigation and arrived at the same conclusion. The complainant, Swissport Bulgaria, appealed the second decision of the CPC. The three-member panel of the Supreme Administrative Court, acting as a first instance, ruled that the CPC failed to comply with the mandatory instructions of the court given in the first review of the case. The CPC was bound to accept that Sofia Airport was dominant and was not entitled to reassess its market position. See Decision No. 15884/2017, 19 December 2018, under administrative case No. 7087/2017 of the Supreme Administrative Court's three-member panel, reversed by Decision No. 8191, June 2019 under Administrative Court's five-member panel. The five-member panel took the opposite view: the antitrust authority had the exclusive power to establish an infringement of Article 21 CPA, and, therefore, the court was not entitled to give mandatory instructions regarding the contents of its decision (including in relation to the market position of the investigated undertaking).
47 CPC Decision No. 450, 27 May 2015.
48 See footnote 13.
49 Case No. CPC/305/554/2013. The CPC decisions towards CEZ group and EVN group are still pending at court.
50 According to this doctrine, all companies that belong to the same economic group can be considered as a single 'undertaking' for purposes of the application of Article 102 TFEU.
51 Each investigated group included companies operating on different markets: operation of the distribution network at low and medium voltage, supply of electricity at regulated prices and supply of electricity at freely negotiated prices.
52 Case No. CPC/319/2016.
53 Several months after the CPC issued its infringement decisions for the period covered by its first investigation (namely, CPC Decisions Nos. 1475 and 1476, 21 December 2017), the second investigation was closed without finding an abuse (CPC Decision No. 1299, 15 November 2018).
54 CPC Decision No. 870, 4 November 2015. The CPC sanctioned Techem for applying different terms of service and rates of its fees to customers residing in different cities within the territory of Bulgaria.
55 By CPC Decision No. 399, 12 May 2015 (reversed by the court upon appeal), the CPC sanctioned the Bulgarian telecommunication incumbent BTC for discriminatory treatment of a client by taking factual measures for resolving a dispute (i.e., termination of a contract), which have not been applied to clients in similar positions in previous disputes. By CPC Decisions Nos. 1475 and 1476, 21 December 2017, the energy incumbents from CEZ and EVN groups were sanctioned for discriminating independent traders outside the group by refusing to provide them access to certain data that were at the disposal of traders within the groups. See Section IV.i.
56 Case No. CPC/121/2015.
57 CPC Decision No. 506, 8 May 2013.
58 See M Marinova and K Yaneva-Ivanova, 'Exploitative Abuse of a Dominant Position in the Bulgarian Energy Markets' Yearbook of Antitrust and Regulatory Studies, 2017, Vol. 10(16).
59 CPC Decision No. 1510, 21 December 2017.
60 CPC Decision No. 158, 31 January 2019.
61 CPC Decision No. 1511, 21 December 2017.
62 CPC Decision No. 1133, 22 December 2016.
63 CPC Decisions Nos. 449, 450 and 451, all 27 May 2015, reversed by the court upon appeal. See also footnote 48.
64 CPC Decision No. 443, 8 June 2016.
65 This rule operates in a particularly confusing way when the abuse has been committed towards a supplier but the fine is calculated on the basis of the revenues from clients.
66 Case No. CPC/305/554/2013; case No. CPC/121/2015.
67 Dawn raids are subject to the prior approval of the administrative court.
68 Between 2010 and 2019, the CPC approved commitments in eight cases, while 36 investigations finished with sanctions.
69 Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union.
70 A new Chapter 15 has been included in the CPA. For more detailed analysis on the implementation of the EU Damages Directive in Bulgaria, see Petrov, Anton, Implementation of the EU Damages Directive in Bulgaria (30 January 2018). Available at SSRN: https://ssrn.com/abstract=3126799.
71 Public sources advise of one successful claim, brought against the operator of the electricity distribution network in north-east Bulgaria, Electrodistribution North, which refused to supply electricity to a factory because of unpaid network charges and electricity price by the previous owner. The CPC sanctioned the network operator for abuse of dominance in the form of unjustified refusal to supply. On the basis of this decision, the claimant was awarded with compensation for loss of profit resulting from the impossibility of concluding a lease agreement for the factory and generating revenues. It was proved that the owner of the factory was in negotiations with a third party, and signing of the agreement was obstructed by the lack of electricity. See Court Decision No. 156, 23 October 2015 of the Varna Court of Appeal.
72 In one of these cases, an energy producer claimed damages (loss of profit) resulting from alleged abuse of dominance in the form of undue restrictions on its production imposed by Electrodistribution North. The court of first instance upheld the claim, while the court of appeal reversed its decision and discontinued the proceedings on the ground that, at that time the CPC's decision establishing the abuse was being appealed at the Supreme Administrative Court, and thus was not final. This was consistent practice of the courts based on the mandatory interpretation of the Supreme Court of Cassation that the CPC is the sole authority entitled to establish infringements of competition law. After the implementation of the EU Damages Directive, this practice shall no longer be deemed relevant. This understanding of the authors is confirmed by judgment no. 8220, 3 December 2019 of the Sofia City Court, which, acting as a court of appeal, reviewed on the merits a stand-alone claim for compensation based on infringement of Article 21 CPA.
73 According to Article 162 of the Civil Procedural Code, if the ground of the claim is proved, but the value is not, the court is entitled to set the amount to be awarded at its own discretion or by hearing an expert opinion.
74 Fines vary from 500 leva to 50,000 leva (for individuals) and from 5,000 leva to 500,000 leva (for companies).
76 This expectation was confirmed on 16 April 2020, when the CPC opened a prohibited agreements/abuse of dominance investigation regarding the settling of prices at all levels of trade – production, wholesale and retail: case No. CPC-255/2020. This is the sixth investigation into the pricing in the sector for the past 10 years.
77 CEZ group v. CPC Decision No.1475/2017, currently being reviewed by the Administrative Court of Sofia – Region under administrative case No. 797/2019; EVN Group v. CPC Decision No.1476/2017, currently being reviewed by the Supreme Administrative court under administrative case No.1152/2018; NEC v. CPC Decision No.833/2019, currently being reviewed by the Administrative Court of Sofia – Region under administrative case No. 1111/2019.
78 Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market.
79 The deadline for implementation is 4 February 2021.