The Public Competition Enforcement Review: Cyprus
The Cyprus Commission for the Protection of Competition (Commission) is the regulatory authority both for the purposes of the Law on the Protection of Competition of 2008 to 2014 (Competition Law), which regulates abuses of market power and prohibits any abuse of a dominant position by one or more enterprises in a market for a product or service, as well as for the purposes of merger control pursuant to the Law on the Control of Concentrations between Enterprises of 2014 (Concentrations Law). The Commission is a member of the European Competition Network, the European Competition Authorities Network and the International Competition Network.
It is within the Commission's competence, pursuant to the Competition Law, to examine complaints submitted by third parties, and also to initiate investigations on its own initiative:
- into formal or informal restrictive agreements and practices that have as their object or effect the elimination, restriction or distortion of competition, and in particular agreements that:
- fix, directly or indirectly, the purchase or selling prices or other trading conditions;
- limit or control production, markets, technical development or investments;
- divide markets or other resources of supply into geographical or other sectors;
- apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or
- make the conclusion of contracts subject to the acceptance by the other parties of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject matter of the contract;
- of abuses by one or more undertakings of a dominant position, especially if:
- they affect or may affect the direct or indirect fixing of unfair purchase or selling prices, or any other unfair (under the circumstances) trading conditions;
- they limit production, distribution or technical development to the prejudice of consumers;
- they apply dissimilar conditions to equivalent transactions, thereby placing certain undertakings at a competitive disadvantage; or
- they make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject matter of such contracts;
- of abuses by one or more undertakings of a relationship of economic dependence where another undertaking, which is a client, supplier, producer, representative, distributor or commercial collaborator, stands at an economic disadvantage compared with that or those undertakings, and does not have an equal alternative solution. Such abuse of a relationship of economic dependence may consist of the imposition of unfair trading conditions, the application of discretionary treatment, or a sudden and inexcusable interruption of long-term trade relationships; and
- into a specific sector of the economy or in relation to specific types of agreements, if the course of commercial transactions or the inelasticity of prices or other conditions raise suspicions of possible restriction or distortion of competition.
The Commission does not have strict timetables for its investigations. Before issuing a decision, it requests that interested parties submit information and observations, and holds proceedings in the form of hearings. The Commission has the power to order interim measures during its investigation, such as requiring an enterprise to suspend a specific activity or agreement. The Commission's decisions, which are subject to judicial review proceedings at the Administrative Court, are published in the Official Gazette as well as on the Commission's official website.
The Commission's work is assisted by a body of staff members (Commission's Service) who are members of the Public Service. The competences of the Service are:
- to carry out the secretarial work of the Commission
- to maintain the Commission's registers;
- to collect and examine the information necessary for the exercise of the Commission's duties and powers;
- to introduce complaints and submit recommendations to the Commission;
- to make any necessary communications and publications; and
- to grant the Commission every possible facilitation to fulfil its competences and duties.
The Commission issued only a few decisions regarding cartel behaviour in 2017:
- In January 2017, the Commission announced that, on the basis of a preliminary investigation by the Commission's Service, it has decided to initiate infringement proceedings against the Association of Contractors for Mechanical and Electrical Works of Cyprus for possible prima facie infringement of Section 3(1)(b) of the Competition Law (concerted practices that limit or control production, markets, technical development or investments) for allegedly attempting to deter its members from participating in an open tender process commissioned by the Paphos Municipality for works on the municipal market. The investigation was concluded in 2017 and the Commission imposed a fine of €2,121.
- In May 2017, the Commission imposed fines (totalling €31,009,766) against JCC Payment Systems Limited, Bank of Cyprus Public Limited, USB Bank plc, Alpha Bank Cyprus Ltd, Commercial Bank of Cyprus Ltd, National Bank of Greece (Cyprus) Ltd and Societe Generale Cyprus Ltd for breaches of Sections 3(1)(a) and 6(1)(a) and (b) of the Competition Law and of the corresponding Articles 101 and 102 of the TFEU in connection with:
- the participation of credit card issuing banks as shareholders in JCC (the acquirer) in the determination of interchange fees;
- agreements entered into between the acquirer and the banks that are not members in the capital of the acquirer for the determination of interchange fees;
- excessive pricing in credit card charges;
- excessive pricing in interchange fees; and
- abusive behaviour in limiting access to the issuance and processing of Amex cards.
The Commission also imposed specific restrictions in the internal operation of JCC enterprises, which is the main credit card acquirer in Cyprus.
In November 2017, the Commission announced the imposition of a total fine of €20,775,630 against ExxonMobil Cyprus Ltd, Hellenic Petroleum Cyprus Ltd, Petrolina Holdings (Public) Ltd and Lukoil Cyprus Ltd for violation of Section 3(1)(a) of the Competition Law in connection with their individual and separate agreements with petrol station operators for fixing prices in the retail market of unleaded petrol and diesel fuel during the period from 1 October 2004 to 22 December 2006.
Antitrust: restrictive agreements and dominance
The Commission did not issue any notable antitrust decisions in 2017, but it has announced the initiation of infringement proceedings as follows:
- The Commission announced that it initiated infringement proceedings against MTN Cyprus Ltd for possible infringement of Section 6(1)(b) of the Competition Law. The aforementioned undertaking holds a dominant position by way of its mobile telephony network, and has been accused by the complainant, Golden Telemedia Ltd, that it unlawfully blocked the access of its subscription-based clientele to the premium rate services offered by the complainant.
- The Commission announced that it initiated infringement proceedings against Henkel AG & Co KGaA and its subsidiary GPM Henkel Ltd for possible infringement of Section 6(1)(b) of the Competition Law and Article 102 of the TFEU. The aforementioned undertakings hold a dominant position in the market for heavy duty detergent cleaners and have been accused by the complainant, KAC Constantinides Trading Ltd, of imposing restrictive marketing practices for the importation and sale of Dixan products in Cyprus.
- The Commission announced that it initiated infringement proceedings against Hermes Airports Ltd for possible infringement of Section 6(1)(a) of the Competition Law. The aforementioned undertaking, as the operator of Larnaca International Airport, holds a dominant position in the market for the provision of administration services at Larnaca International Airport and in the market for the provision of valet parking areas within the airport so that other companies may offer their services. A Princess Airport Parking Ltd, C&A Stop and Fly Ltd and X Xanthos Airport Parking Services Ltd filed a complaint with the Commission that Hermes Airports Ltd employed certain practices and imposed abusive conditions on companies that wished to offer parking and valet parking services at the airport.
Sectoral competition: market investigations and regulated industries
State aid is regulated by a separate and distinct legislative framework and a separate and distinct independent authority. Pursuant to the State Aid Control Laws of 2001 to 2009, the Council of Ministers of the Republic of Cyprus appoints the Commissioner for State Aid Control, who is competent and responsible mainly for the following:
- examining and issuing legally binding decisions on the compatibility of draft aid measures with state aid rules;
- carrying out a preliminary assessment and issuing reasoned opinions on the compatibility of all other draft aid measures with state aid rules;
- applying the provisions of Council Regulation No. 659/1999 and the implementation of provisions adopted by the European Commission according to Article 27 of the Regulation;
- monitoring the implementation and the final impact of all aid granted;
- collecting progress reports from all aid-granting authorities in order to monitor the implementation and the final impact of all aid granted;
- submitting to the European Commission all information required, including information regarding state aid granted in Cyprus;
- collecting, compiling and monitoring all information concerning state aid;
- preparing and keeping an up-to-date inventory of all state aid schemes;
- observing national cumulative limits pursuant to Commission Regulation No. 1535/2007 and Commission Regulation No. 875/2007 for any period of three fiscal years;
- training all authorities granting aid and other parties involved on state aid matters;
- preparing and submitting to the President of Cyprus an annual report on his work with observations and suggestions, including a statistical analysis for the granting of state aid; and
- representing Cyprus in the EU Advisory Committee on State Aid as well as on any other committees and working groups dealing with the development or the implementation of state aid policy taking place in Cyprus or abroad.
The Office of the Commissioner for State Aid Control is staffed by eight people, of whom five are scientific staff members and three are administrative staff members.
The current Commissioner, Mr Theofanis Theofanous, was appointed in March 2015 for a six-year term. During 2017, the Commissioner for State Aid Control issued a couple of decisions regarding government programmes and schemes:
- A scheme providing financing by the Cultural Services of the Ministry of Education and Culture for the production of long and short films (fiction, documentaries, animation) with a budget of €3 million until 2021. The scheme aims to provide support to producers and scriptwriters based in Cyprus and the EU during all stages of production, including scriptwriting, preproduction, postproduction and distribution. Its aim is to encourage cultural diversity, creativity and the creation of new employment in the film industry.
- A scheme providing financing by the Cyprus Tourism Organisation for the enrichment and modernisation of tourism and the lengthening of the tourism season, with a budget of €16 million until 2020.
Pursuant to the Concentrations Law, the following events give rise to a concentration and trigger an obligation by the undertakings participating in a concentration to notify it to the Commission:
- a merger of two or more previously independent undertakings;
- one or more persons that already control one or more undertakings acquiring direct or indirect control of the whole or part of one or more other undertakings (this can be done through a purchase of securities or assets, by agreement or otherwise); or
- the establishment of a joint venture that permanently carries out all the functions of an autonomous economic entity.
A concentration shall only be notifiable if the following cumulatively apply:
- at least two of the participating undertakings each have a worldwide aggregate turnover in excess of €3.5 million;
- at least two of the participants engage in commercial activities within Cyprus; and
- at least €3.5 million of the worldwide aggregate turnover of all the participants relates to the provision of goods or the supply of services in Cyprus.
Notifications are mandatory, must be made in writing (by paying an administrative fee of €1,000) in Greek by way of a prescribed form (supporting documents may be filed in English), and must be submitted by one or more participants before putting the concentration into effect after either the signing of the relevant agreement, or the publication of the offer to purchase, exchange or acquire a participation that grants control of the undertaking.
The relevant transaction must be put into effect pending the outcome of the Commission's investigation, but one or more of the participants can apply to the Commission for permission to complete the transaction before approval subject to any conditions that the Commission may impose. The Commission's decision either to clear the concentration or to order a full investigation must be notified to the notifying party within one month of receipt of a complete notification. A Phase II full investigation by the Commission must be carried out (by also paying an administrative fee of €6,000) and a decision must be issued within four months of receipt of a complete notification. The Commission will clear the concentration only if it declares that the transaction is compatible with the conditions of the competitive market, and may also authorise the merger subject to conditions.
During 2017, the Commission received 40 notifications of concentrations and published 34 Phase I merger clearance decisions. Other notable decisions of the Commission are the following:
- The Commission issued a clearance decision following a Phase II full investigation in the case of a joint venture company called VLPG Plant Ltd, which will undertake the administration and storage of LPG gas in Cyprus, where the participants were Hellenic Petroleum Cyprus Ltd, Petrolina Holdings (Public) Ltd, Synergas Cooperative Society and Intergaz Ltd. Following notification of the concentration, the Commission expressed doubts as to the compatibility of the concentration with the functioning of competition in the relevant market. As a result of negotiations between the Commission's Service and the participating undertakings, the participants submitted a number of commitments that the Commission accepted, and it declared the concentration compatible with the functioning of competition in the market subject to the commitments being valid for the whole time period that the joint venture company will be active. The commitments included, among others, the following:
- amendment of the shareholders' agreement and articles of association of the new company;
- restriction of the directors of the founding companies to hold office in the new company;
- restrictions on the passing of confidential information from the directors of the new company to the directors of the founding company;
- the appointment of an independent trustee to verify that commitments are kept and to submit an annual report to the Commission confirming the implementation of the commitments;
- the implementation of competition compliance employee manuals within the new company;
- commitments that the new company will operate at arm's length with the founding companies and with third parties; and
- the granting of access to essential services to new entrants in the market.
- In 2016, the Commission had cleared a concentration notified by Eurogate International GmbH (Eurogate), Interorient Navigation Co Ltd (Interorient) and East Med Holdings SA (East Med) concerning the acquisition of the operation of the Container Terminal at the Limassol Port (the primary commercial port in Cyprus), which was previously operated by the Cyprus Ports Authority. Following up on information obtained by the Commission in 2017 during another investigation concerning proposed mergers regarding the acquisition of the operations of marine and other terminal services at the same port, the Commission decided to further investigate the issue regarding possible infringements of the law by Eurogate, Interorient and East Med (participants) during the notification of the concentration. The Commission was specifically concerned that the participants had not disclosed to the Commission complete and accurate information during the notification process. After hearing the arguments of the participants, the Commission (by majority decision: the chairperson dissented) held that the parties had not failed to provide information; nor was the information provided untrue or misleading, and it held that the information provided was given in good faith and honestly. As such, it decided that there had been no violation of the Concentrations Law.
- In 2017, the Commission received a notification of a proposed concentration whereby VIP Turkey Enerji AS of Turkey (VIP Turkey) would acquire 100 per cent of the share capital of OMV Petrol Ofisi Holding AS (OMV). The concentration was notified to the Commission because VIP Turkey is a subsidiary of Vitol Holding BV of the Netherlands and part of the Vitol Group of companies, and both the Vitol Group and the OMV group operate within Cyprus. Vitol Group operates in Cyprus in the distribution of fuel oil for electricity production and asphalt for construction projects. OMV Group on the other hand is active in the distribution of lubricants in the geographical areas of Cyprus that are not controlled by the government, but that are rather controlled by Turkish troops following Turkey's invasion of the island in 1974, and its occupation since then of the northern part of the island. The Commission took the view that although the Concentrations Law applies to the entire territory of Cyprus, there is an objective obstacle for its application in those areas that are under Turkish occupation and that are not under the effective control of the government, so the evaluation by the Commission of the notified transaction is rendered impossible, and the Commission concluded that it was not possible to assess the notified concentration.
- In 2014, the Commission cleared a concentration pursuant to which certain individuals sold to Delta (a Greek company that was a subsidiary of Vivartia) their shares in the company Mevgal of Greece, and by which Vivartia would acquire control of Mevgal. The Commission later discovered that Delta had sent misleading and incorrect information on the products that Vivartia sold in Cyprus, and in 2017 it imposed a fine on Delta totalling €37,000.
The Commission has long been preparing a comprehensive procedural regulation to govern all matters before it; however, the proposal is still under legislative review.
In 2017, the House of Representatives enacted the new Law on Certain Rules Governing Actions for Damages for Infringement of Competition Law of 2017, which was published on 21 July 2017. The new Law was passed for purposes of national transposition of, and harmonisation with, 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. The new Law introduces new rules with respect to, among others, the following:
- ensuring that any person who suffers loss due to violation of competition rules by any enterprise can take effective measures to claim and obtain redress at civil courts;
- obtaining documents and information in aid of legal proceedings;
- determining the liability of enterprises that are found to be in breach of competition rules as to the damage causes;
- determining the damages that can be awarded; and
- ensuring the finality of the decisions of the Commission.