Moldova: Competition Council

Promoting a positive competition environment is a task for all of society

Being involved in the process of restructuring and modernising the national economy by promoting competition is a constant concern of the Moldovan Competition Council. Since 2007, the Competition Council has investigated various cases of breach of competition law, imposed fines for distorting the competition environment, launched several market studies in various economic sectors, carried out many training sessions in the domain with different authorities, and improved and developed the competition law.

However, no major changes have been ascertained compared to expectations regarding the improvement of the loyal competitive environment, especially for the opening of the regulated economic sectors to competition. Several analyses of anticompetitive barriers in the national economy sector were carried out in order to identify the biggest competition problems. These analyses highlighted several regulated markets with anticompetitive issues, including the financial, pharmaceutical, energy, audiovisual, transport, communications and education and science markets.

Regulated markets with anticompetitive barriers that were identified in the study

Here are some examples of anticompetitive barriers in each economic sector:

• the communications sector – non-transparent tariffs for public radio communications services;
• the transportation sector – regulation of prices for car and railway transport; lack of separation of infrastructure management activity from the provision of railway transport services; unclear regulations on the assignment of passenger car routes; inappropriate harmonisation with EU directives, which generated a lack of competition in ground-handling services in airports;
• the energy sector – excessive regulation when obtaining a licence for the retail of petroleum products;
• financial – excessive regulation for establishing insurance cover and delay of liberalisation of the insurance market; self-­regulation in the Green Card market;
• education and science – low transparency and efficiency in funding public research projects; limited access of private universities to public funding; and
• pharmaceutical – regulations limiting the location of pharmacies and the price-capping of pharmaceuticals and par pharmaceuticals; signs of restriction of simultaneous imports for the retail of pharmaceuticals products.

Once the problem had been established, the competences of all public authorities were outlined along with solutions. The main goal was for each authority to identify and remove the anti­competitive barriers that existed in the regulated areas. Unfortunately, the initiatives of the Competition Council have not been fully supported by other public authorities (central and local) due to their misunderstanding of the underlined problems and the role of their competences in solving them. This was the main motivation for elaborating the National Competition and State Aid Program, 2017–2020 (the Program). The Program was approved by Law No. 169 of 20 July 2017 by parliament, becoming the first road map for all public authorities.

The structure of the Program is as follows:

• problem identification;
• specific objectives;
• actions to be taken;
• implementation phases and deadlines;
• responsible institutions;
• overall cost-estimation;
• expected results;
• progress and performance indicators; and
• reporting and evaluation procedures.

The general objective of the Program is to develop a loyal competitive environment by opening up economic sectors to competition and effective monitoring of state aid. The expected results for the implementation of the Program are: opening the economic sectors to competition and reducing the product market regulations from 2.48 to 1.55; and reducing the share of state aid in the gross domestic product to 1 per cent by 2020.

The Matrix of the National Program in the field of
Competition and State Aid

Responsibility for the implementation of the Program are all central and local public authorities, regulators and control authorities, supported by development partners, research and consultancy institutions, professional and business associations, and the media.

Although a well-articulated format of collaboration with identified actions has been highlighted, poor competition culture and superficial involvement of public authorities in the evaluation of exclusive rights and competitive barriers remain a challenge in ensuring the smooth implementation of the Program.

Thanks to significant effort and cooperation from the partners, the Program’s first results were achieved in 2017, and included:

• identifying 48 state-owned enterprises and 263 municipal enterprises that have exclusive rights and generate a turnover of 9.22 billion leu (6.83 per cent of the GDP);
• aligning 16 existing aid schemes in the form of tax incentives and three in the form of grants (amounting to 0.5 per cent of the GDP);
• promoting the implementation of competition courses in 10 higher education institutions;
• establishing a Competition Day, which will be marked annually on June 30 (nationwide);
• implementing a training programme for judges;
• connecting the Register of State Aid of 38 Central Public Service Providers (100 per cent of the total) and 764 local public-service providers (81.9 per cent of the total) to the Automated Information System; and
• awarding through public auctions services of general economic interest (for the first time for the Republic of Moldova) by six local public authorities for eight enterprises.

In order to implement the Program, a group was set up within the Competition Council and anticompetitive barriers were assessed for three key sectors: food industry, transport and construction. An additional effort was made to attract public authorities and the various business sectors into implementing the 37 actions of the Program. And on the basis of the activities carried out, the Competition Council drafted an annual report on the implementation of the Program (for the first year, 2017), to be presented to Parliament.

In 2018, the Competition Council, by improving cooperation with central public authorities, will focus its efforts on assessing and removing anticompetitive barriers in the regulated sectors, optimising the exclusive rights system and aligning state aid schemes with the provisions of the EU acquis on state aid.

With the support of development partners, several meetings with representatives of local public authorities and the business sector will be organised in the country with a veiw to promoting competitive culture and improving the level of implementation of the Program.

Successful implementation of the Program will have a positive impact on consumer welfare, contributing directly to accelerated economic growth, improving market access for new businesses and implementing new innovations, and integrating the economy of the Republic of Moldova into the European Union’s economic area.