Romania: private practice perspective

General overview of the Romanian Competition Council

Scope and powers

The Romanian Competition Council (RCC or the Authority) started its activity on 6 September 1996, and it is the sole authority empowered with the enforcement in Romania of the competition rules laid out under Competition Law No. 21/1996 (the Competition Law) and under the Treaty on the Functioning of the European Union (TFEU).

The RCC is not responsible for the enforcement of consumer protection laws (the prerogatives are attributed by national legislation to the National Authority for Consumer Protection), but the Authority has other specific powers concerning (i) state aid, (ii) unfair competition (B2B unfair trading practices), (iii) the implementation of the P2B Regulation,[1] (iv) the compliance with the national and European Union provisions of the activities in the railway sector, and in the areas of the management of ports and waterways, the use of shipping facilities held in the public domain and the operation of shipping activities in ports and on inland waterways. Recently, the Authority has also been empowered with specific roles in the screening process of foreign direct investments.[2] The RCC enjoys extensive competences and powers related to the above subject matters, yet its focal point is continuously based on competition-related aspects.

The RCC is independent and autonomous from both the Government and Parliament. The decisions rendered by the RCC can be appealed only before the Bucharest Court of Appeal (as court of first instance), whose decision is in turn subject to recourse before the High Court of Cassation and Justice of Romania.

As per its annual report,[3] in 2020, the RCC was involved in 225 competition court cases. With respect to the decisions rendered by the relevant courts in 2020, the Bucharest Court of Appeal upheld 81 per cent of the total amount of fines imposed (estimated success rate in front of the court of first instance of 89 per cent) and the High Court of Cassation and Justice of Romania upheld 82 per cent of the total amount of fines imposed (estimated success rate in front of the court of 79 per cent).

The Authority has adapted quickly to the new challenges of the economic environment and continued its work at a steady pace in competition enforcement – a series of ongoing investigations were finalised in 2020, numerous merger clearances have been issued and a great deal of activity took place regarding state aid, market monitoring and guidance.

Recent developments

Mergers

In 2020, the Authority cleared 52 mergers, only three transactions giving rise to significant competition concerns, therefore being subject to an in-depth analysis and conditional approval. The Authority maintained its analysis flow, with a merger being on average cleared within 1.8 months from the first submission of the clearance file.

For instance, the Authority conditionally cleared the envisaged transaction whereby a provider of integrated cash management services (CIT), entirely owned by the Romanian Commercial Bank prior to the transaction, was bound to fall under the joint control of three Romanian banks (full function joint venture), thus serving as a provider, as well as an affiliated company for each of the shareholder banks.

Given the nature of the services offered by the provider, as well as the high degree of market concentration and market power of CIT, the Authority raised its concerns on the potential exchange of sensitive information between the envisaged shareholders, as well as on the potential foreclosure effects on the market for the cash management services and the potential of the transaction to give rise to unfair commercial practices towards third-party banks.

The commitments proposed by the buyers to alleviate the RCC’s concerns covered the establishment of rules and principles to be applied in the commercial relationship of CIT with third-party banks, as well as the deployment of an Antitrust Guide, which would, in essence, prevent the bank shareholders from sharing sensitive information.[4]

Cartels

During 2020, 13 infringement investigations were finalised, with a record number of cartel investigations (11 cartel investigations), the highest number of cartel investigations completed per year in the period 2010–2020.

One of the highlight investigations finalised in 2020 is the first investigation of the RCC on the wood procurement market, which resulted in a total aggregated fine of €26 million for 31 undertakings having allegedly participated in a bid rigging. Following an ex officio investigation initiated in 2016, the Authority analysed a number of tenders organised by various forest managers or owners between 2011 and 2016 and found that the concerned undertakings coordinated their behaviour by exchanging commercially sensitive information on raw material requirements, their timber purchasing policy and the commercial strategy for participating in certain tenders or the conduct of bidding or not bidding for certain wood lots. In the RCC’s view, companies eliminated competition between them during the tenders, with a view to being awarded the wood at the lowest possible price, often to the detriment of the Romanian state, which received less income.

An element of novelty in this case is the manner in which the Authority applied the economic continuity principle. Prior to this decision, the RCC applied the ‘the theory of economic continuity’  in two different cases: (i) when the infringing undertaking no longer existed at the time of the statement of objections, the sanction was imposed on the successors (not part to anticompetitive agreements) of the guilty party; and (ii) when the guilty party was absorbed by an undertaking outside the group, the sanction was imposed on the buyer. In the case above, it was the first time that the RCC had applied this principle by sanctioning not only the infringing undertakings, which still existed at the moment when the fine was applied, but also the undertaking that had taken over the business of the respective undertakings as a result of corporate restructuring that occurred during the investigation. Thus, three companies were sanctioned for the same infringement committed by two of them (ie, the companies actually involved in the cartel (the transferors) and the company that took over the concerned business line (the transferee)).

In an investigation initiated in 2017, the RCC investigated a cartel on the financial leasing and consumer credit market. The investigated conduct concerned an alleged exchange of sensitive information with quarterly occurrence between competitors, regarding the value of current and future financing and other financial indicators, such as the value of the financed goods, the financed period, the residual value, the leasing portfolio etc, yet the infringement decision only covered the exchange of the estimated future financed values for a period of two consecutive quarters (only two such exchanges were sanctioned).

Pursuant to the sanctioning decision, the exchange of information has led to excessive market transparency on the financial leasing market (no infringement has been found on the consumer credit market), giving competitors the opportunity to adapt their business strategies accordingly.

The exchange was facilitated by the Association of Romanian Financial Companies (ALB), but also by a private entity (Diplomat Consult) that was in charge of collecting data (sometimes in an aggressive share-to-receive approach) and disseminating market reports among ALB members. Diplomat Consult applied for the leniency policy and was granted full immunity from the fine.


During the investigation, only one company concluded a settlement with the RCC with regard to the investigated conduct. Out of more than 30 companies investigated, only ALB and 16 companies were sanctioned. The decision is currently under appeal before the Bucharest Court of Appeal.

From RCC practice perspective, this was the first exchange of sensitive information sanctioned by the Authority per se, namely in the absence of a horizontal agreement on prices, quantities, market shares, clients, etc. Up to then, the RCC had only sanctioned exchanges of sensitive information that occurred in the framework of a cartel-type agreement.

More recently, the RCC has also rendered a reference decision which will tailor the Authority’s future approach towards the computation of turnover and fines. Specifically, in two cartel investigations finalised in 2020 and 2021 respectively, the Authority decided for the first time that the turnover registered during the financial year shall not refer to the turnover registered during the calendar year (which is the financial year pursuant to national accounting legislation), but during the financial year chosen by the sanctioned company for tax purposes.[5] As such, the Authority applied a different reference period for the turnover registered by each investigated party, albeit the fine percentage was largely the same.

Unilateral conduct

The RCC sanctioned Dante International (part of Naspers Group), the operator of eMag Marketplace, €6.7 million for the abuse of dominant position on the online intermediation platforms market. The investigation focused primarily on the presentation and marketing of products on the eMag platform, including the analysis of the existence and use of algorithms and other specific tools in listing and presenting product offers.

Following the investigation, the Authority found that Dante, as owner and administrator of eMag Marketplace, abused its dominant position, between January 2013 and June 2019, in particular by displaying a more favourable position towards its own products, to the detriment of its platform clients that marketed electro-IT products on the platform and with which Dante was in direct competition.

The Competition Council required the company to adopt a series of measures regarding the algorithms used by the platform, Dante having the obligation to fully and correctly inform the partner traders on how the algorithms work, such as listing, positioning products on the platform and limiting manual interventions in the operation of relevant algorithms.

At the same time, the company must implement changes to its organisational structure, create a system for managing the data collected and stored through the platform, so that access to such aggregated data is achieved in a non-discriminatory manner. At the same time, Dante needs to improve its complaints policy, by creating a set of good practices in managing the relationship with the participants on the platform.

Market inquiries

During the covid-19 pandemic, the RCC continued to monitor the sectors that have historically been under its scrutiny (eg, food retail, fuel, the retail of electricity and natural gas for households, etc), as well as sanitary products, pharma and other markets of significant importance for the economy and consumers.

In 2020, two market inquiries were launched with regard to digital e-hailing platforms and the liberalisation of the natural gas retail market for households. The Authority also finalised its sector inquiry into copyright and related rights.[6]

During the first eight months of 2021, the RCC launched a series of market inquiries on: (i) online intermediation platforms (four types of platforms came under the scrutiny of the RCC: food delivery, accommodation, tourist packages, online advertising);[7] (ii) construction materials (eg, cement, bitumen, bricks and ceramic blocks, polystyrene used for thermal insulation, iron, steel and rolled products, polypropylene products, etc);[8] and (iii) the activity of connecting household customers to networks for the distribution of electricity and natural gas, in the context of the change in the applicable legislative framework and the process of liberalisation of the two markets for household consumers.[9]

State aid

Acting as the national contact point entrusted with the primary responsibilities in the field of state aid, the RCC has played a key role over the past year in the implementation of support measures in the context of the covid-19 pandemic.

While the main state aid measures adopted by Romania to tackle the fallout from the covid-19 pandemic, as authorised by the Commission over the past year, have primarily targeted SMEs, aid schemes open to large companies have also been implemented at national level to assist with recovering from the damages suffered due to covid-19 outbreak. In comparison to other EU countries, the Romanian state was moderately active in aiding the business environment to recover from the immense financial burden of last year. To this end, the following main state aid schemes were enacted:

  • €800 million scheme to support companies affected by the coronavirus outbreak;[10]
  • €500 million scheme to support companies active in tourism, accommodation, food services, as well as travel agencies in the context of the coronavirus outbreak;[11]
  • generic scheme to support SMEs in the context of the coronavirus outbreak, irrespective of the business line of the respective companies;[12] and
  • supplementary scheme for supporting companies affected by the coronavirus outbreak.[13]

In addition to the more general state aid schemes outlined above, the Romanian state has also shown its strong support to a particularly affected sector – the aviation sector. As the airline industry has been severely affected by the covid-19 pandemic and in line with the support measures adopted in other member states, the Romanian authorities have taken measures to mitigate the negative effects of the covid-19 pandemic in this sector, either through the implementation of state aid schemes or individual support measures, as outlined below:

  • loan guarantee of up to around €19.3 million in favour of the Romanian state-owned airline TAROM;[14]
  • loan guarantee of up to around €62 million in favour of Romanian airline Blue Air;[15]
  • state aid schemes aiming to support airlines affected by the coronavirus outbreak resuming or starting flights to and from certain airports in Romania which play an important role in the regional and international connectivity of the country (namely Oradea, Sibiu and Târgu Mureș airports);[16] and
  • other support measures targeted airport operators for the damage incurred due to the covid-19 outbreak.[17]

As regards investment incentives, the two main state aid schemes for supporting the foreign capital influx into the Romanian economy[18] have been significantly updated in the past year to be more flexible and less bureaucratic, providing more straightforward communication between the state and investors, as potential beneficiaries of the state aid. In addition, the duration of both schemes has been extended to 31 December 2023.

Furthermore, greenfield investments in strategic sectors may fall under a new state aid scheme, which is currently under debate and is intended to boost strategic investments for new economic activities amounting to at least €100 million, aiming to attract strategic investors (either from EU countries or coming from third countries and wishing to locate in the territory of the EU) active in economic sectors eligible for support.

Legislative framework

The most recent legislative novelties concerned the (i) actions for damages for infringements of the competition law provisions, (ii) reporting obligations for market studies, (iii) sanctioning rules for non-residents in case of breach of certain rules with respect to economic concentrations, and (iv) individualisation of fines. Also, changes have been made to the unfair competition legal framework and state aid rules.

With regard to private actions in claiming antitrust damages, the Antitrust Damages Directive[19] was (re)transposed into the national law.[20] As regards the main provisions of the national legislation, in respect of the quantification of damage, supplementary to the provisions laid out under the Antitrust Damages Directive, it shall be presumed that cartels cause damages consisting of price overcharges of 20 per cent and that the abuse of a dominant position causes harm (in both cases, the infringer has the right to rebut such presumption). [21]

Another important amendment concerns the dawn raid procedure. As such, during a dawn raid, the data stored or archived electronically can be fully copied and taken on an electronic data storage device, followed by collection of the necessary information at the RCC’s premises, in the presence of the undertaking’s representative. In practice, this instrument has been already used by the Authority on numerous occasions thus far, the amendment being just a formal confirmation of the Authority’s well-known power of conducting IT forensic searches. 

Economic concentrations were also targeted by the amendments brought to the Competition Law, namely by the establishment of the turnover or revenues of reference for the application of sanctions in case of a breach of merger control-related competition rules by non-residents.[22]

Furthermore, the provisions regarding the sanctions applicable by the RCC were also amended to expand the 10 per cent turnover threshold to the total worldwide turnover instead of the former provision that limited the threshold to the total figures registered in Romania.

As regards the individualisation of the sanctions, we highlight another series of secondary legislation changes, brought by the newly implemented and amended Guidelines issued by the Authority.[23] The amendments address (i) the mitigating circumstances,[24] (ii) the turnover computation method for financial leasing companies,[25] and (iii) fine reductions applicable for companies that choose to settle during the investigation.[26]

Another important amendment concerns the unfair competition legal framework. In June 2020, the RCC published for public consultation a draft Government Emergency Ordinance amending and supplementing Law No. 11/1991 on unfair competition (the Draft Law).

The most important amendment brought by the Draft Law is the introduction of the abuse of superior bargaining position, which refers to the position of an undertaking that is not dominant according to the Competition Law, but a position that is established by the RCC on a case-by-case basis, subject to market features and commercial relationships between two undertakings.[27] The abusive behaviour consists in conduct such as: (i) the unjustified refusal to supply or purchase goods or services; (ii) the failure to comply with contractual clauses regarding payment, supply or purchase; (iii) the imposition of unjustifiably onerous or discriminatory conditions considering the scope of the contract; or (iv) the amendment or termination in an unjustified manner of the business relationship with the respective undertaking.

The Draft Law also amends the sanctioning mechanism for unfair competition infringements, namely the sanctions that can be imposed on undertakings for non-compliance with the provisions of Law No. 11/1991 on unfair competition. The Draft Law provides fines of 0.01 to 1 per cent of the total turnover obtained in the financial year prior to the sanction (instead of the former low, fixed thresholds). However, the Authority announced its intention to avoid imposing large fines in the first year, focusing rather on disseminating the new rules in the market and outlining the case law. The Draft Law has not been adopted thus far; it is expected to be adopted in the near future.

The year ahead

Despite the fact that the pandemic has been an important factor in postponing the conduct of dawn raids, which have been fewer in number, the published annual report revealed that the Authority opened in 2020 with 40–45 per cent more investigations than in 2019, and more recent developments demonstrate an intense activity of the RCC in investigating many alleged anticompetitive behaviours, particularly through the resumption of dawn raids at the premises of many companies from a wide range of sectors of activity. Starting in the first half of 2021, the Authority launched a series of new investigations on markets such as road signs, food, electricity, electro-IT, medical waste, natural gas, etc.

Horizontal agreements continue to account for the largest share of all infringement investigations, signalling that this type of practice remains under the RCC’s scrutiny. The recent activity of the Authority reveals that it monitors and investigates a wide range of potentially anticompetitive behaviours (price fixing, bid rigging, exchanges sensitive information or potential abuses of dominant companies), both the types of behaviour investigated and the concerned markets covering a wide range of (potential) targets.

The RCC has on numerous occasions expressed interest in certain sectors that are essential for consumers and the economy (such as, most recently, the energy markets and the marketing of health products and services), without, however, excluding that other areas of activity also be subject to the control or at least the monitoring by the Authority, which is paying close attention to concentrated markets, where relatively few players are active, but also to other sectors of activity of particular significance to consumers (pharma, food, online intermediation platforms, fuels, construction materials, etc).


Notes

[1] Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services (the P2B Regulation).

[2] Pursuant to Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union.

[3] Available online at: http://www.consiliulconcurentei.ro/wp-content/uploads/2021/04/final-Raport-anual-2020-v2modif.pdf.

[4] Which covered, inter alia, the establishment of two different communication channels, one for their relationship with the cash management provider as a service supplier and a separate one for shareholders, as well as other mechanisms that would prevent the three bank shareholders from receiving information that they should not be privy to.

[5] Each company registered in Romania is free to choose a separate financial year for tax purposes, yet in such a case two sets of financial reports shall be registered with the tax authorities: the reports on the calendar year (the official financial year in Romania) and the reports on the chosen financial year.

[6] The findings and recommendations of the RCC are included in the full report on the market investigation, available here: http://www.consiliulconcurentei.ro/wp-content/uploads/2020/08/2020-08-03_Raport-final_drepturi-de-autor-si-conexe_site.pdf.

[7] The press release issued by the Authority is available at: http://www.consiliulconcurentei.ro/wp-content/uploads/2021/07/4-studii-iul-2021-docx-1.pdf.

[8] The press release issued by the Authority is available at: http://www.consiliulconcurentei.ro/wp-content/uploads/2021/07/Materiale-de-constructii-iul-2021-1.pdf.

[9] The press release issued by the Authority is available at: http://www.consiliulconcurentei.ro/wp-content/uploads/2021/06/analize-racordari-2021.pdf.

[10] In the form of subsidised loans and state guarantees on loans, aims at enhancing access to financing for SMEs with a turnover of above 20 million lei (approximately €4 million) in 2019 and large companies, thus enabling them to continue their activities during and after the coronavirus outbreak.

[11] The public support took the form of direct grants, covering up to 20 per cent of the losses of revenues (or, for certain travel agencies applying a special regime, the volume of invoices issued for tourist services, including the margin) incurred by the beneficiaries between 1 January and 21 December 2020, compared to the same period in 2019 and aims at helping the beneficiaries address their liquidity needs and continue their activities during and after the outbreak.

[12] The public support, in the form of direct grants and state guarantees for investment and working capital loans, is accessible to SMEs facing difficulties as a result of the economic impact of the coronavirus outbreak and aims to help businesses cover their immediate working capital or investment needs, thus ensuring the continuation of their activities.

[13] The public support, in the form of direct grants for working capital and productive investments, is co-financed by the European Regional Development Fund and is accessible to SMEs active in specific sectors and certain large companies related to the eligible SMEs, which have been negatively impacted by the coronavirus outbreak. The aim of the scheme is to provide liquidity to these companies, thus enabling them to continue their activities, start investments and maintain employment.

[14] Aiming to compensate the airline for the losses directly caused by the coronavirus outbreak and the travel restrictions introduced by Romania and other destination countries to limit the spread of the coronavirus in the period between 16 March 2020 and 30 June 2020. In this context, TAROM has been forced to cancel most of its scheduled flights and incurred major losses in turnover.

[15] Aiming also at compensating the airline for the damages suffered due to the coronavirus outbreak, as well as, in addition, providing it with urgent liquidity support. The measure was approved partly based on article 107(2)(b) of the TFEU and partly under the Commission’s 2014 Guidelines on State aid for rescue and restructuring.

[16] The aid measures, in the form of direct grants, aim to support the activity of air operators by mitigating the sudden liquidity shortages faced by the beneficiaries due to the coronavirus outbreak and the restrictive measures implemented to limit the spread of the virus, thus leading to the overall economic recovery and structural viability of those regions.

[17] Such as the state aid scheme to compensate regional airport operators for the damage suffered due to the coronavirus outbreak opened to operators of Romanian airports with annual traffic turnovers between 200,000 and 3 million passengers and the individual aid in the form of direct grant of 4.8 million lei. (approximately €1 million) to the Timisoara Airport to compensate the airport for the high operating losses incurred in the context of the coronavirus outbreak.

[18] Pursuant to Government Decision No. 807/2014 on investments with major impact on the economy and to Government Decision No. 332/2014 on investments promoting regional development through the creation of jobs.

[19] Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union.

[20] By way of Government Emergency Ordinance No. 170 of 14 October 2020.

[21] The national transposition legislation goes a step further than the Antitrust Damages Directive, which only provides for the presumption that cartels cause harm.

[22] Any foreign person, as well as any other foreign entity, including collective investment undertakings without legal personality, which are not registered in Romania under the law.

[23] Guidelines of 10 December 2019 regarding the individualisation of the sanctions for the contraventions provided in article 55 of the Competition Law No. 21/1996.

[24] Undertakings can no longer benefit of the mitigating circumstance related to the limited part (under 20 per cent) of the total turnover achieved from the sale of the products or services under investigation, a mitigating circumstance for which the base level of the fine used to be reduced by up to 25 per cent. However, the Guidelines provide now for the reduction of the fine in order to ensure the proportionality of the fine. Undertakings may ask for the reduction of the fine, after such fine was individualised, based on the share of the income obtained in Romania during the time of the infringement from the sale of products or services that are directly or indirectly related to the infringement, in the total turnover of the infringing undertaking.

[25] The Guidelines were first introduced by the end of the investigation on the financial leasing market, allowing the Authority to apply increased fines despite controversies arising out of the interpretation of the former set of Guidelines on the computation of turnover and the application of the more favourable law principle.

[26] Reduction thresholds envisage the timeline of a given investigation, namely how fast or how far along an investigated company engages in settlement discussions with the Authority (ie, during the first six months, 12 months of the investigation, etc).

[27] Key elements in such assessment include (i) the specific structure of the production or distribution chains, (ii) vulnerability towards external factors, (iii) perishability or seasonality, and (iv) the specific relation between an undertaking and other undertakings active on different markets.

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