Competition in Romania - Main legal issues

08.02.2013 ZF English

Relevant legislation

Since Romania’s accession to the European Union, competition has been governed by both domestic and EU legislation.

The relevant domestic legislation on merger control (control of economic concentrations), anti-competitive agreements, concerted practices and abuse of dominant position includes the Competition Law (no. 21/1996, as republished and further amended), as well as the secondary legislation issued by the Competition Council. The main regulatory document regulating national state aid procedures is Government Emergency Ordinance no.

117/2006, as further amended.

The Competition Law applies, subject to certain conditions, to all companies (regardless of their nationality) in connection with activities performed in Romania or outside Romania, if these activities have an effect on competition in Romania, as well as to central or local public administration authorities involved in economic operations and influencing, directly or indirectly, competition on a certain relevant market.

Competition Authority

The Competition Council is an autonomous administrative authority responsible for secondary legislation in the competition field, and the enforcement of competition regulations in Romania. The Competition Council has been very active over the past few years, issuing a significant number of regulations and guidelines, frequently opening ex officio investigations on various competition related issues.

Main issues

The main issues to be considered in respect of competition matters are:

  1. Merger control (control of economic concentrations).
  2. Anti-competitive practices (anti-competitive agreements, decisions of associations of undertakings and concerted practices).
  3. Abuse of dominant position.
  4. State aid.

 

Merger control (control of economic concentrations)

The underlying principle is the prohibition of economic concentrations that would raise any significant obstacles to effective competition on the Romanian market or on a substantial part thereof, especially by way of creating or consolidating a dominant position.

According to the Competition Law, an economic concentration involves a change of control resulting from operations such as the merger of two or more previously independent undertakings or part thereof, or the acquisition of direct or indirect control by one or more undertakings over other undertaking/s via shares/assets/contracts/etc. 

Control may be exercised by one entity (sole control), or by two or more entities that agree to adopt important decisions in connection with the entity they control (joint control).

An internal restructuring within a group of companies/undertakings does not represent an economic concentration for the purposes of the Competition Law.

Concentrations exceeding certain turnover thresholds must be notified to, and assessed by the Competition Council. The current thresholds, the level of which is periodically subject to amendment by the Competition Council depending on market development, are as follows: (i) A worldwide aggregated turnover of EUR 10,000,000 in RON equivalent generated by the undertakings involved and (ii) A turnover of EUR 4,000,000 in RON equivalent generated in Romania by each of at least two of the undertakings involved in the operation. International transactions that produce effects in Romania must also be notified to the Competition Council if the above criteria on turnover thresholds are met. Turnover is assessed for the year preceding that in which the operation was performed and the applicable exchange rate is that published by the National Bank of Romania for the last day of the same year. As a general rule, a concentration which exceeds the above turnover thresholds may not be set up until the Competition Council has approved it.

Where there is an obligation to notify the Competition Council, this notification must be made:

  • By each of the parties involved, in the case of mergers;
  • By the party acquiring control, in any other case.

Economic concentrations are authorized to operate, provided that they are proved to be compatible with a normal competitive environment and the Competition Council has adopted a non-objection decision in this respect. The criteria for evaluating this compatibility are: (i) The need to protect, maintain and develop effective competition on the Romanian market or part of it. (ii) The position on the market of the parties to the concentration and their financial and economic strength. (iii) The alternatives available to providers and users, their access to supply sources or markets and any other legal or other barriers to market entry, etc.

Economic concentrations may also be approved under certain conditions, subject to fulfillment of certain requirements by the parties involved, such as the assignment of an undertaking’s activity to an adequate buyer, termination of an undertaking’s contractual relationships with its competitors, termination or amendment of exclusive clauses in certain contracts etc.

Additional procedural rules are enforced under regulations issued by the Competition Council.

Anti-competitive practices (with reference to anti-competitive agreements or concerted practices)

As a rule, agreements between undertakings, decisions of associations of undertakings and concerted practices that are aimed at or result in the restriction, prevention or distortion of competition on the Romanian market or on significant parts thereof (such as price fixing, limitation of or exercising control over production, technical development or investments, market sharing, etc.) are prohibited.

Exemptions

As a general rule, anti-competitive prohibitions do not apply in certain cases, for example:

  • If the cumulated market share of the parties to an agreement does not exceed 10% in any of the relevant markets affected.
  • When the agreement is concluded between parties that are competitors or potential competitors on one market.
  • If the market share of each of the parties to an agreement does not exceed 15% in any of the relevant markets affected.
  • When the agreement is concluded between parties that are neither competitors nor potential competitors on any market, etc.

In addition, certain agreements, decisions and concerted practices can benefit from block-exemptions provided under the applicable Community regulations (e.g. certain vertical agreements setting forth the conditions under which the parties may purchase, sell or resell new motor vehicles, etc.).

However, agreements between undertakings that contain restrictions which, according to the Competition Law, are deemed to be serious (e.g. agreements between competitors to set the selling price of products to third parties; agreements between non-competitors imposing restrictions in terms of territory to be covered or clients to whom the buyer may sell goods or services, etc.), are prohibited, regardless of the cumulated market share held by the parties to the agreement in question.

Abuse of dominant position

Holding a dominant position on the Romanian market or a substantial part thereof is not prohibited by the Competition Law, but only the abusive use of this position through anti-competitive practices, such as the imposition of inequitable prices or contractual terms and refusal to deal with certain suppliers or customers, applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage, or making  the conclusion of contracts conditional on acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the object of these contracts etc.

According to the Competition Law, an undertaking is presumed to hold a dominant position if its market share on the relevant market, in the period subject to investigation, exceeds 40%.

State Aid Control

Following Romania’s accession to the European Union, the EU legal framework on state aid has become directly applicable in Romania. Therefore, as a general rule, granting and implementing state aid in Romania is now subject to the European Commission’s prior approval, inasmuch as the state aid falls under the legal notification requirements. The Competition Council plays the role of liaising authority between the European Union and the authorities/beneficiaries of state aid and provides professional assistance in the field of state aid (by drafting documents to ensure that the specific conditions are met, etc.).

According to Romanian legislation and EU law, state aid is any supportive measure that meets all of the conditions below:

  • It is granted by the state from state resources, irrespective of form.
  • It is selective.
  • It ensures a benefit to the enterprise in question.
  • It distorts or threatens to distort competition or affects trade among the European Union Member States.

In principle, state aid is provided in a variety of forms such as grants, interest and tax relief, guarantees or the provision of goods and services on preferential terms etc.

The Treaty on the Functioning of the European Union generally prohibits state aid unless, for instance, it is justified by reasons pertaining to general economic development. In this respect, state aid granted in Romania is subject to the notification of and prior approval by the Commission (notification is made via the Romanian Competition Council).

However, not all state aid is subject to the notification requirements and the prior approval of the Commission. Thus, according to the de minimis rule, state aid not exceeding the equivalent of EUR 200,000 over three fiscal years is not subject to the notification of and prior approval by the Commission. (In the road transport sector the threshold is EUR 100,000).

The de minimis rule does not apply to undertakings acting in certain fields set out under the EU regulations, such as fishery aquaculture, the coal sector and primary production of certain agricultural products. In addition, certain categories of state aid may be exempted from the notification and authorization requirements, provided that the conditions set out under the block exemption regulation are met. This regulation creates exemptions for the following types of state aid: aid for small and medium-sized enterprises, aid to promote employment, aid in the form of risk capital, aid for environmental protection, aid for research, development and innovation, as well as aid for disabled and disadvantaged workers.

Penalties provided by law for non-compliance with legal provisions on competition

Deliberate or negligent failure to notify economic concentrations or the implementation thereof without obtaining clearance from the Competition Council may lead, among other things, to fines of up to 10% of the total annual turnover for the year preceding the penalty.

Deliberate or negligent failure to comply with the rules on anticompetitive agreements, decisions of undertakings and concerted practices may trigger fines of up to 10% of the total annual turnover for the year preceding the penalty. In addition, individuals who have a significant role in creating/implementing an anti-competitive agreement, a decision of an association of undertakings or a concerted practice may become subject, under certain conditions, to criminal penalties. 

Deliberate or negligent failure to comply with the rules on the abuse of dominant position may trigger fines of up to 10% of the total annual turnover of the year preceding the penalty.

Any state aid illegally granted or abusively used must be reimbursed along with related interest.

 

Source: KPMG - Investment in Romania report (May 2013)

Keywords:
romania
, competition
, business

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