Competition - competition policies, institutions and anti-competitive behaviour
December 15, 2021 rcplegal 0 Comments

The first set of competition rules was introduced in the US in the US Sherman Act of 1890. The Sherman Act outlaws “any contract, combination or conspiracy to restrain trade” and any “monopolization, attempted monopolization or conspiracy or combination to monopolize”. Long ago, the Supreme Court ruled that the Sherman Act does not prohibit all restraints of trade, only those that are unreasonable. For example, in one sense, an agreement between two individuals to form a partnership restricts trade, but it cannot do so unreasonably and therefore may be legal under the antitrust laws. On the other hand, some acts are considered so harmful to competition that they are almost always illegal. These include clear agreements between competing individuals or companies to fix prices, share markets or manipulate bids. These acts are “per se” violations of the Sherman Act; in other words, no defense or justification is allowed.

In Romania, the most common anti-competitive behaviours concern violations of legislative articles such as: Art.5 paragraph (1) of the Competition Law 21/1996, Art.6 of the Competition Law 21/1996, republished, Art.12 of the Competition Law 21/1996.

Article 5(1) of the Competition Law no. 21/1996, republished, prohibits agreements between economic agents or associations of economic agents, decisions taken by associations of economic agents or concerted practices whose object or effect is to restrict, prevent or distort competition on the Romanian market or part of it.

The most serious anti-competitive agreements are cartels – secret agreements concluded between competing economic agents, which have as their object the fixing of prices, the limitation of production, the sharing of markets, the allocation of customers and territories, etc.

Article 6 of the Competition Act No 21/1996, republished, prohibits: “the abusive use of a dominant position held by one or more economic agents on the Romanian market or on a substantial part of it, by resorting to anti-competitive acts, which have as their object or may have as their effect the impairment of economic activity or the prejudice of consumers”.

The most common forms of abuse of dominant position are: imposing sales prices, tariffs, refusing to deal with certain economic agents, limiting production, etc.

According to art.12 of the Competition Law no.21/1996, republished: “economic concentrations which, having the effect of creating or consolidating a dominant position, lead or could lead to the restriction, elimination or significant distortion of competition on the Romanian market or part of it, are prohibited”.

The notion of economic concentration includes the following categories of operations: mergers, acquisitions and the creation of concentrative joint ventures. Economic concentration operations, in which the turnover of the economic agents involved exceeds the value threshold provided by law, must be notified to the Competition Council.

As a case study for this topic of discussion we propose the case of Orange and Vodafone vs Netmaster.

In 2011, the authority sanctioned Orange and Vodafone for refusing to grant Netmaster access to their telephone networks. The two companies, Orange and Vodafone, have appealed to the Competition Council. The Bucharest Court of Appeal had different solutions in the two cases and, as a result, the High Court of Cassation and Justice sent them back to the first instance for retrial.  In the Orange case, the ICCJ irrevocably confirmed Orange’s infringement of competition law in April 2018. The two companies have a monopoly in their own networks, and under European competition rules, a refusal by a dominant company can constitute an abuse, in the absence of objective justification. More details here on Hotnews (click for full article).

There are 2 committees at EU level dealing specifically with competition and consumer protection policy issues:

  • ECON (Economic and Monetary Affairs) EU economic and monetary policy, competition rules and state aid to enterprises
  • IMCO (Internal Market and Consumer Protection) identifying and removing obstacles to the functioning of the single market and promoting and protecting consumers’ economic interests.

The European Commission ensures the proper application of EU competition rules. Its role is mainly to monitor and, where necessary, block:

  • anti-competitive agreements (in particular cartels)
  • abuses of dominant positions
  • mergers and acquisitions
  • state aid.

To ensure the enforcement of competition law, the Commission has a number of powers, such as the right to launch an investigation into a particular sector of the economy, to hold hearings and to grant exemptions. Member State governments also have a duty to inform the Commission in advance of any support measures they intend to take in favour of certain undertakings (state aid). However, since 2004, as part of the “modernisation” process (Regulation 1/2003), some of these prerogatives relating to the application of competition law have been transferred to the Member States. This Regulation provides that national authorities and national courts may apply Articles 101 (ex Article 81 of the EC Treaty) and 102 (ex Article 82 of the EC Treaty) of the Treaty on the Functioning of the European Union. In implementing all aspects of competition policy, the Commission takes account of consumer interests (information taken from the official website of the European Union. More details here).

Regarding the internal measures that a company can take to avoid various anti-competitive behaviours, we can mention the following:

  • compliance programmes
  • company-wide training
  • dedicated contractual clauses

Compliance programmes allow companies to avoid breaches of applicable competition law. These programmes are based both on information materials designed to create and develop a culture of compliance (compliance manual) and on operational alert mechanisms – auditing, warning, advising and empowerment – which are indispensable for the effective implementation of such a programme. It must also be tailored to the company’s own business model, and its development must be based on a rigorous risk analysis specific to the activity and industry in which the company operates, as well as its organisational structure.

Compliance programmes are designed to create a climate of compliance with competition rules and to develop methods for identifying and remedying possible violations. The particular importance attached to prevention is reflected in the concerns of the authorities at both domestic and international level. This perspective of institutional policy is matched by the practical experience of the Competition Council which, over the years, has systematised a wide range of compliance programmes that different companies have presented during investigations and has proposed a set of best practices in this document.

The responsibility and effectiveness that companies demonstrate in implementing a compliance programme can lead, if the investigation results in a sanction, to an effective reward from the authority, i.e. a reduction of up to 10% of the base level of the sanction.

Company-wide trainings to train persons who may have duties in the segment in which the company operates that could lead to anti-competitive actions.

Insertion of contractual clauses in contracts with suppliers and customers whereby the parties undertake to comply with the provisions of the Competition Act, as well as insertion of clauses in the Internal Regulations for employees providing that failure to comply with certain obligations relating to competition issues represents serious disciplinary offences that may lead to sanctions such as termination of the individual employment contract.

The main raison d’être of competition policy is determined by the fact that the market cannot naturally function normally without outside intervention to ensure its proper development. The principle of an open market economy does not imply a passive attitude to the way markets work, but rather requires constant vigilance to allow market mechanisms to function properly. Given the current global context of globalization, characterized by deepening market integration, active scrutiny and prompt involvement in any action or activity that may violate the principles of competition is necessary to give all trading participants equal opportunities in the global economy.

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