This article was originally published in the schoenherr roadmap`10 - if you would like to receive a complimentary copy of this publication, please visit: http://www.schoenherr.eu/roadmap.

After a period of virtual dormancy, public enforcement of competition rules gained momentum in 2007 and 2008 when the Bulgarian Commission for Protection of Competition (CPC) initiated an array of cartel investigations and adopted record fines on undertakings for infringing competition rules. In 2009, the Supreme Administrative Court (SAC) ruled on some of the appeals brought against these decisions. The SAC's reaction was none too positive for the CPC as the court overturned the majority of the decisions.

In 2007/2008 the CPC conducted six cartel investigations in different sectors. In five of the cases the CPC imposed fines for price fixing and exchange of sensitive commercial information. Only one of the decisions was upheld and is now binding. This concerned the CPC's decision in the insurance sector by which the CPC levied the highest fine ever of some EUR 1 mln (the maximum possible fine under the competition act then in place) on 14 Bulgarian insurance companies and the Bulgarian Association of Insurance Companies (the Association) for signing a memorandum within the association purporting to fix prices.

Other decisions were overturned, mainly because the CPC failed to provide sufficient evidence. The proceedings are now pending before the appellate body of the SAC.

The Vegetable Oil Decision1

In its Vegetable Oil decision, the CPC imposed the second highest fine ever on the producers of vegetable oil and their association for (i) directly fixing the price for sunflowers and (ii) indirectly fixing the price for vegetable oil. The decision was partly overturned by the SAC2. It found that the CPC had not produced sufficient evidence that the implicated undertakings had indirectly fixed the price for vegetable oil.

The producers of vegetable oil colluded on the purchase price of sunflowers in 2006 and 2007. From this, the CPC concluded that they thereby also indirectly fixed the price of vegetable oil as sunflowers are the most important ingredient for the production of vegetable oil and thus the most important cost factor. The conclusion was based on interviews and a prognosis for the vegetable oil price by the chairman of the association of the producers of vegetable oil in Bulgaria.

The SAC held that the CPC had interpreted these interviews and announcements out of context and that the CPC had not analysed the vegetable oil sale price of each producer. In addition, the expert appointed by the SAC demonstrated that the prices of the various producers differed and were based on objective factors. As a result, the fines were reduced by approximately half (i.e. EUR 364,000). The decision is now under appeal before the highest chamber of the SAC.

The Milk Decision3

Its investigation against the Association of Milk Producers (AMP) in Bulgaria and the National Association of Milk Producers led the CPC to fine the two associations. They were found to have (i) directly or indirectly fixed the prices of cow and goat milk, and of two particular types of cheese and (ii) exchanged sensitive commercial information. The SAC4 reversed the CPC decision to the extent it related to AMP, as the SAC was of the opinion that the AMP had not adopted any decision which affected prices on the relevant markets.

The SAC found that the AMP's members had in fact discussed the sector's downturn (e.g., not sufficient quantity and quality of milk) but that they had not agreed on prices but, rather, sold milk at different prices. Second, the court found that the AMP did not fix the price of the respective types of cheese, as it confirmed by a court expert that these were formed on the basis of objective factors. Third, the information exchange administered by AMP from its members was general information for past periods (e.g. information about historic market prices that were charged three years before).

The Bread Decision5

The CPC fined three Bulgarian associations of producers of bread and confectionery for fixing prices of particular types of bread. The CPC based its decision mainly on protocols on sessions of the managing bodies where price issues had been discussed. The CPC saw a further indication of collusion between bread producers in the fact that the increase in prices for flour also led to an increase in the price for bread, whereas a decrease of the price of meal had no corresponding effect on the price for bread.

The SAC6 found that the associations' members did not collude on prices but only expressed their opinion on the desirable price level, without any binding effect. The SAC's findings confirmed that prices were discussed at associations' meetings. However, the SAC did not consider these discussions to be impermissible as, in its opinion, the discussions only purported to protect bread producers against the anti-dumping prices of non-regulated producers. Moreover, a court expert concluded that the prices for bread were based on objective factors and that bread producers purchased flour at different prices and sold their products at different prices.

Conclusions From The SAC's Decisions

It will be interesting to see what the SAC's decisions will do to the CPC's resolve to battle cartels. On the one hand, the CPC's most important decision was upheld; on the other hand, several decisions were overturned for lack of evidence. It remains to be seen whether this means that future cartel investigations will be more detailed – and longer – to enable the CPC to compile a solid base of evidence. Or will it encourage the CPC to commence only those investigations where it is convinced that it will be able to uncover all necessary evidence, which in turn could mean fewer investigations. Another possibility is that the CPC will not be affected at all and will continue its increased enforcement of competition rules.

The Bulgarian competition authority's fight against cartels has been dealt a blow by the Supreme Administration Court, which has reversed several of the competition authority's decisions on appeal for lack of evidence. Whether this will lead to less enforcement or more thorough investigations remains to be seen.

The Bulgarian competition authority's fight against cartels has been dealt a blow by the Supreme Administration Court, which has reversed several of the competition authority's decisions on appeal for lack of evidence. Whether this will lead to less enforcement or more thorough investigations remains to be seen.

Footnotes

1. Decision No 1150/2007 of CPC.

2. Decision No 4024/2009 of SAC first instance.

3. Decision No 650/2008 of CPC.

4. Decision No 9227/2009 of SAC first instance.

5. Decision No 662/2008 of CPC.

6. Decision 9588/2009 of SAC first instance.

This article was originally published in the schoenherr roadmap`10 - if you would like to receive a complimentary copy of this publication, please visit: http://www.schoenherr.eu/roadmap.

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