The Dominance and Monopolies Review: Bulgaria
Bulgaria is a Member State 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, Article 21 of the Competition Protection Act (CPA) prohibits abuse of dominant position, which is applicable to all kinds of undertakings, regardless of their ownership or industry sector. Article 37a of the CPA historically prohibited abuse of stronger bargaining position (i.e., relative market power), but this provision was recently abolished as part of a major reform of the CPA2 and is relevant for pending cases only.3
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 or the municipality 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.4 The Energy Act contains a similar provision, addressed to undertakings active in the transmission or distribution of electricity, heat energy or natural gas. These provisions, however, have little practical importance, as we are not aware of a case in which an undertaking has been relieved of its responsibility for breaching the competition rules on these grounds. On the contrary, these companies have been sanctioned for abusing their dominance in many cases.5
Year in review
Shortly after the covid-19 outbreak was declared a global pandemic, the CPC agreed to the European Commission and European Competition Network commitments to closely monitor the food, pharmaceuticals and sanitary products markets (particularly for items such as masks and sanitiser) for anticompetitive practices, including excessive pricing. The CPC made it clear that while it might 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. However, no proceedings have yet been initiated in any of the above-mentioned sectors.
In 2020, the CPC initiated seven new cases of alleged abuse of dominant position (three more than in 2019). Two of these cases were resumed investigations of old practices, returned by the court for further review, which may distort conclusions about antitrust enforcement trends. The trend from the previous year, namely that investigations are triggered by client, supplier or competitor complaints, rather than being initiated ex officio, remains. Among the targeted sectors were the usual suspects of fuel,6 media7 and utilities.8
The only case formed upon the CPC's initiative was instigated by the Supreme Prosecution Office, which identified significant disparities between petrol prices on the international stock exchanges and within the country.9 The investigation began in mid-April 2020 and appeared as a response to economic difficulties related to the pandemic. However, the investigation, which was into both alleged abused market power and cartel, did not progress much beyond the dawn raid carried out at the Bulgarian Petrol and Gas Association's premises and the penalty of 2,500 leva imposed on the Association for obstructing the inspection.
In addition, the CPC commenced six new investigations of alleged abuse of stronger bargaining position (compared with seven proceedings in 2019), which continue regardless of the recent abolishment of the relevant prohibition because of the grandfathering provision.
The statistics on fines imposed in 2020 show that abuse of stronger bargaining position served as a suitable alternative for claimants that were unsuccessful in abuse of dominance cases because of the inability to prove dominance. While the CPC did not impose any fines for abuse of dominance in 2020, it sanctioned four companies for abuse of stronger bargaining position: a fine of 343,417 leva was imposed on the food retailer Kaufland Bulgaria for unfair treatment of a supplier, including termination of contract;10 and a total fine of 4,411,500 leva was imposed on three Bulgarian companies within CEZ Group for unjustified termination of contract with a cash payment services supplier and entering into a new contract with the same supplier under unfair trading conditions.11 Notably, the same allegations against CEZ Group companies were rejected by the CPC in 201912 due to lack of dominant position of the companies in their capacity as clients of the affected services. Another example is the local water and sewage supplier in Sofia, Sofiyska Voda, whose behaviour is being investigated in parallel as alleged abuse of stronger bargaining position and as abuse of dominance.13
In terms of judicial review, the end of an energy sector antitrust saga, which began in 2013, deserves a mention. Following a four-year investigation, the CPC imposed a total fine of 2.19 million leva on two Bulgarian companies within CEZ Group for obstructing the liberalisation of the Bulgarian energy market. The ongoing liberalisation of the energy market allows clients to switch from the regulated market 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.14 CEZ Group was vertically integrated and present in both the regulated and free electricity markets, but held a dominant position in the regulated market only. The CPC held that CEZ Group discriminated traders outside the group by refusing them access to historical data about clients' hourly consumption, which CEZ Group had collected during its operations on the regulated market, and which was at the disposal of the trader within CEZ Group. According to the CPC, such strategic information was important for traders to provide quotations to potential clients and compete against each other and thus, by exchanging this information with the CEZ Group trader, the two sanctioned companies provided an unjustified advantage for that trader over independent traders. Further, it was alleged that CEZ Group also applied various practices aimed at preventing clients from switching to the free market or at least delaying this process. The CPC found that the exchange of information, together with other practices, constituted part of a group strategy, aiming to keep clients within CEZ Group – either in the regulated market in the licensed territory, exclusively supplied by CEZ Group, by delaying the process of switching between the markets, or in the free market, by favouring its trader.
While the court of first instance entirely upheld the antitrust authority's decision,15 the Supreme Administrative Court, acting as a court of cassation, took the view that establishing all the relevant facts and circumstances of the case required an expert opinion and returned the case back to the lower court for a new review on the merits.16 In performance of these mandatory instructions, the court appointed an expert who was, in fact, invited to replace the CPC's economic analysis by answering questions relating to, inter alia, market definition, market share and barriers to entry.17 Relying on the opinion of this independent expert, another panel of the court of first instance concluded that there was no abuse and cancelled the antitrust authority's decision.18 While the court acknowledged the liberalisation was delayed, it found the delay to be in result of reasons outside the behaviour of the investigated companies, which acted to protect their legitimate commercial interests. Further, the court disagreed with the CPC about the strategic nature of the exchanged information due to the existence of other sources of information enabling traders to forecast client consumption and make an offer, including the fact that clients held this information and were able to provide it to traders for quotation purposes. Apart from the complicated factual background of the case, which was subject to disputes itself, the court touched upon the issue of the fine line between abuse and competition on the merits. While the allegations against CEZ Group were based on, among other things, internal documents evidencing the group strategy of keeping clients and improving market performance, the court made it clear that such strategy could pursue entirely legitimate goals. This decision was, however, overturned by the court of cassation,19 which disagreed with the lower court both in fact and in law. In fact, the higher court largely adopted the findings of the antitrust authority that the alleged exchange of information did take place. In law, there was disagreement between the courts on the strategic nature of the exchanged information, which led to different conclusions on the anticompetitiveness of the behaviour. It was held that while dominant undertakings, in principle, were allowed to protect their legitimate interests, such behaviour should not aim to keep, affirm or strengthen their dominant position. In the case under review, the higher court concluded that abuse consisted of the provision of competitive advantage of the affiliated trader because of the access to certain intra-group information of which this trader was in receipt.
As two Bulgarian EVN Group companies have been sanctioned by the CPC on the basis of similar allegations, it is to be seen whether the outcome in their case will be the same.20
Information about pending cases in 2020 is summarised below. The year passed without any fines being issued for abuse of dominance.
Investigations of abuse of dominance pending at the CPC
|Sector||Investigating authority||Conduct||Case opened|
|Aviation/aircraft||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. Statement of objections issued||March 201621|
|CPC||Abuse of dominance, unspecified||September 2020|
|Fuel||CPC||Abuse of dominance related to pricing||April 2020|
|CPC||Imposition of unfair trading conditions||June 202022|
|Hospital care||CPC||Abuse of dominance, unspecified||April 2020, June 2020|
|Providing rights for radio broadcasting of music and literary works by a collective management organisation||CPC||Refusal to supply (termination of the existing agreement with a view to force the Bulgarian national radio station (BNR) to accept different trading conditions, particularly higher fees payable to the collective management organisation)||January 202023|
|Food and beverage processing through high pressure processing technology||CPC||Refusal to supply24||August 2020|
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,25 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,26 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. In Talar Foods v. Veselina Trade and Aquabar,27 the CPC considered the high pressure processing food and beverages market to be wider than national.
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.28
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 unrelated 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, because of 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 the 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 share is assessed in 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 sufficient evidence for dominance in an oligopolistic market with high entry barriers because of the strong competitive pressure exerted between the two main market players.29 On the contrary, in Techem,30 Techem was found dominant in the individual measurement and allocation of the heating energy market even with a market share of less than 50 per cent because of its market share being combined with vertical integration, economies of scope and the incompatibility of its installed measurement devices with competitors. In Swissport v. Sofia Airport,31 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 revenue owing to its monopolistic position as an airport operator.
Market share, however, appeared an inappropriate indicator for assessment of market position in an emerging market.32
In Fast Pay v. CEZ Group,33 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 abuse 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,34 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 in which some competition still exists, which can only be overcome by a high-profile economic analysis. The dominant position in a certain market does not automatically make the company dominant per se in every market and in every capacity in which it might participate.35
The CPC and Bulgarian courts have acknowledged that it is the abuse and not the dominant position itself, that is prohibited.36
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. 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:37
- direct or indirect imposition of purchase or selling prices or other unfair trading conditions;
- limitation of the production, trade or technical development to the detriment of consumers;
- 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
- unjustified refusal to supply goods or to provide services to actual or potential customers, to impede their economic activity.
The CPC's understanding of 'unilateral' behaviour is somewhat flexible. In Bulgartransgaz,38 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 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 the 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,39 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.40 However, the CPC and courts do not have a consistent understanding of the meaning of this concept. The CPC relies on the objective concept to reject the relevance of the subjective intentions behind the behaviour,41 while the court refers to it42 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.43
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 (the AEC test) only once – in a case relating to fidelity rebates44 and, in general, tends to follow a stricter form-based approach without a developed coherent theory of harm and with less economic evidence.
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.45
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 to limit potential competition or to limit competitors' expansion, or imposing competitive constraint on the dominant company.46
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 both 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 short cut to making a complaint.47
One of the very few cases in this area is regarding the alleged predatory pricing of the ground-handling services of Sofia Airport EAD,48 which started in 2012 following a complaint by the company's competitor, Swissport Bulgaria. The case was the subject of judicial review twice.49 During the last review before the court of first instance, the appellant Swissport Bulgaria surprisingly withdrew its appeal, and as a result, the CPC's 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.50 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,51 the CPC sent a statement of objections (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 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 2017.52 The case is also discussed in Section II, as the final court decision was issued recently. In that case, the CPC did not apply the doctrine of the single economic entity,53 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 Elektro Bulgaria AD (CEZ Group) and EVN Bulgaria Elektrosnabdyavane EAD (EVN Group), which were found liable for abuse benefiting their related traders54 and, therefore, reaffirming the understanding that the abuse may take place in a different market to 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 logically excluding each other). Despite this inconsistency, the CPC decision in CEZ Group was finally upheld by the court.55
Against the background of the pending investigation, in 2016 the CPC began another investigation56 into the same companies on the basis of similar allegations but related to a subsequent period in time. Both investigations ran in parallel and finished with contradictory decisions.57
The provision of Article 21(c) of the CPA explicitly lists discrimination (applying dissimilar terms to equivalent transactions) as a possible form of abuse of dominance. 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,58 as well as various forms of factual behaviour.59 In CEZ Group and EVN Group, the exchange of certain information between companies within the same economic group was held to be discriminatory towards competitors outside the group.60
iv Exploitative abuses
In RES Producers v. NEC,61 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 the difference between exclusionary and exploitative abuse is not always obvious. In ViK Dobrich v. Energo-Pro,62 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.63 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 operator of an electricity distribution network (which was 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 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 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.64
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.65 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 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 several years, the CPC has sanctioned several companies for excessive pricing:
- a cemetery's sole provider of funeral services;66
- the owner and exclusive operator of a bus station;67 and
- three operators of electricity distribution networks.68
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.69
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 regard 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, whether 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 it is necessary to prove that the particular costs were included in the price of a product or service, as well as the relevance of these costs. The lack of objective pricing methodology or using irrelevant pricing factors per se may lead to the finding of an infringement.
Relying on the common understanding that the competition authorities should not act as price regulators, the CPC often orders undertakings to terminate infringements 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 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.
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%||Up to 2%|
|Medium||Up to 8%||Up to 5%|
|Heavy||Up to 10%||Up to 10%|
The base amount is multiplied by the number of years the infringement took place. 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).
Since 26 February 2021, the relevant provisions of the CPA have allowed sanctions to be imposed not only on the undertaking, which is the immediate infringer, but also on a person, who:
- exercises control over this undertaking;
- has acquired assets following a transformation that resulted in the undertaking infringer ceasing to exist; or
- is the economic successor of the operations through which the infringement was committed.
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. Since 26 February 2021, the CPC has been able to refuse to open a case on the basis of a complaint if the matter is not among its enforcement priorities (these priorities are to be determined by specific rules, which have not yet been adopted). Investigations are not limited in time. Most cases are completed within two to three years; however, some cases have been of longer duration.70 Below is a summary of the procedure that the CPC follows while investigating abuse of dominance.
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.71 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 its total annual turnover for the preceding financial year. The same fine is imposed for obstruction of an inspection. 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 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.
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 within a set period, set by the 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 (except in the case of heavy infringements), and this 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. Non-compliance, reported by a third party or established ex officio, may also result in an investigation being resumed.
Unlike other jurisdictions, in Bulgaria closing investigations with commitments is still more an exception than a rule.72
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 to the Administrative Procedural Code, effective since 1 January 2019, appeals against CPC decisions are reviewed by a court of first instance, which did not have previous experience of competition cases; the court of second instance is a three-member panel of the Supreme Administrative Court (formerly, the court of first instance). When a case returns to the CPC for a new investigation, the court provides mandatory interpretation of law, but may not instruct the CPC to find a dominant position or abuse of such.73
Private enforcement in Bulgaria is still an underdeveloped area regardless of the implementation of the EU Damages Directive74 through amendments to the CPA,75 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 limited76 and mainly includes discontinued cases owing to the lack of a final decision on the abuse by the CPC.77
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 CPC 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 on the calculation of damages and is entitled to award compensation even if the precise amount of the damages is not established.78
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 fines79 that are significantly higher than those applicable in the ordinary civil litigation.
Claims for compensation are reviewed by the civil courts, while CPC decisions are appealed before the administrative courts. This is another obstacle in stand-alone claims: civil judges have no experience in establishing competition law infringement.
In February 2021, the CPA underwent major changes that were necessary to implement the ECN Directive80 and the Unfair Trading Practices Directive.81 The concept of relative market power, which was introduced in 2015 as a tool for dealing with the issues of misused economic dependence in the food sector (but in practice was applied in various sectors), is now replaced by a new approach of regulating the business relationships between suppliers and clients. The new legal framework, which will become effective from 1 November 2021, introduces turnover-based criteria of economic dependence between a seller and a buyer. It consists of a list of conditional and non-conditional prohibitions on particular unfair commercial practices aiming to protect sellers that are economically weaker. While the turnover itself does not indicate dominance, the restrictions should be considered by undertakings acting as buyers in the agricultural and food supply chain as it is highly likely that an undertaking with buying power in this market would qualify for the relevant thresholds.
Among the changes to the CPA was the expansion of the scope of undertakings that can be sanctioned for abuse of dominant position, which now not only includes the undertaking that committed the breach, but also its parent company and successors (both legal and economic). The wording of the new provision ('may impose' instead of 'impose'), however, implies that this new possibility might be considered as an option rather than a duty of the competition authority. This is a new legal concept of Bulgarian law, which has traditionally recognised administrative liability as personal, and it is to be seen how it will be applied in practice. The new provisions on extension of liabilities for undiscovered infringements are also likely to seriously affect the mergers and acquisitions market.
The outcome in CEZ Group provides a good opportunity to test if and how private enforcement works in Bulgaria. The admissibility of stand-alone claims following the implementation of the EU Damages Directive appears to be an unsettled issue, which invites clarifications from the Supreme Court of Cassation.
1 Kremena Yaneva-Ivanova is a senior associate and Georgi Spasov is the managing partner at Spasov & Bratanov Lawyers' Partnership.
2 Effective since 26 February 2021.
3 For this reason, in this edition we do not review in detail the statutory and procedural specifics of this prohibition. See the Bulgaria chapter in The Dominance and Monopolies Review, Eighth Edition.
4 Article 2, Paragraph 1, item 3 of the Competition Protection Act (CPA).
5 See, for example, Competition Protection Commission (CPC) Decision No. 1510 of 21 December 2017; CPC Decision No. 1475 of 14 December 2017; CPC Decision No. 1476 of 14 December 2017.
6 Case No. CPC/255/2020.
7 Cases No. CPC/605/2020 and CPC/84/2020.
8 Case No. CPC/383/2020.
9 This was the sixth investigation into fuel pricing in the past 10 years.
10 CPC Decision No. 689 of 17 September 2020, currently under appeal.
11 CPC Decision No. 466 of 1 June 2020, finally upheld by the court.
12 CPC Decision No. 508 of 18 April 2019.
13 Cases Nos. CPC/439/2020 and CPC/383/2020 were both formed upon a complaint arising from Treger OOD.
14 This number relates to 2013. There are currently approximately 50 licensed traders but not all of these supply end-consumers.
15 Decision No. 15629 of 13 December 2018 and Decision No. 13130 of 29 October 2018 of the Supreme Administrative Court's three-member panel.
16 Decision No. 7729 of 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).
17 The admissibility of this expertise was strongly objected to by the CPC.
18 Decision No. 423 of 30 April 2020 of the Administrative Court of Sofia District, eighth panel.
19 Decision No. 984 of 26 January 2021 under Administrative Case No. 6582/2020 of the Supreme Administrative Court's five-member panel.
20 The EVN Group case has been pending at the court of first instance since 2018. Administrative Case No. 1152/2018 at the registry of the Supreme Administrative Court.
21 The investigation was resumed after the CPC decision was cancelled by the Supreme Administrative Court.
22 The investigation was resumed after the CPC decision was cancelled by the Supreme Administrative Court.
23 The investigation was resumed after the CPC decision was cancelled by the Supreme Administrative Court. The case was also discussed in the Bulgaria chapter in The Dominance and Monopolies Review, Seventh Edition.
24 The case was closed by CPC Decision No. 217 of 25 February 2021, finding no infringement.
25 Case No. CPC/712/2011.
26 Case No. CPC/501/2013.
27 CPC Decision No. 217 of 25 February 2021.
28 CPC Decision No. 313 of 7 March 2019, containing a market analysis of the fuel markets adopted following a sector inquiry, is the most recent example of the CPC's 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 of 28 March 2017, Section IV.1.2. The CPC's view on the geographic dimensions of the retail markets was objected to by the investigated undertakings.
29 CPC Decision No. 842/2013 of 11 July 2013, under Case No. CPC/712/2011.
30 CPC Decision No. 870 of 4 November 2015, under Case No. CPC/626/2014.
31 Decision No. 3304 of 23 March 2016, under Administrative Case No. 1906/2016 of the Supreme Administrative Court's five-member panel.
32 CPC Decision No. 217 of 25 February 2021.
33 Case No. CPC/869/2017.
34 For example, the water and sewage supply company within a certain area. See CPC Decision No. 1314 of 5 December 2019.
35 Even though CEZ Electro was dominant in its capacity as electricity supplier within its licence territory, the CPC rejected the same company being dominant in its capacity as client in the market of cash payment services. See CPC Decision No. 508 of 18 April 2019.
36 Decision No. 6985 of 5 June 2017, under Administrative Case No. 2659/2017 of the Supreme Administrative Court's five-member panel.
37 Decision No. 15629 of 13 December 2018, under Administrative Case No. 1262/2018 of the Supreme Administrative Court's three-member panel; Decision No. 1082 of 29 January 2015, under Administrative Case No. 4734/2014 of the Supreme Administrative Court's three-member panel.
38 Case No. CPC/1082/2017.
39 Case No. CPC/305/554/2013.
40 CPC Decision No. 641 of 14 May 2014.
41 CPC Decision No. 399 of 12 May 2015; CPC Decision No. 1576 of 20 November 2013; CPC Decision No. 506 of 8 May 2013.
42 Judgment of the Court of 13 February 1979.
43 Decision No. 6985 of 5 June 2017, under Administrative Case No. 2659/2017 of the Supreme Administrative Court's five-member panel; Decision No. 10524 of 12 October 2015, under Administrative Case No. 9059/2015 of the Supreme Administrative Court's five-member panel.
44 Case No. CPC/712/2011.
45 CPC Decision No. 1133 of 22 December 2016; CPC Decision No. 1475 of 14 December 2017.
46 CPC Decision No. 425 of 19 May 2015.
47 In 2018, the CPC imposed two fines for unfair competition on companies selling below cost.
48 Case No. CPC/1074/2012 (first review), Case No. CPC/145/2016 (second review).
49 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 the court of 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 of 19 December 2018, under Administrative Case No. 7087/2017 of the Supreme Administrative Court's three-member panel, reversed by Decision No. 8191 of June 2019 under the 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 of the 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).
50 CPC Decision No. 450 of 27 May 2015.
51 See footnote 25.
52 Case No. CPC/305/554/2013. The CPC decision in EVN Group is still pending at court.
53 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 of the TFEU.
54 Each investigated group included companies operating in 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.
55 Decision No. 984 of 26 January 2021, under Administrative Case No. 6582/2020 of the Supreme Administrative Court's five-member panel.
56 Case No. CPC/319/2016.
57 Several months after the CPC issued its infringement decisions for the period covered by its first investigation (namely, CPC Decisions Nos. 1475 and 1476 of 21 December 2017), the second investigation was closed without finding an abuse (CPC Decision No. 1299 of 15 November 2018).
58 CPC Decision No. 870 of 4 November 2015. The CPC sanctioned Techem for applying different terms of service and rates of fees to customers residing in different cities within the territory of Bulgaria.
59 By CPC Decision No. 399 of 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.
60 CPC Decisions Nos. 1475 and 1476 of 21 December 2017. See also Section IV.ii.
61 Case No. CPC/121/2015.
62 CPC Decision No. 506 of 8 May 2013.
63 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).
64 CPC Decision No. 1510 of 21 December 2017.
65 CPC Decision No. 158 of 31 January 2019.
66 CPC Decision No. 1511 of 21 December 2017.
67 CPC Decision No. 1133 of 22 December 2016.
68 CPC Decisions Nos. 449, 450 and 451, all of 27 May 2015, reversed by the court upon appeal. See also footnote 26.
69 CPC Decision No. 443 of 8 June 2016.
70 For example, Cases Nos. CPC/305/554/2013 and CPC/121/2015.
71 Dawn raids are subject to the prior approval of the administrative court.
72 Between 2010 and 2019, the CPC approved commitments in eight cases, while 36 investigations finished with sanctions. There were no commitments decisions in 2020.
73 Decision No. 8191 of 3 June 2019 under Administrative Case No. 2905/2019 of the Supreme Administrative Court's five-member panel.
74 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.
75 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 A Petrov, 'Implementation of the EU Damages Directive in Bulgaria' (30 January 2018), available at SSRN: https://ssrn.com/abstract=3126799.
76 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 and electricity charges by the previous owner. The CPC sanctioned this network operator for abuse of dominance in the form of unjustified refusal to supply. On the basis of this decision, the claimant was awarded 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 of 23 October 2015 of the Varna Court of Appeal.
77 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. The understanding of the authors is confirmed by Judgment No. 8220 of 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 of the CPA.
78 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.
79 Fines vary from 500 leva to 50,000 leva for individuals and from 5,000 leva to 500,000 leva for companies.
80 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.
81 Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain.