The Romanian competition rules (which largely mirror EC competition rules) are laid down in the Romanian Competition Act (RCA) and in secondary legislation adopted by the national competition authority, the Romanian Competition Council (RCC). The RCC is an autonomous administrative body and was set up in 1997. Decisions of the RCC may be appealed before the Bucharest Court of Appeals, whose decisions may be challenged before the High Court of Cessation and Justice.
Anticompetitive agreements
The cartel prohibition in Article 5 of the RCA covers any express or tacit agreement between undertakings, concerted practice or decisions of associations of undertakings that has as its object or effect the restriction of competition in the Romanian market. Article 5 contains a non-exhaustive list of impermissible practices. The list is more detailed than Article 81 of the EC Treaty. According to the RCA, it is impermissible to:
- fix prices, tariffs, rebates, margins or any other trading conditions;
- limit or control production, distribution, technological development or investments;
- share markets or sources of supply based on territory, the volume of sales or acquisitions or other criteria;
- apply dissimilar conditions to equivalent transactions, thereby placing trading partners at a competitive disadvantage;
- make the conclusion of contracts conditional upon the acceptance by the other parties of additional obligations that have no connection with the subject of such contracts;
- participate, in a concerted manner, in rigged bids in auctions or in other forms of competitive tendering;
- eliminate competitors from the market, limit or prevent access to the market or limit the exercise of competition between other undertakings; or
- make agreements not to buy from or sell to certain parties without reasonable justification.
Such prohibited agreements or decisions are null and void. In addition, undertakings that infringe the cartel prohibition face fines of up to 10% of their total turnover in the last financial year. It is not specified as to whether this relates to the worldwide or national turnover of the undertakings: in its decisional practice, the RCC tends to take only the Romanian turnover into account.
Exceptions to cartel prohibition
The RCA does not apply to agreements that concern labour issues, monetary markets or securities markets, insofar as competition in these markets is regulated by special provisions.
The cartel prohibition also does not apply to agreements of minor importance. De minimis agreements are defined as those between undertakings not exceeding certain market share thresholds: a combined market share of 5% if the undertakings are active on the same level of supply or an individual market share of 10% if they are active on different levels of supply. In addition, their Romanian turnover must not exceed L4 million ($1.6 million). Finally, exemption from the cartel prohibition is subject to the agreement not containing hardcore cartel restrictions such as price-fixing, market-sharing or bid-rigging.
Article 5 of the RCA follows Article 81 (3) of the EC Treaty and exempts restrictive agreements from the cartel prohibition if their pro-competitive effects outweigh their anticompetitive effects. The RCA provides for two types of exemptions: (i) agreements that are automatically permissible if they meet the requirements of a block exemption regulation (BER); and (ii) where a restrictive agreement does not benefit from a BER it may be exempted individually. Article 81 (3) of the EC Treaty is directly applicable and leaves it to the parties to assess for themselves whether restrictive provisions merit an exemption. In contrast, the RCA provides for an authorisation regime under which undertakings have to apply for an individual exemption. Individual exemptions will then be granted only for a limited period of time, not usually longer than 5 years.
Informal guidance
To enhance legal certainty, the RCC followed the example set by the European Commission and adopted a Notice on Informal Guidance on Anticompetitive Agreements and Abuses of Market Dominance. Under the notice, undertakings may seek guidance from the RCC on the permissibility of agreements if such questions relate to novel and/or unresolved questions about the interpretation of the cartel prohibition. Applying for informal guidance has the clear drawback that it is at the RCC's discretion whether and when to respond. So far, the RCC has issued one single guidance letter concerning the application of the BER, on vertical agreements in the motor vehicles industry.
The banking industry
Recently, the RCC has placed an increased emphasis on the investigation of cartels. A survey published by the RCC in 2005 listed the banking industry as being among the top 13 industries where the preservation of effective competition was deemed to be of the greatest importance to the Romanian economy. Therefore, the RCC is now expected to keep a particularly close eye on the banking industry. Based on the case law of the European Commission and the Community Courts, the following antitrust issues have been identified as likely to arise in the banking industry:
- collusion on exchange rates, deposits and interest rates;
- issuance of banking cards or terms and conditions of acceptance for Eurocheques;
- B2B information exchange (common in the creation of electronic exchange systems for sales to other banks); and
- refusals to deal.
The RCC has recently instigated a market survey on the condition of retail banking services in Romania. In addition, the RCC is looking into the level of fees for ATM cash withdrawals and fees charged for payments with Visa and MasterCard cards (the proceedings were instigated upon requests for individual exemptions). However, there is no further publicly available information on these proceedings.
Other case law
The pharmaceutical sector has faced recent scrutiny. In 2008, the RCC imposed fines on large pharmaceutical companies for rigging bids in public tenders organised by public health authorities.
Following an investigation that started in 2005, the RCC concluded that SC Fresenius Medical Care România SRL, SC Alsifcom Intermed SRL and SC Opremi Medfarm SRL, all of which distribute the dialysis products of the Swedish company Gambro, rigged bids during the tender proceedings for dialysis products organised by the public health authorities in 2003. The three undertakings were consequently fined a total of approximately L6 million. An interesting aspect of this case was that, in its analysis, the RCC applied an extremely narrow market definition and delineated the market to comprise each tender for a product as provided in the tender documentation, an approach that departs from the one usually taken by the European Commission.
SC A&A Medical SRL, SC Relad Pharma SRL and SC Mediplus Exim SRL are all Romanian distributors of the pharmaceutical product ranges of Eli Lilly. After an investigation that started in July 2005, Eli Lilly and its three distributors were found to have shared the market for insulin products following an auction within the National Diabetic Programme in 2003. Though all three distributors had distributed the various Eli Lilly product ranges before the auction, each of them tendered for a distinct product range, thus avoiding competition between them. An essential piece of evidence was a document prepared by Eli Lilly in which it concluded that the participation of the three distributors of distinct product ranges was to be preferred over them tendering for their entire product range, as the latter would have led to a bidding war between them. In addition, the RCC discovered correspondence between Eli Lilly and the distributors where the distributors sought compensation for products already in stock that could not be sold owing to the limited tender. The RCC thus established that Eli Lilly and its distributors had engaged in market sharing and fined the four companies a total of L84 million.
A smaller antitrust case involved the National Association of Dental Technicians. In 2005, the RCC started an ex officio investigation into alleged price-fixing by the Association by means of adopting a reference price list for dental prosthetic works. According to the minutes of meetings of the Association in 2004, the prices mentioned in the list are minimum prices. This goes hand in hand with a provision in the Association's articles that one its aims is to foster minimum prices in Romania. The RCC fined the Association L20,000 and ordered it to remove the respective provisions.
The RCC was recently dealt a significant setback when the Romanian High Court of Cessation annulled a decision of the RCC imposing a fine of approximately €27 million ($38 million) on three cement manufacturers, citing lack of evidence. The court concluded that the RCC had not produced evidence that there could be no explanation for a parallel price increase other than collusion between the three undertakings. The court also rejected other evidence and explanations by the RCC (for example, reference to constant market shares and the handwritten note of a director of another company referring to price changes).
Abuse of dominance
Article 6 of the RCA prohibits the abuse of a dominant position held in the Romanian market or a substantive part thereof. Examples of abusive conduct provided under Article 6 of the RCA follow the examples for exploitative or exclusionary practices in Article 82 of the EC Treaty. The RCA also lists the following practices as constituting an abuse of donimance:
- the refusal to deal with certain suppliers or beneficiaries;
- excessive prices and predatory prices aimed at elimination of competitors; and
- the exploitation of dependency of other parties or the cessation of commercial relations for the sole ground that the partner refuses to accept unjustified commercial terms.
The RCA is stricter than Article 82 of the EC Treaty in that it prohibits export at prices below production costs when this is subsidised by increased prices on the domestic market.
In applying Article 6 of the RCA, the usually follows case law developed by the European Commission. To date there have been few decisions by the RCC in relation to the abuse of a dominant position. The most recent cases related to the discriminatory treatment of customers by a railway carrier and unfair pricing by a Romanian cable TV operator. In this last case, the RCC departed from the EC approach, ruling that unfair pricing under Romanian law is a stand-alone concept compared to excessive and predatory pricing.
Merger control
The RCA covers the merger between two or more previously independent undertakings, the acquisition of control over another undertaking and the creation of a concentrated full-function joint venture.
A concentration is subject to merger control by the RCC if the parties' revenues in the financial year preceding the transaction meet the following thresholds:
- at least two concerned parties having recorded revenues in Romania in excess of €4 million each; and
- an aggregated worldwide turnover of the parties exceeding €1 million.
For credit and financial institutions the turnover is calculated on the basis of one-tenth of the value of assets of the balance sheet. In addition, acquisitions in the banking industry are subject to the scrutiny of the National Bank of Romania.
In the case of acquisitions of an undertaking or parts thereof through two or more transactions, the relevant turnover consists of the sum of the turnovers of all the parts that were subject to the respective transactions during the previous two years. According to the current wording of the RCA, this rule applies only to asset deals. However, the RCC also applies it by analogy to staggered share deals.
Several types of transactions are not caught by merger control rules. They include the following.
- The temporary acquisition of control by banks and other credit institutions, financial institutions, insurance and reinsurance companies, the normal activities of which include transactions and dealing in securities on their own account or on the account of others, of securities with a view to reselling them provided that they do not exercise voting rights in respect of those securities in order to determine the competitive behaviour of the target or, if they do exercise such voting rights, then only to prepare the disposal of those securities, and that such disposal takes place within one year of the date of acquisition.
- the acquisition of control by a court-appointed liquidator or by another person mandated by a public authority in the case of cessation of payments, judicial liquidation or any other any similar proceedings opened against the target;
- intra-group restructurings and reorganisations; and
- the acquisition of control if the voting rights in the target undertaking are not exercised, apart from with a view to maintaining the full value of such investment and not to determine, directly or indirectly, the competitive behaviour of the controlled undertaking. This provision differs from the corresponding European provision in that it does not limit its application to financial holding companies.
Merger control proceedings
Where a concentration meets the jurisdictional thresholds, the parties have to inform the RCC of the transaction within seven days and submit a notification to the RCC within 30 days. These periods are usually triggered by the execution of the agreement whereby control is acquired. The RCC may impose fines of up to 1% of the turnover achieved in the previous year for failure or delay in notifying a transaction. It is worth mentioning that the RCC has continuously fined companies for not adhering to the filing deadline, even in cases where the transfer of control was still subject to conditions precedents.
The RCC is bound to issue a decision within 30 days of the notification becoming effective. Where the notified operation leads to serious doubts regarding its compatibility with the competition environment, Phase II proceedings will be opened by the RCC. Phase II proceedings must be finalised within five months of the date on which the notification became effective. In practice, clearance of concentrations in the Phase I procedure usually takes between one and a half and two and a half months, as the RCC tends to send several information requests to the notifying undertakings before it declares a notification to be effective.
Before obtaining formal clearance
Parties are prohibited from implementing a notifiable concentration before obtaining formal clearance in cases of concentrations subsequently prohibited by the RCC. There are three exceptions to this suspension rule.
Firstly, undertakings are permitted to carry out a public auction or bid provided that the voting rights acquired are exerted only in order to safeguard the entire value of that investment.
Secondly, the RCC may, on the basis of a reasoned request by the parties, allow the implementation of a transaction before its formal clearance. In practice, such derogations are granted very rarely. However, the specific procedure for such derogation requests is neither regulated by law nor by a notice of the RCC.
Finally, the parties may effectuate reversible measures in the context of the notified concentration if this does not alter the market structure. There is a non-exhaustive list of examples of measures that are deemed as irreversible, for example:
- the market entry or exit of the target;
- a change in the scope of business or the commercial name of the target;
- the exercise of voting rights to designate members of the executive management of the target to adopt the incomes and expenses budget, the business plan or the investment plan of the target; and
- the dismissal of employees.
In view of these examples, the transfer of shares would not appear to be deemed an irreversible measure. However, given that the RCC has granted derogation in order to acquire shares (instead of ruling that it is a reversible measure), it is advisable that the parties abstain from transferring shares before issuance of an authorisation or derogation decision.
Implementation measures that breach the suspension clause are null and void. In addition, infringements of the suspension clause may lead to fines of up to 10% of the total turnover achieved in the preceding financial year. The RCC has twice fined undertakings for infringing the suspension clause. The two concentrations involved Cross Lander USA Inc/Aro SA and Comnord/Girueta SA. However, the RCC was not very consistent in calculating the fines. In Cross Lander USA Inc/Aro SA, the RCC determined the fine by reference to the Romanian turnover of the entire Cross Lander Group (including the target company), whereas in Comnord SA/Girueta SA only the turnover of the offending company (Comnord) was considered.
Foreseeable developments
It is expected that the system for applying to the RCC for the individual exemption of anticompetitive agreements will be replaced by a system of direct application of the exemption from the cartel prohibition, as introduced at the EU level by Regulation 1/2003.
In accordance with EC merger control legislation, it is expected that a new substantive test for mergers will be introduced to assess whether transactions will lead to a significant lessening of competition. It is further anticipated that the RCC will soon adopt guidelines on the assessment of vertical and horizontal mergers, as well as in relation to the calculation of turnover and the undertakings concerned.
| Author biographies |
Cristina Pana
Schoenherr
Cristina Pana is a senior associate of Schoenherr, Bucharest, specialising in competition law. Her main areas of practice are merger control and investigation proceedings before the Romanian Competition Council. She also regularly advises national and international clients on antitrust matters and state aid issues. Before joining Schoenherr in 2003, she graduated from an LLM programme in international business law at the Central European University, Hungary.
Franz Urlesberger
Schoenherr
Franz Urlesberger became a partner at Schoenherr in 2007, where he works in the firm's EU and Competition Unit in Vienna. He also heads the respective competition practices in the firm's CEE offices. He obtained his law degrees from the University of Salzburg (JD, 2000) and the London School of Economics (LLM, 1999). Franz has been a member of the Austrian Bar since 2003. His practice focuses on European and Austrian competition law, in which he represents and advises clients from a wide range of industries including paper and packaging, energy, oil and the media. He is engaged in all types of public and private litigation as well as giving out of court advice and, of course, merger control work. In addition, he has gained broad experience in supporting firms in implementing comprehensive antitrust compliance programmes. |