Romania: Overview

Recent changes in the domestic competition rules

The Competition Act No. 21/1996 (the Competition Act)¹ 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 2016, the amendments initiated in 2015 regarding the Competition Act have continued, aiming at improving the existing legal framework. These amendments focused on various policy areas from anticompetitive practices, abuse of dominance to merger control. The modifications brought to Competition Act concerned mainly:

• amendment of article 5 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;
• regulation of the relationship between the CC and the Supreme Council of National Defence (SCND) in proceedings regarding economic concentrations that present risks regarding national security; and
• regulation of some procedural aspects aimed at facilitating the investigation procedure conducted by the CC.

Regarding the modification of articles 5 and 6 of the Competition Act, both articles were redrafted in order to become 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 dominant position.² Of course, carving out two examples of unlawful practices does not mean these practices are no longer illegal.³

With respect to mergers, 2016 brought important clarifications regarding the relation between parallel proceedings conducted both by the SCND and by the CC, with respect to economic concentrations that present risks for national security.

Until these modifications the two proceedings were conducted in parallel, leading to potentially contradictory decisions; now, however, it is expressly provided that the proceedings before the CC will be suspended until the SCND decides whether or not a risk to national defence exists. In addition, the new provisions govern the effect of the SCND's decision to prohibit an economic concentration that presents risks for national security in relation to the CC. Now, if the SCND issues a prohibition decision, the procedure before the CC will end and the CC will inform the notifying party of such.

A highly praised amendment of the Competition Act is the incentive for undertakings to cooperate with the CC during an investigation. The procedure of recognition has been detailed in the secondary instructions of the CC, entered into force in November 2016.⁴

This incentive takes the form of a substantial reduction of the fine, ranging between 10% and 30%. These may be obtained by undertakings under investigation that acknowledge the anticompetitive behaviour. However, the fine cannot fall below 0.2% of the turnover for the financial year preceding the sanction. The period during which an interested undertaking may acknowledge the anticompetitive act and conclude a settlement with the CC has been extended. Discussions with respect to the recognition may be initiated even before the CC issues the investigation report.⁵

In order to benefit from a reduction in the fine, the undertaking must submit a formal request that will include, among others:

• a clear statement that the undertaking acknowledges the anticompetitive practice and accepts the maximum sum predicted for the fine;
• confirmation by the parties that they have been informed accordingly, and that they were given the opportunity to express their point of view regarding the infringement; and
• confirmation that the parties will request access to the file and/or the hearing organisation, if the investigation report communicated does not reflect the propositions of the practice's recognition.

If the CC does not accept the terms of the request for reducing the fine, the reduction will not be awarded and the recognition provided by the undertaking shall not be used as evidence. 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 as the recognition will no longer be taken into consideration as a mitigating circumstance. 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% of the fine even where an undertaking cumulates the leniency and acknowledgement proceedings.

Along with the above amendments, the consolidated version of the Competition Act includes also changes with respect to: the statute of limitation of CC's right to apply sanctions; access to the investigation file; and the CC's new rights with respect to the investigations.

Regarding the statute of limitations

Before the Government Emergency Ordinance No. 31/2015⁶ entered into force, the statute of limitations could only be interrupted for causes and actions that took place prior to the investigation opening. Additionally, the Competition Council had five years, from the date on which the investigation was initiated, to finalise the investigation.

Pursuant to the new amendments, the statute of limitations may be interrupted not just for causes and actions that took place prior to investigation initiation, but also for subsequent causes and actions. This was also the interpretation given by the Bucharest Court of Appeal with respect to the old legal provisions concerning the matter of interrupting the statute of limitations.⁷ The amendments brought to the Competition Act also include two new events that can trigger the interruption of the statute of limitations: the CC conducting dawn raids and communication of the investigation report.⁸ Also, the statute of limitations is now suspended while the CC's decision is pending before a court of law.

Regarding the right to access the investigation file

The Competition Act now clearly states that access is granted once, namely after the investigation report has been communicated to the parties. Also, decisions through which the CC grants access to confidential information are no longer qualified as unilateral administrative acts and cannot be challenged separately - only with the CC's final decision with respect to the investigation.

Regarding the CC's rights with respect to investigations

The amended version of the Competition Act now also provides an important enforcement tool for the CC to intervene in the case of market dysfunctions. If an investigation regarding a certain economic sector is finalised by identifying some dysfunctionalities of the market that affect competition, the CC can now take all measures necessary to establish the conditions for effective competition. These measures are to be put to public debate before their adoption and the undertakings concerned have the right to access the file, present their point of view and even require hearings in front of CC's Plenum.

Also, the new version of the Competition Act introduces the CC's right to prioritise cases based on: their potential impact on competition; the general interest of the consumers; or the strategic importance of the economic field concerned. This modification will certainly generate discussion with respect to the legality and proportionality of such actions in cases where the CC makes use of these rights. This is mainly because there are no precise, public criteria based on which the CC may decide to prioritise the cases.

With respect to dawn raids:

• the CC now has the right to collect and/or use as evidence all preparatory documents drafted by the undertaking being investigated, for the exclusive purpose of exercising its right to defence - the only documents remaining under protection will be communications between the undertaking under investigation and its lawyer, made exclusively for the purpose of exercising the right of defence;
• the time limit for challenging the court decision approving a dawn raid has been extended from 48 hours to 72 hours, calculated froom the time that the court approval was communicated; and
• the CC can conduct down raids not only in the spaces that are legally detained by the undertaking, but also in the spaces in which the undertaking operates.

CC's activity

CC's investigations

In 2016, the CC finalised 25 investigations, of which 48% concerned vertical agreements and 28% concerned horizontal agreements or abuses of dominant position. This marks an increase in the number of finalised investigations compared to 2015, when the CC finalised only 21 investigations. The total value of fines imposed by the CC in 2016 amounted to €15.2 million. The biggest fined imposed last year amounted to €4.9 million - much smaller than the €37 million aggregated fine imposed in 2015 (one of the largest fines ever applied by the CC in its activity). According to the CC's activity report, in 2016, 119 undertakings/associations of undertakings were sanctioned, of which 93 recognised the infringement of Competition Act.⁹

The CC opened no less than 13 new investigations in 2015, of which 39% concerned horizontal agreements potentially infringing competition policy. In 2016 the CC opened 12 new investigations, of which 33% concerned potential horizontal agreements and 25% potential abuses of dominant position. The new investigations concern different fields such as wood processing; the lease of public land included in the port infrastructure; services of access to the communications infrastructure; wholesale and retail distribution of medicine; tourism agencies; and the market for notary services.¹⁰

Court activity

The CC is mainly involved in court proceedings initiated by undertakings that seek the annulment of the CC's sanctioning decisions. In general, the courts of law uphold the majority of the CC's decisions. Nonetheless, the courts started to pay more attention to assessing the proportionality of the fines imposed by the CC. Also, in the past, the Court had a tendency to analyse the case from a procedural perspective, whereas nowadays it conducts an analysis on its merits and reassesses the evidence provided by the parties. In addition, the Court has also started to admit a wider range of evidence, such as expert appraisements. In 2016, the CC had 189 files ongoing before the national courts of law - 4.5% less than in 2015. The fines imposed by the CC were confirmed in 81% of the cases - less than in 2015, when 82% of cases were confirmed by the courts. Also the number of cases upheld by the Court of Appeal decreased to 86.48%. Indeed, the number of Court decisions to reduce the fines imposed by the CC, or even cancel the CC's decisions altogether, are increasing.

Concerning private enforcement of competition, 2015 marked the first ruling of a national court. Up until then, the national courts only dealt with a few private litigations on antitrust matters (ie, stand-alone actions). In a recent case, the High Court of Cassation and Justice¹¹ upheld the decision of the court of appeal¹² and obliged the defendant to pay the plaintiff an indemnification of approximately €930,000. This was the first time a national court admitted such action.

Sectorial inquiries and reports

In 2016, the CC issued several reports after finalising five sectorial inquiries in fields concerning the market for services provided by insolvency practitioners, electric energy, sanitation services at a national level, car insurance, and services of access to the electronic communications infrastructure (NetCity). The CC also started five sectorial inquiries in fields such as the exploitation market for mineral water resources from Romania; the market for copyright and related rights; the market for retail banking services; the market for the production and the sale of cement in Romania; and the market for electronic commerce - the component concerning marketing strategies. In March 2017, the CC announced that it had launched a sectorial inquiry on the market for snow-melting salt.¹³

In 2016 the CC published a preliminary final report on the pharmaceutical market, which was finalised in the first third of 2017.¹⁴ Some of the most important observations and recommendations issued by the CC concern the direct-to-pharmacy (DTP) system (the manufacturer's sales are made directly to the pharmacy, with no distributors implicated in the process), tied selling, trade mark-ups and discounts.

With respect to DTP, the CC stated that such system is not presumed anticompetitive or illegal. In assessing the pros and cons of a classic system of distribution versus DTP, the CC does not recommend one in favour of another.

Nonetheless CC identifies some anticompetitive concerns in the following cases:

• when more important manufacturers implement DTP in the long term;
• when there is a restrictive medicine quota allocation per pharmacy system implemented,
• when the manufacturer internalises its trade mark-ups and sells the products at wholesale price (no efficiencies transfer in this case);
• when the discounts granted to pharmacies under the classic distribution system are not maintained; and
• when the manufacturer using DTP is in dominant position.

Due to their potential anticompetitive effects, the report on the pharmaceutical market includes also a list of ‘better to avoid' measures for the manufactures intending to switch to DTP. Under this category the report includes: breaching the non-discriminatory and transparent principle when establishing and implementing the selection procedure for the logistic operator; offering less favourable trading conditions, due to eliminating intra-brand competition, with a focus on payment periods, guarantees and discounts; total restriction of parallel trade; decrease in services level; internalisation of all benefits registered as a consequence of switching to DTP system; and implementing a complex acquisition procedure, which would increase the costs of pharmacies/hospitals.

Regarding tie sales of medicine, the CC stated that there is a generalised practice of selling medicine in form of packages (generally a mix of medicine for which there is a high demand and medicine for which there is less demand) which affect especially independent pharmacies that do not have enough financial resources. Therefore, the CC recommended that the Ministry of Health amends the legislation in the field of health in the sense of prohibiting tied sales. This proposed amendment will envisage not only distributors, but also the manufacturers.

Concerning trade mark-ups and discounts, the CC proposes the standardisation of trade mark-ups (for distributors and also for pharmacies) in order to increase the availability and commercialisation of cheap medicine. For the same purposes, the CC proposes the limitation of maximum discounts that can be practised. This idea was generated by the CC's observation that, when practised, the discounts are not transmitted on the distribution chain. In addition, in general, discounts are applied for expensive medicine and not for generic medicine, which is cheaper.

Merger control

The CC had a full year concerning its merger control activity in 2016. The CC issued 59 decisions in merger control cases, while in 2015 there were only 35 decisions in this area. The merger control decisions issued by the CC represented approximately 70% of the total number of decisions issued by the CC. As a general remark, all of CC's decisions were issued during Phase I of the notification proceedings and only one decision had commitments attached, as the CC rarely enters into Phase II investigation proceedings when it assesses economic concentrations. In other words, the economic concentrations notified to the CC posed no risks to effective competition on the relevant markets. The economic concentrations notified to the CC in 2016 concerned undertakings active in various relevant markets such as real estate market, financial and banking, energy, food and non-food retail and wholesale sectors, and pharma.

Other projects and future developments

In 2016, the CC published some guidelines with respect to consortium bids.¹⁵ These guidelines clarify the conditions in which competitors (actual or potential) can make a common offer without breaching competition law. According to CC's new guidelines, consortium bid even between actual or potential competitors will not of itself breach competition law if all of the following conditions are met:

• none of the consortium members could fulfil the requirements of the tender competition, in normal activity conditions¹⁶ (indispensability test);
• no subset of the consortium members could together fulfil the requirements of the tender competition or the contract;
• only the minimum amount of information strictly necessary for the formulation of the consortium bid and the performance of the contract (if awarded) is shared between the consortium members and is restricted to relevant staff on a ‘need to know' basis; and
• the consortium members ensure that they compete vigorously as normal in all other contexts

The amended Competition Act also set up the legal framework for the so-called competition whistle-blowers and also a platform on the CC's website that can be used by individuals wanting to report a potential anticompetitive practice.¹⁷ The latter are individuals that provide information concerning potential violation of the Competition Act, acting on their own intentions. According to the Competition Act, the identity of whistle-blowers will be protected and the fact that they provide information is not deemed to be a violation of confidentiality obligations provided in employment agreements or by the Labour Code.

The legal framework for private enforcement was also subject to further amendments as the European Directive on private enforcement¹⁸ was transposed in our national law through the Emergency Government Ordinance no 39/2017, which entered into force on 8 June 2017.¹⁹ Regarding its contents, the ordinance simply mirrors the text of the directive.

Notes

1. Competition Act No. 21/1996 republished in the Official Gazette, Part I, No 153 on 29 February 2016.
2. For anticompetitive practices the following were eliminated: point f) bid rigging and point g) the elimination from the market of other competitors, limitation or prevent entry on the market and liberty of exercising competition by other undertakings, as well as agreements not to buy or not to sell to other undertaking without a reasonable justification. For abuses of dominant position the following were eliminated: point e) excessive pricing or predatory pricing policies for the purpose of eliminating the competition, sales for export below production costs by covering the differences by imposing majored prices for intern consumers and point f) exploiting the dependence state in which an undertaking is in relation with another one and which does not have an alternative solution at equivalent conditions, as well as breaching the contractual relationships only because the partner refuses to comply with unjustified commercials conditions.
3. The modification in the sense of the removal of these practices listed expressly in the previous rules has generated a series of discussions from a practical point of view, especially for investigations in course. The CC had to reframe the investigated practices under the eliminated provisions in one of the practices mentioned at articles 5 and 6 of Competition Act. This reframing is not a simple formality, but generates supplementary obligations for proving the specific elements of the practices for which the legal reframing was done.
4. Instructions regarding individualisation of sanctions for contraventions provided at art. 55 of Competition Act of 11.10.2016
5. The declaration of the undertaking in sense of declaring its availability to discuss regarding the recognition does not constitute recognition of the participation of the undertaking to an anticompetitive practice or of its responsibility for this infringement. In the same time, the refuse of the undertaking to use the recognition procedure does not represent a refuse of cooperation or an obstruction of the CC's procedure.
6. Government Emergency Ordinance No. 31/2015 for modification and for completion of Competition Act No. 21/1996 and for completion of Government Emergency Ordinance No. 83/2014 regarding payment of the staff paid from public funds in 2015, as well as other measures from public expenditure field, published in the Official Gazette Part I No. 474 of 30 June 2015.
7. Bucharest Court of Appeal, File No. 3203/2/2016, Decision No. 2786.
8. Article 64 (1) of the Competition Act states that: Any action carried out by the Competition Council in view of a preliminary examination or in view of investigating a law infringement interrupts the course of the statutes of limitations provided at article 63 (2) The actions that may be carried out by the Competition Council and which interrupt the course of the statute of limitations include, mainly, the following:
       a) information requests, in writing;
       b) order of the Competition Council President to initiate an investigation;
       c) carrying out inspections;
       d) initiating legal procedures; and
       e) communicating the investigation report.
9. www.consiliulconcurentei.ro/uploads/docs/items/id12029/bilant_2016_ian_2017.pdf.
10. Idem 9.
11. High Court of Cassation and Justice Supreme, Decision No. 1979/2016 of 23.11.2016.
12. Court of Appeal of Bucharest, Decision No. 1701/2015 of 30 October 2015
13.  www.consiliulconcurentei.ro/uploads/docs/items/id12097/utila_sare_deszapezire_final.pdf.
14.  www.consiliulconcurentei.ro/uploads/docs/items/id12125/raport_final_ptr_site_martie_2017.pdf.
15.  www.consiliulconcurentei.ro/uploads/docs/items/id12037/ghid_consortii_final.pdf.
16. The normal activity conditions are defined by CC as: those conditions that do not imply a risk higher than the one usually assumed through conducting any economic activity (does not involve significant changes of existing tangible and intangible assets, additional investments, strategic decisions or significant delays in completing other projects).
         The examples offered by CC with respect to this indispensability test refers also to both objective impossibility (eg, A, B and C are competitors and enter into a consortium in order to tender for a bid having as object the awarding of an execution contract for certain equipment. The companies cannot bid individually, as A does not own the entire technology necessary for production, B does not have the necessary and sufficient resources, and C does not fulfil all requirements relating to the economic and financial situation imposed by the purchasing body in the awarding documentation) and also to subjective impossibility (eg, A and B are competitors and enter into a consortium in order to tender for a bid having as object the awarding of a consultancy contract for a complex and lengthy project. Both A and B each fulfil objectively the requirements imposed in the tender book). However, for both companies, the individual tendering (with the involvement of all resources according to the tender book) could have as consequence the dismissal of any other client during the project and, implicitly, significant financial losses (in this case, the companies must justify the fact that tendering with individual bids would not be possible unless its activity is affected.
17. www.consiliulconcurentei.ro/ro/despre-noi/contact/contact-ccr.html.
18. 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 Act provisions of the Member States and of the European Union Text with EEA relevance, OJ L 349.
19.  Emergency Ordinance No. 39 of 31 May 2017 on damages claims in cases of breaching competition law as well as on modification and supplementing Competition Act No. 21/1996.