The European, Middle Eastern and African Antitrust Review 2017

Romania: Overview

21 July 2016

Popovici Nitu & Asociatii

Recent changes in the domestic competition rules

The Competition Law No. 21/1996 (the Competition Act) establishes the primary rules on antitrust policy and merger control, while the secondary legislation in the form of regulations and guidelines brings some welcomed details designed to facilitate the implementation of the competition rules. Our national competition authority in charge of enforcing the competition policy is the Competition Council (CC).

In 2015, the Competition Act underwent various amendments, first aiming at improving all aspects the existing legal framework. These amendments focused on various policy areas from anticompetitive practices, abuse of dominance to merger control.

Both article 5 of the Competition Act on anticompetitive practices and article 6 governing abuse of dominance, the ‘local’ correspondents of article 101 of the Treaty on the Functioning of the European Union (TFEU) and article 102 TFEU respectively, were redrafted. Currently, the newly reworded articles 5 and 6 of the Competition Act are basically identical to their correspondents from the TFEU. This was done by removing two examples of prohibited practices from the enumerations of anticompetitive practices and abuses. Of course, carving out two examples of unlawful practices does not mean these practices are no longer illegal.

In the merger control area, the CC gained the power to change, if it deems necessary, the turnover thresholds above which an economic concentration falls under the scrutiny of the CC. These thresholds have been the same since 2003, but from now on, the CC has the power to amend them. Before any change of the turnover limits, the CC must obtain the opinion of the Ministry of Economy and only afterwards will the new thresholds be approved by decision of the CC’s Plenum. For the implementation of the CC’s Plenum decision, the President of the CC will issue an order that will enter into force within six months of its publication in the Romanian Official Gazette. This change most likely comes after the recommendation made by the Organisation for Economic Co-operation and Development (OECD) in a report on policy and competition law in Romania issued in 2014. While gathering data for its report, the OECD found that more than 30 per cent of the notified economic concentrations were cleared by the CC in the context of the simplified assessment procedure. Mergers that qualify for the simplified review by the CC basically do not pose risks to effective competition on the market, so allowing the CC to change the merger control turnover thresholds should work in practice as an effective instrument for the CC to increase efficiency and reduce administrative costs by limiting the number of non-problematic notified economic concentrations through higher turnover limits.

Several amendments were made as regards the statute of limitation the CC must observe when it applies fines for breaches of the Competition Act. Two new events that trigger the interruption of the statute of limitation period have been added: the CC conducting dawn raids and communication of the investigation report. The Competition Act also adds that the statute of limitation is suspended while the CC’s decision is pending before a court of law. Another change comes to expressly qualify that the statute of limitation for breaches of the Competition Act refers to the CC’s right to apply sanctions, replacing the existing general wording ‘to take action’.

Starting from June 2015, the time limit for challenging the court decision approving a dawn raid was extended from 48 hours to 72 hours calculated as of the time of communication of the court approval. Even where a court decision allowing the CC to carry out a dawn raid is challenged, the CC can still proceed to the dawn raid: the challenge before the High Court of Cassation and Justice has no suspension effects whatsoever.

A highly praised amendment of the Competition Act is the incentive for undertakings to cooperate with the CC during an investigation. This incentive takes the form of a substantial reduction of the fine ranging between 10 per cent and 30 per cent and may be accessed by undertakings under investigation that acknowledge the anticompetitive behaviour. The window period during which an interested undertaking may acknowledge the anticompetitive act and conclude a settlement with the CC has been widened. Acknowledgement and settlement discussions may be initiated even before the CC issues the investigation report. In order to benefit from a reduction in the fine, the undertaking must submit a formal request that will include a clear statement that the undertaking acknowledges the anticompetitive practice and accepts the maximum amount of the fine. Needless to say, if the undertaking that benefited from a fine reduction by using this special procedure decides to challenge CC’s decision before a court of law, the undertaking will lose this benefit.

An undertaking that benefited from the leniency policy may also use the acknowledgement procedure to gain an additional reduction of the fine. However, the total reduction cannot exceed 60 per cent of the fine even where an undertaking cumulates the leniency and acknowledgement proceedings.

As for the rules applicable to the right to access the investigation file, the Competition Act clearly states that access is granted for one occasion, namely after the investigation report has been communicated. Unless new information has been added to the investigation file, no further access will be granted.

CC’s activity

Closed investigations and fines

In 2015, the CC finalised 21 investigations, out of which approximately 70 per cent concerned vertical agreements. This marks an increase in the number of finalised investigations compared to 2014, when the CC finalised only 17 investigations.

The total value of fines imposed by the CC in 2015 amounted to 240,101,502 lei, which represents an increase by 12 per cent compared to 2014. The €37 million fine imposed last year by the CC is also one of the largest fines ever applied by the CC in its activity. This fine was applied in the investigation carried out with respect to Hidroelectrica SA, the main Romanian electricity producer and 10 electricity traders for concluding vertical anticompetitive agreements on the market of electricity producing and trading.

2015 was also the year when, for the first time in its activity, the CC applied fines for failure to comply with commitments. The fine was approximately €155,000 and the addressees were: (1) the Professional Football League for breach of the commitments undertaken in relation to the investigation on the football matches broadcast rights and (2) two distributors of mobile phone prepay products in connection with CC’s investigation on anticompetitive agreements between Orange, Vodafone, Cosmote and their distributors.

New investigations

The CC opened two new investigations in 2015 on (1) a potential bid rigging on the market of electricity meters and connected equipment, and (2) the insurance market regarding a potential breach of the national and community competition rules, through an alleged exchange of sensitive commercial information between competitors.

Also, some of the ongoing investigations have been extended by the CC. Notable here are two investigations on bid-rigging practices: one concerns an alleged cartel among the participants to the auctions organised by Transgaz SA in 2011 for natural gas connections and maintenance works of facilities and the other relates to the dairy products market.

Court activity

The CC is mainly involved in court proceedings initiated by undertakings that seek the annulment of the CC’s sanctioning decisions. The courts of law uphold the majority of the CC’s decisions.

In 2015, the CC had 198 files ongoing before the national courts of law – 5 per cent less than in 2014. The fines imposed by the CC were confirmed in 82 per cent of the cases, which means a 15 per cent increase compared with 2014.

In what is probably one of CC’s greatest successes to date, in 2015, the CC irrevocably won the trials with three of the six oil companies sanctioned by the CC in 2011 with approximately €205 million – the highest fine ever imposed by the CC for having participated in a cartel type agreement. The High Court of Cassation and Justice confirmed the anticompetitive practice, but diminished the fines imposed by the CC. The other three oil companies also challenged the CC’s decision but the files were still pending before the court at the end of 2015.

2015 also marked the year for the first ruling of a national court on private enforcement of competition. Up to this moment, the national courts have dealt with only two private litigations on antitrust matters (ie, stand-alone actions). In both cases the first jurisdiction court held that the claimants have not proved the alleged breaches of the Competition Act and thus their claims were dismissed as ungrounded. Currently, one of the cases is pending before the High Court of Cassation and Justice. In the other case, Bucharest Court of Appeal awarded the appeal and obliged the defendant to pay the plaintiff an indemnification of approximately €930,000, but this ruling was further challenged before the High Court of Cassation and Justice. This was the first time a national court admitted such action.

Sectorial inquiries and reports

In 2015, the CC issued several reports after finalising several sector inquiries such as the life insurance products and services market, the motor insurance market, and the electric energy market. The CC also issued a preliminary report on access services to the electronic communication infrastructure in Bucharest, which is the result of a sector investigation initiated in 2013. The CC found that the legislation on the communications infrastructure should be supplemented by a set of technical rules related to Law No. 154/2012.

The CC also issued its annual report on competition in key sectors. The 2015 report continues the CC’s approach initiated in 2013 and contains an assessment of the aggregate index of competitive pressure (AICP) for 20 industries from the national economy. Following the AICP test, the CC concluded that: (1) the industries that seem to be the most opened to free and healthy competition are: IT services – consultancy, architectural services, distribution of spare parts for automobiles, wholesale distribution of automobiles, and drugs manufacturing; while (2) the industries that have the features to host anticompetitive behaviours include: retail distribution of fuel, rail transport services for passengers and goods, motor vehicle liability insurance policies, notary services, and cement production and sale.

Merger control

The CC’s activity in the merger control policy area in 2015 continued the downward trend that started two years ago. The main reason has been the general economic crisis which determined a decrease in the number of transactions and, as a consequence, a lower number of economic concentrations notifications filed with the CC. In 2014, the CC issued 42 decisions in merger control cases, while in 2015 there were only 35 decisions in this area. In 2014, the merger control decisions issued by the CC represented approximately 70 per cent of the total number of decisions issued by the CC. On the other hand, the 35 decisions issued in 2015 accounted for less than half (approximately 45 per cent) of the total number of decisions issued by the CC during 2015.

As a general remark, most of the CC’s decisions were issued during Phase I of the notification proceedings, as the CC rarely enters into Phase II investigation proceedings when it assesses economic concentrations.

The economic concentrations notified to the CC in 2015 concerned undertakings active in various relevant markets. A significant number of merger cases reviewed by the CC concerned the real estate sector, mainly the real estate rental market, with its sub-markets: retail centres, shopping centres and office buildings.

The CC also used the special derogation procedure in 2015 and issued two decisions allowing the acquirers to implement control rights over the targets before obtaining the CC’s clearance. One decision concerned the merger between Banca Transilvania (one of the largest banks in Romania) and Volksbank. In this case, the CC took into account the fact that the acquirer was in need of finding a feasible solution for the retail clients of the target bank who had contracted loans in Swiss francs and had difficulties reimbursing the loans.

Other projects and future developments

In 2015, the Council finalised the implementation of the State Aid Register Project – RegAS – ‘Establishment of a mechanism for a better controlling and monitoring of state aid’. This works like an interactive database designed to assist interested individuals and ensure access to information, policies and procedures on state aid matters.

The CC, in partnership with the Romanian government and OECD, is involved in a project that aims to provide a thorough assessment of the impact of regulations in three sectors of the national economy: construction, food processing and transport.

In 2015, the CC initiated several public debates on intended changes to be brought to several pieces of secondary legislation that are still ongoing.

We can expect further developments and changes in the national legal framework in the competition area as a result of the intended consultations with the representatives of the OECD and of the World Bank.

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