The European, Middle Eastern and African Antitrust Review 2018

Cyprus: Commission for the Protection of Competition

14 August 2017

Chairperson

The Cyprus Commission for the Protection of Competition (CPC) is the competent authority for applying competition rules in the Republic of Cyprus. In this regard, there are two applicable laws relating to antitrust enforcement and mergers and acquisitions control:

  • the Protection of Competition Laws of 2008 No. 13(I)/2008, as amended by Law No. 41(I)/2014 (the Competition Law); and
  • the Control of Concentrations between Undertakings Law of 2014, No. 83(I)/2014 (the Concentrations Law).

The CPC is an independent administrative authority. It comprises the chairperson and four members who are appointed by the Council of Ministers based on a proposal of the minister of energy, commerce, industry and tourism. The term of office of the chairperson and members is five years and can be renewed once. The current members of the CPC were appointed in 2013; however, one was appointed recently to replace a member who resigned in 2016. The CPC serves on a full-time basis and is assisted by its Service. The staff of the Service are members of the Public Service and are appointed as per the Public Service Law and procedures.

The CPC is an administrative body, bound by administrative law, and as such all decisions of the CPC can be appealed to the Administrative Court (established on 1 January 2016 - previously reviewed by the Supreme Court of Cyprus).

The period of reference taken into account for this contribution is between June 2016 and May 2017.

It should be noted that on 29 January 2016, the Administrative Court of the Republic of Cyprus issued a decision in the case of Cyta v CPC (Case No. 5651/2013) according to which the composition of the CPC was deemed unlawful due to the participation to the CPC of a member who was also a member of the central committee of a political party. The CPC was forced to tackle a large number of issues and problems in order to actively comply with said decision in accordance with the applicable administrative law and the Constitution of the Republic of Cyprus (the Constitution), and in order to avoid future administrative law issues that would arise in each and every case for which a decision would have been reached.

However, on 3 March 2017, the plenary of the Supreme Court of Cyprus issued a majority decision in the revisional appeal No. 2/2016 filed by the CPC, overruling the above-mentioned Administrative Court's decision and upholding the CPC's decision. The CPC will have to follow the necessary procedures and steps in order to actively comply with the decision of the Supreme Court in accordance with the applicable administrative law and the Constitution.

Despite the above obstacles and setbacks, the CPC has been able to examine, between June 2016 and May 2017, 42 notifications of concentrations between undertakings, issuing clearance decisions to 39 of them in Phase I and to two of them in Phase II on the basis of certain terms and conditions.

Regarding the two clearance decisions in Phase II, the first case (Case No. 8.13.016.06, Decision No. 28/2016) concerned the acqui­sition of the management of Marine Services at Limassol Port (LOT2) by the newly established joint venture, P & O CYPRUS. P & O CYPRUS was created by P & O Maritime FZE (P & O FZE) and GAP Vassilopoulos Marine Services Limited (GAP Vassilopoulos Marine). The concentration was based on two agreements: the Joint Venture Agreement dated 22 April 2016 (the JV Agreement) between GAP Vassilopoulos Marine and P & O FZE for the establishment of P & O CYPRUS and the Concession Agreement for the services concession for the provision of Marine Services at Limassol Port between the Republic of Cyprus and P & O CYPRUS dated 25 April 2016. Pursuant to the JV Agreement, P & O FZE owns 75% and GAP Vassilopoulos Marine owns 25% of the share capital of P & O CYPRUS. Pursuant to the Concession Agreement, P & O CYPRUS was to acquire the management of Marine Services at Limassol Port. The CPC, having evaluated all the information of the case after the completion of the Phase II investigation, reached a unanimous decision to declare the concentration compatible with the competitive market subject to a number of conditions and commit­ments that the parties were prepared to undertake. The commitments undertaken by the undertakings in the concentration that will apply throughout the period covered by the Concession Agreement concern the following:

  • Commitment to amend the Joint Venture Agreement and the Memorandum & Articles of Association of P & O CYPRUS so that the director of GAP Vassilopoulos Marine will not be present and will not participate in any discussions during the meetings of the Board of Directors of P & O CYPRUS. Among others, he will have no voting rights in relation to any matter, agreement or proposed agreement with P & O CYPRUS in which the group companies of GAP Vassilopoulos Public Ltd may have substantial commercial interest.
  • The undertakings concerned will ensure that an independent third party, such as the auditors of P & O CYPRUS, will verify compliance with the commitments and inform the CPC annually.
  • Commitment of the undertakings concerned that:
  • P & O CYPRUS will conduct its activities through the provision of marine services at Limassol port on a basis that will ensure non-discrimination (arm's length basis) - the transactions will be non-discriminatory (arm's length transactions) in relation to the access to services, infra­structure, facilities and goods, their quality, and the regulated and non-regulated tariffs;
  • P & O CYPRUS particularly commits that any transaction carried out by GAP Vassilopoulos Public Ltd or any of its subsidiaries will be conducted under conditions that ensure that no discrimination takes place (arm's length terms);
  • P & O CYPRUS commits to publish standard terms and conditions and its price list (for regulated and non-regulated charges) on its website; and
  • P & O CYPRUS commits to inform the market regarding any rebate mechanism.
  • In relation to the above, the undertakings concerned commit that P & O CYPRUS will publish this procedure or mechanism for dispute resolution on its website no later than 27 January 2017 and at the same time inform the CPC thereof.
  • Commitment of the undertakings concerned to amend the Services Agreement between GAP Vassilopoulos Public Ltd and P & O CYPRUS in such a way as to eliminate the concern of the CPC that GAP Vassilopoulos Public Ltd may influence strategic decisions made by P & O CYPRUS or obtain sensitive infor­mation about a competitor of GAP Vassilopoulos Public Ltd.

The second case (Case No. 8.13.016.07, Decision No. 29/2016) concerned the acquisition of the management of the multipurpose terminal of Limassol Port (LOT3) by the newly established Joint Venture, DP World Limassol. DP World Limassol was created by DP World FZE and GAP Vassilopoulos Multipurpose Port Services Ltd. The concentration is based on two agreements: the Joint Venture Agreement dated 22 April 2016 (the JV Agreement) between DP World FZE and GAP Vassilopoulos Multipurpose Port Services Ltd for the establishment of DP World Limassol and the Concession Agreement between the Republic of Cyprus and DP World Limassol dated 25 April 2016. Pursuant to the JV Agreement, DP World FZE owns 75% and GAP Vassilopoulos Multipurpose Port Services Ltd owns 25% of the share capital of DP World Limassol. Pursuant to the Concession Agreement, DP World Limassol was to acquire the management of the multipurpose terminal of Limassol Port (LOT3). The CPC, having evaluated all the information of the case after the completion of the Phase II investigation, reached the unanimous decision to declare the concentration compatible with the competitive market subject to a number of conditions and commitments that the parties were prepared to undertake. The commitments undertaken by the undertakings in the concentration that will apply throughout the period covered by the Concession Agreement concern the following:

Commitment to amend the Joint Venture Agreement and the Memorandum & Articles of Association of DP World Limassol, so that the director of GAP Vassilopoulos Multipurpose Port Services Cyprus Ltd will not be present and will not participate in any discussions during the meetings of the Board of Directors of DP World Limassol. Among others, he will have no voting rights in relation to any matter, agreement or proposed agreement with DP World Limassol in which the Group companies of GAP Vassilopoulos Public Ltd may have substantial commercial interest.

The undertakings concerned will ensure that an inde­pendent third party, such as the auditors of DP World Limassol, will verify compliance with the commitments and inform the CPC annually.

Commitment of the undertakings concerned that:

  • DP World Limassol will conduct its activities through the provision of services, facilities and goods in the multipurpose terminal of Limassol port on a basis that will ensure non-discrimination (arm's length basis) - the transactions will be non-discriminatory (arm's length transactions) in relation to the access to services, infrastructure, facilities and goods, their quality, and the regulated and non-regulated tariffs;
  • DP World Limassol particularly commits that any trans­action carried out by GAP Vassilopoulos Public Limited or any of its subsidiaries will be conducted under conditions that ensure that no discrimination takes place (arm's length terms);
  • DP World Limassol commits to publish standard terms and conditions and its price list (for regulated and non-regulated charges) on its website; and
  • DP World Limassol commits to inform the market regarding any rebate mechanism.
  • In relation to the above, the undertakings concerned commit that DP World Limassol will publish its procedure or mechanism for dispute resolution on its website no later than 27 January 2017 and at the same time inform the CPC thereof.
  • Commitment of the undertakings concerned to amend the Services Agreement between GAP Vassilopoulos Public Ltd and DP World Limassol in such a way as to eliminate the concern of the CPC that GAP Vassilopoulos Public Ltd may influence strategic decisions made by DP World Limassol or obtain sensitive information about a competitor of GAP Vassilopoulos Public Ltd.
  • Commitment that, regardless of the terms of the Concession Agreement between DP World Limassol and the Republic of Cyprus related to the constraint of 900,000 tons in Larnaca port, the Cyprus Ports Authority will continue to provide services to the existing users for their commercial activities at the Port of Larnaca (without applying the constraint of 900,000 tons) according to the policy of the government in relation to the use of the Larnaca port, as decided from time to time.

In addition to the above, the CPC, after the conclusion of the examination of the complaint filed by FBME Card Services Ltd, has issued a decision imposing fines on JCC Payment Systems Limited (JCC) (acquirer in card payments) and the issuing banks: Bank of Cyprus Public Co Ltd (BOC), Marfin Popular Bank Public Co Ltd (Marfin), Hellenic Bank Plc (Hellenic), USB Bank Plc (USB), Alpha Bank Cyprus Ltd (Alpha), Emporiki Bank Cyprus Limited (Emporiki), National Bank of Greece (Cyprus) Ltd (NBG) and Societe Generale Cyprus Ltd (Societe) for the infringement of sections 3(1)(a) and 6(1)(a), (b) of the Protection of Competition Laws of 2008 and 2014 and articles 101 and 102 of the Treaty for the Functioning of the European Union (TFEU). Specifically, the CPC unanimously decided to impose fines in regards to:

  • JCC's decision as an association of undertakings of its shareholders - issuing banks to fix the Domestic Interchange Fees (DIFs), which limits competition in the payment card issuance market and, consequently, in the payment card acquiring market in Cyprus, as it brings about a uniform system of fixing DIFs in violation of section 3(1)(a) of the Competition Law and article 101 TFEU. Said infringement is continuing. A fine of €1.2 million was imposed on JCC.
  • Agreements signed between JCC and banks in Cyprus that were not its shareholders, namely with USB, Emporiki and Societe, for fixing DIFs, which limit competition in the payment card issuance market and, consequently, in the payment card acquiring market in Cyprus, in violation of section 3(1)(a) of the Competition Law and article 101 TFEU. Said infringement is continuing. Fines of €344,000, €121,500, €161,000 and €94,000 were imposed on JCC, USB, Emporiki and Societe, respectively.
  • The imposition of unfair prices in relation to Merchant Service Charges (MSCs) through predation by JCC which holds a dominant position in the relevant market of payment card acquiring in Cyprus, in violation of section 6(1)(a) of the Competition Law and article 102 TFEU. A fine of €172,000 was imposed on JCC.
  • The imposition of unfair prices through excessive pricing in relation to DIFs by the shareholder banks of JCC, namely BOC, Marfin, Hellenic, Alpha and NBG, which hold a collective dominant position in the market of payment cards issuance in Cyprus, in violation of section 6(1)(a) of the Competition Law and article 102 TFEU. Fines of €7.2 million, €7.7 million, €1.6 million, €1.4 million and €234,000 were imposed on BOC, Marfin, Hellenic, Alpha and NBG, respectively.
  • The behaviour of BOC, which holds a dominant position in the issuance and acquiring of American Express cards (AMEX) in Cyprus, which limited competition in the market of processing of AMEX cards, because without an objective justification, BOC did not allow FBME Card Services Ltd's terminals to accept AMEX cards for the purpose of transaction processing, in violation of section 6(1)(b) of the Competition Law and article 102 TFEU to the detriment of the consumers. Said infringement continued up to 2014. A fine of €10.8 million was imposed on BOC.

The CPC also unanimously decided, for the purposes of terminating the abovementioned infringements by JCC, to impose on JCC the following measures:

  • To make amendments to all Service Agreements within three months of notification of the decision so that they do not contain specific terms and after being ratified (signed by all parties affected by the amendments) to be sent to the CPC.
  • To proceed, within six months of notification of the decision, to amendments of its Articles of Association, so that it provides for or includes provisions on how to appoint completely independent directors by the shareholder banks in the Board of Directors of JCC and subsequently notify the CPC. These directors should not hold any position or post in these companies and must act in full independence and make decisions without being affected by the shareholder banks of JCC.
  • The independence of the directors must be confirmed by JCC within six months of the notification of the CPC's decision by notifying to the CPC the relevant letters of appointment by the shareholder banks of the appointed directors and relevant signed statements by said directors themselves regarding their independence. Subsequently, for each new appointment of a board member, the JCC will communicate the above documents within one month of the appointment of each board member (director).
  • To write and communicate to the CPC, within six months of the notification of CPC's decision, a Code of Appointment, Conduct and Termination of Directors in order to ensure their independence.

Furthermore, the CPC has decided to launch a full investigation of the merger regarding the creation of a joint venture called VLPG PLANT LTD by the companies Hellenic Petroleum Cyprus Ltd, Petrolina (Holdings) Public Ltd, Intergaz Ltd and Synergkaz Ltd. Based on the information in the notification, the named companies will relocate part of their activities relating to the storage and handling of liquefied petroleum gas to the new company. The CPC unanimously decided that such concentration raises doubts as to its compatibility with the functioning of competition in the storage and handling of liquefied petroleum gas market in which the new company will operate, and the import and wholesale of liquefied petroleum gas markets in which the companies also operate.

In addition to the above, the CPC has also issued a statement of objections against the Association of Contractors of Mechanical and Electrical Works of Cyprus (SEMEEK) regarding a prima facie suspected violation of article 3 (1) (b) of the Competition Law. In particular, the CPC preliminary considered that SEMEEK, as an association of undertakings, had the intent, through a press release and circular issued on the basis of a General Assembly decision, to prevent its members from participating in an open tender of Pafos Municipality for the restoration of the municipal market of Pafos, announced through the subcontracting method, thus restricting prima facie competition by object and effect, in violation of article 3 (1) (b) of the Competition Law. The hearing of the case has been completed and the decision is imminent.

The CPC, in an effort to enhance its advocacy role and promote competition culture and compliance with competition rules in Cyprus, organised a seminar on 30 March 2017 titled ‘Control of Concentrations between Undertakings 2014: Notification of concentrations and the requirements of Annex III, submission of information and documents'.

Furthermore, the CPC is also involved in the national preparations and groundwork in relation to the Proposal for a Directive of the European Parliament and of the Council to empower the competition authorities of the member states to be more effective enforcers and to ensure the proper functioning of the internal market.

The CPC continues to cooperate closely with regulators and in particular with the Regulator for Telecommunications and Postal Services and the Energy Regulator, and provides reasoned opinions to public bodies, such as government departments and the House of Representatives, on issues of its competence and on new or older legislation or other activities.

The CPC is committed to the public enforcement of competition rules to prevent and deter infringements for the benefit of the economy and consumers. Being an administrative body, the CPC must investigate all complaints submitted despite its limited resources available.

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