site.btaParliamentary Ad Hoc Budget Committee Adopts Competition Act Amendments at First Reading

A bill to amend and supplement the Protection of Competition Act, submitted by Progressive Bulgaria MP Yavor Gechev and a group of MPs, was adopted at first reading on Tuesday by the ad hoc parliamentary budget and finance committee with 17 votes in favour, two abstentions and two votes against.

The bill provides for a ban on "excessively high selling prices", with the new concept applying both to companies in a dominant market position and to undertakings in a collective dominant position. According to the draft texts, a collective dominant position exists where two or more undertakings possess market power enabling them to act to a significant extent independently of their competitors, suppliers, customers or consumers, and to hinder effective competition on the relevant market. An "excessively high price" is defined as a price that significantly exceeds economically justified costs for production, acquisition and marketing, including a reasonable profit margin.

In determining whether a price is excessive, the Commission for Protection of Competition (CPC) will apply one or more criteria, including a comparative criterion, a historical criterion and a criterion based on economic value. The methodology and indicators for applying these criteria will be set out in an ordinance of the Council of Ministers, adopted following an opinion by the CPC, within three months of the law’s entry into force.

In the event of a breach of the prohibition on excessively high prices, the CPC would be empowered to impose a pecuniary sanction of up to 10% of the undertaking’s total turnover for the previous financial year.

The bill also provides for the establishment of a central electronic register for traceability along the supply chain of agricultural and food products and raw materials, as well as other products at the wholesale trade stage, from business operators to distribution to the end consumer. The register will be maintained by the Ministry of Economy, Investments and Industry, while the procedure and conditions for maintaining the register will be determined by a Council of Ministers ordinance.

The proposed fines for failure to submit information to the register, or for submitting false or misleading information, range from EUR 2,500 to EUR 25,000 for companies with annual turnover of up to EUR 2.5 million; from EUR 10,000 to EUR 100,000 for companies with turnover between EUR 2.5 million and EUR 25 million; and from EUR 25,000 to EUR 250,000 for companies with turnover between EUR 25 million and EUR 250 million. For companies with annual turnover above EUR 250 million, the proposed fine ranges from EUR 50,000 to EUR 500,000, or up to 1% of total turnover for the previous financial year where that amount is higher.

For repeated violations, the sanction would amount to up to twice the maximum penalty, but no more than 2% of the total turnover for the previous financial year. If two or more violations are established within a period of two years, the conduct would be considered systematic and a fine amounting to 10% of total turnover for the previous financial year would be imposed.

The bill envisages restricting the ability of traders with significant market power to unilaterally impose prices, sales conditions and additional payments.

The proposal would classify as unfair practices the charging of listing fees for products, the requirement for retroactive bonuses and payments, and the formation of the actual acquisition price through hidden or non-transparent mechanisms. The explanatory memorandum states that the aim is to limit the transfer of commercial risk onto suppliers.

The draft also includes provisions against discriminatory treatment among trading partners through different discounts, fees and mark-ups for similar products. It further provides for the protection of suppliers’ trademarks and identity through a ban on depackaging products and selling them loose or in bulk.

Among the new provisions are restrictions on removing products from assortments, worsening their positioning in retail networks or replacing them with retailers’ own brands. The use of sensitive supplier information for the development or preferential promotion of retailers’ own brands would also be prohibited.