Competition: The watchdog that never sleeps
Source: Patrisyu

While the watchdog of democracy seems to have lost its defining qualities over the years, its equivalent in the economy sector, the Competition Council, confirms its status through consistent work meant to ensure compliance with competition regulations so as to maintain the proper functioning of the economic environment.

"Indeed, Romania’s watchdog has a positive and active track record in ensuring a normal competitive environment. The authority is acknowledged by the business environment, as well as other governmental institutions as making an important contribution to the efficiency of the national competitive environment”, says Raluca Vasilache, Partner of Tuca Zbarcea & Asociatii. 

Although seen as one of the few working tools of the Romanian State, as Daniela Nemoianu, Managing Partner of NTMO Attorneys at Law, acknowledges – “I very much appreciate the professionalism, thoroughness and oversight exercised by this authority. Their market interventions during the last 2-4 years had a positive impact”, there is also a less favorable perception of the Romanian Competition Council, observes Bryan Jardine, Managing Partner of Wolf Theiss: 

“People tend to look at the Competition Council sometimes as a mechanism that the Romanian State uses to generate revenues”. However, this standpoint has no grounds, he believes, highlighting the importance of the competition authority in protecting consumers against unfair market practices: “They have an important role to play to ensure that the consumers are protected, because if you have monopolies or price-fixing between competitors on the market, at the end of the day they’re trying to drive up profits at the expense of consumers”.

Last year, the administrative body headed by Bogdan Chiritoiu maintained a volume of finalized investigations similar to the one recorded in 2012, having succeeded to complete 23 cases, one less than the previous year. On the other hand, the number of investigations initiated in 2013 dropped by 22 percent over 2012 and by 50 percent as compared to 2011, the decrease being attributed to an increased effort of the authority to complete ongoing cases, according to the 2013 Annual Report of the Council. Thus, the year-end showed a lower number of investigations in progress, 63, as compared to 69 in 2012.

As indicates the said report, the main fields where investigations of possible competition law infringement were started last year were the road construction, dairy and film industry.

In terms of the amount of penalties, the Competition Council applied fines of about €20 million, nearly three times higher than in 2012, yet below the record-level achieved in 2011 when the fines were directed towards companies with large turnovers in the oil industry and communications sector.

At the forefront as regards cases finalized with economic sanctions there were investigations involving armament manufacturers for bid rigging in public procurement processes within the Ministry of Defence, on the electronics distribution market or on the Romanian Lottery National Company for a vertical anticompetitive agreement concluded with three other companies.

Fines imposed by the competition authority do not automatically mean the payment by those sanctioned, leaving the concerned courts to confirm those penalties.

“It is important not only to apply heavy fines, but have them confirmed in court as well. Otherwise, the discouraging effect they generate goes down the drain. We have in courts, especially at the Supreme Court, cases with penalties totaling €300 million, mainly fines against telecom operators and players in the oil industry”, says Bogdan Chiritoiu, President of the Romanian Competition Council, according to  .

Since sanctions are often disputed in court, an intense work of the Council translates into a source of cases for law firms which act in both directions: as representatives of the competition authority and as advisers of companies subject to investigations.

Still, such cases cover only part of the legal work implied by competition issues, as lawyers’ work in this area is extended to prevention activities or consultancy services.

”Our work in this field is multi-leveled, mainly encompassing compliance and prevention (legal assistance to ensure observance of Romanian and European legislation and case law in the field) M&A related assistance, when transactions are subject to merger merger notification requirements, as well as assistance in antitrust and unfair competition investigations conducted by competition authorities”, explains Alina Popescu, Managing Partner of Maravela & Asociatii.

For Tuca Zbarcea & Asociatii 2013 brought consistent activity in the investigation area, the firm acting in various competition cases initiated by the authority in charge in sectors such as dental products market, the electronic waste collection and white goods or the gambling sector, states Raluca Vasilache, Partner of Tuca Zbarcea & Asociatii. Also, referring to one of theirs most recent and challenging mandates in the competition field, as advisers of Vodafone which set-up a 16-year share agreement of the network infrastructure with Orange, she highlights that “Pursuant to such agreement, the Competition Council issued a new set of Guidelines on the interpretation and application of Article 5(2) of Romanian Competition Law No. 21/1996 on co-investment agreements, joint use of mobile communication networks respectively. These Guidelines lay the groundwork for similar projects to be implemented in Romania and represent an important milestone in our activity.”

NNDKP was also involved in the investigations conducted by the Competition Council on the buy-back campaigns related to waste of electrical and electronic equipment, representing the leader of the large household appliances market and the leader of the small household appliances market.

The electric and electronic products field, among others, generated some activity for Stoica & Asociatii, too, says Cristiana I. Stoica, Founding Partner of the law firm: “Another milestone was the assisting and representation of various local IT, household appliances and electric tools product sellers and distributors in respect of the investigation of the Competition Council regarding a potential anticompetitive arrangement concluded by the entities involved in the waste management of electronic equipment”. Additionally, she mentions that one of the most important cases they have been involved in was the assisting and representation of a professional organization in respect with the annulment of the decision issued by the Competition Council imposing a fine of about lei 4 million for alleged price-fixing.

In addition to investigations concerning possible infringement of the competition rules or sector inquiries, the Competition Council is also focused on the state-aid area, serving as a bridge between the European Commission and the beneficiaries of such subsidies, be they public authorities or private entities, ensuring implementation and compliance with related legislation.

This territory in which the competition authority has seen increasing activity in 2013 provides interesting cases for law firms as well. ”In terms of State aid, our lawyers have been involved in assessments regarding the consistency of the envisaged aid measures with applicable regulations as well as in inquiries conducted by the Competition Council and the European Commission”, says Alina Popescu, Managing Partner of Maravela & Asociatii.

Daniela Nemoianu indicates privatizations, alongside state-aids, as “important lines of action” for them. “The Competition Council has an important role to play in most of these projects”, she adds.

In the sector of state-owned enterprises, continuing the cooperation with the International Monetary Fund, the European Union and the World Bank in view of ensuring compliance with the related legislation in the restructuring and privatization process of such companies as the Romanian Post, CFR Marfa or Oltchim is one of the Council’s priorities for 2014, reveals the previously mentioned report.

“I would like to see at least one major state-owned company privatized from the distressed ones and which are having their debts erased: Oltchim, CFR Marfa, the Romanian Post. I am the most optimistic about the Romanian Post”, says Chiritoiu according to .

With a sector inquiry on the auto insurance market opened this year and an investigation on how the Professional Football League (LPF) sold the broadcasting rights of the football matches, the Competition Council seeks to carry out some major ongoing investigationon alleged violation of the competition law, such as the arrangements between retailers and suppliers for establishing resale prices in the food retail industry, the cartel on the elimination of competition in tenders for assigning advertising accounts of Romanian clients or the analysis of the tender for awarding drilling services, specifies the Council’s 2013 Annual Report. The completion of the sector inquiries on the electricity market and the primary wood market are also targeted by the competition authority.

“The following 12 months are important for the economy in terms of further liberalization of the gas price. I wish this process to succeed, the market to be free, the price not to increase excessively in order for us to do not have to resort to exceptional measures”, also explained Bogdan Chiritoiu, as per the indicated source.

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