Publications


Changes in the Bulgarian Protection of Competition Act

 

On 9 July 2015 Bulgaria’s Parliament passed at second reading amendments to the Protection of Competition Act (“PCA”).

The focus of the passed amendments are on the relationships between retail chains and producers. Particularly, the adopted amendments impose several restrictions on the retailers that has dominant position when negotiating agreements for purchase and/or sale of different kind of products. The amended PCA prohibit actions and/or omissions executed in bad faith and when the execution of such actions/omissions lacked objective economic justification. The amended PCA provides examples for lack of objective economic justification - refusal to supply or to purchase goods and/or services, implementation of unequal or discriminatory conditions or unjustified termination of a contract. The amended PCA provides that when evaluating whether a merchant is in a dominant position during the negotiations of an agreement the following shall be taken into account:
- the characteristics and the structure of the respective market;
- the relationship between the respective undertakings;
- the dependency between the undertakings;
- the character of their activity;
- the possibility for conclusion of an agreement with another merchant;
- the presence of alternative options for supply;
- alternative distributions channels and clients.

Hence, the evaluation for the undertaking’s positions will be make on case-by-case basis.

The definitions and examples provided create broad filed for application of the restrictions over the retailers which may lead to initiation of proceedings by the Commission for Protection of Competition (“CPC”) against practically all kind of retailers that have strong market position. The sanctions that might be imposed when there is a violation of the new provisions amounts to up to 10% of the turnover realized from the respective product’s sale, but not less that BGN 10. 000 (EUR 1= BGN 1,95883 ). When there is no turnover, the sanction that might be imposed by the CPC is between BGN 10, 000 and BGN 50, 000.

Additionally, through amendment of the Foodstuffs Act, to prohibit the implementation of several clauses that would lead to abuse of dominant position during the negotiations of agreements for purchase and sale of foodstuff. As a consequence, such clauses will be considered invalid. The prohibited clauses are:
- Prohibition or limitation for proposal or purchase of products from third parties;
- Prohibition or limitation for provision of equal or better commercial conditions to third parties;
- Sanctions for provision of equal or better commercial conditions to third parties;
- Unilateral amendment of a contract, unless expressly provided in it;
- Payment of renumeration for services that has never been provided;
- Unjustified or disproportional transfer of commercial risk;
- Term for payment of issued invoice longer than 30 days;
- Prohibition or limitation for transfer to third parties of receivables deriving from the concluded.

Within 6 months as of entering into force of the amended PCA, all contracts for sale and/or purchase of foodstuff shall be made compliant with the new requirements. Otherwise, the state authorities may initiate proceedings against the retailers and may impose sanctions.

Another change is the creation of authorities that will resolve amicably disputes between producers and traders of foodstuff.

In conclusion, the amendments of the PCA are considerable and will affect the retailers with strong market position in almost all markets in the Republic of Bulgaria. Additionally, the list with the prohibited clauses and the obligation for review of already concluded contracts will also affect the retailers of foodstuff. The latter shall amend their current agreements, otherwise the prohibited clauses will be considered null and void.