Vol. XV No.9
September 2010



 New Amendments to The Competition Law In A Troubled Economy

Lawful competition is the key to a functional and efficient economy. However, achieving fair commercial competition is not simply a matter of adopting adequate legislation; it requires the proper implementation of the law to ensure the necessary framework for a solid economic environment which leaves little room for unlawful behavior. But, should those rules be tightened or lessened during difficult economic times? The Romanian Government’s answer has been to increase the role of the Competition Council, which is the national authority in the competition field, to enable it to intervene more promptly and efficiently in cases of potential anti-competitive practices. To do so, it adopted Government Emergency Ordinance no. 75/2010 (“GEO 75”) for the amendment and completion of the Competition Law, i.e. Law 21/1996.

Although the reasons cited by the Romanian Government for adopting GEO 75 -- the necessity to improve the current procedural framework in the competition field -- are most welcome, there are certain aspects which appear to worry the business community. Indeed, there are provisions of GEO 75 which may restrict the ability of undertakings to challenge the decisions of the Competition Council and to defend themselves when there is a suspicion with regard to their possible anti-competitive practices. This article explores these issues, as well as examines other aspects of GEO 75.

In the past, we have addressed various competition issues such as in our October 2009 Digest article, “Romanian State Aid in a Time of Crisis”, or in our June 2010 Digest article, “New Developments in European Antitrust Law Affecting Romania”. See the Digest archive at www.hr.ro/digest/200910/  or www.hr.ro/digest/201006/.

[ Up to Contents ]

Main Amendments Introduced by GEO 75

The purpose of this article is not to provide an exhaustive presentation of the multitude of amendments introduced by GEO 75, but rather to point out the ones that presumably have the most impact on the role of the Competition Council, on the life of undertakings, and, eventually, on the national economic environment. There are various amendments and supplementations which reflect the increased powers of the Competition Council. Others involve simplifying the procedures before the Council, but it is hard to say how they will be implemented in practice or how they will actually affect the life of undertakings involved in competitive business.

Suspension of a decision of the Competition Council
One of the new provisions of GEO 75 which has already raised much controversy in the business community is the one which provides that a decision adopted by the Competition Council may now be suspended by the court only after the payment of a bond equal to 30% of the amount of the fee established by the respective decision of the Council which is object of the claim in court.

In comparison to the former provisions, which did not set any such obligation to pay a bond, the new provisions are justified by the claim that they will reduce the number of cases where the payment of a fine is suspended. In reality, the new provisions may be perceived as nothing more than a legal means to provide revenue to the state budget. But undertakings are worried that these new provisions will seriously affect companies facing financial difficulties, which have grown more numerous in these troubled times, because such firms will be unable to afford to pay a bond – and this might even trigger the initiation of bankruptcy procedures against some of them.

Authorization fee for mergers
Another very significant amendment introduced by GEO 75 is a new percentage for the fee applicable in case of authorizations of mergers, as well as the new method for calculating that fee. The percentage represented by the fee for the authorization of a merger was decreased by GEO 75 from 0.1%, as previously provided in the competition law, to 0.04%. In addition, the method for calculating the fee for the authorization of mergers was simplified so that it now represents 0.04% of the total turnover of the respective company in Romania, up to the maximum of €100,000 in its lei equivalent.

Pursuant to the prior provisions of the competition law, the authorization fee represented 0.1% of the turnover of the specific segment of the market where the merger was to be performed. This new method for calculating the fee is seen as simplifying the entire procedure, since it will most certainly be much easier for companies to calculate their total turnover on the Romanian market for the financial year prior to the year when the merger was completed, instead of calculating the turnover only on specific segments of the market. The implementation of the new provisions should actually speed up the entire merger procedure, and this is perceived as a positive amendment introduced by GEO 75, providing more flexibility in the market.

Notifying the intent to perform a merger
Another amendment introduced by GEO 75 regards the ability of undertakings to officially notify the Competition Council of their intention to perform a merger, either as a take-over or as a merger itself. Up until now, the Competition Council could only be formally notified after the signing of the merger agreement. As a matter of practice, parties informally reported mergers before the execution of the merger contract to speed up the whole process. This possibility is now formally provided by the law. It will enable parties to future mergers to save a great deal of time by being able to report the merger before the signing of the final agreements.

The “Compatibility Test”
GEO 75 has also introduced amendments with regard to the compatibility test of mergers with a normal competitive environment, the “dominant position test” which is now replaced by the SIEC test, i.e. the “substantial impediment of effective competition test”. While under the former test, the Competition Council first had to determine whether the potential merger resulted in the creation or strengthening of a dominant position on the market and only afterwards analyze the effects related to the significant prevention of actual competition, the new amendments focus on the effects of the merger on the competitive environment, while the creation or strengthening of a dominant position is no longer mandatorily perceived as forms of restraint of competition.

Increased role of the Competition Council
There are various new amendments put in place by GEO 75 which reflect the increased powers granted to the Competition Council. By the new law establishing a minimum level of fines on which the Council must decide, and providing that inspectors of the Council may perform unannounced investigations, under certain conditions, as mentioned below, GEO 75 has emphasized the role of the Competition Council as the national authority which must more closely control anti-competitive practices and decide upon the corresponding sanctions more efficiently.

Minimum level of fines
In comparison to the former provisions of the competition law, which did not establish any minimum limits for fines, GEO 75 has set such limits, so that companies will now be more aware of the potential consequences of any unlawful behavior. According to GEO 75, should a company participate in a prohibited arrangement, or should a merger be implemented prior to clearance by the Competition Council, the minimum fine imposed will be of 0.5% of the turnover of that company in the year preceding the decision of the Competition Council, and it could go as high as 10% of the turnover of that company.

Sanctioning public authorities
An amendment introduced by GEO 75 that is widely supported by the business community provides that public authorities, both central and local, may now be sanctioned with fees between 5,000 – 40,000 lei if they fail to provide the Competition Council with the requested information and/or documents, or if they provide inaccurate or incomplete information and/or documents.
Until the enactment of GEO 75, the only entities that could be sanctioned by the Competition Council were undertakings. But the market is not restricted to just private businesses -- public authorities are also involved in various matters that may involve them in competitive relations. The fact that public authorities may now also be sanctioned attests to the fact that even Romanian governmental entities must comply with competition laws and regulations, or face the consequences. Indeed, the new amendments reflect once again the increased powers granted to the Competition Council, which is now called upon to assess the behavior of public authorities in terms of compliance with legislation in the competition field.

Other fines
Pursuant to GEO 75, companies providing incomplete, misleading or inaccurate information or documents or refusing to submit to an inspection carried out by the Competition Council shall be subject to a fine of between 0.1% and 1% of the total turnover of the financial year prior to the date when the fine is imposed. This should make companies more attentive when responding to requests of the Competition Council which, at least in theory, should increase the transparency and efficiency of the Council’s procedures. However, since the new law is actually more focused on increased transparency, those undertakings that acknowledge their anti-competitive behavior are entitled, according to the provisions of GEO 75, to have the amounts of the fines applicable to them diminished.

Recognition of the anti-competitive behavior
As mentioned above, an innovation provided for by GEO 75 is that the acknowledgment by an undertaking of an anti-competitive act can actually diminish the amount of the fine imposed upon it by between 10-25% from the basic level of the fine.

New sanctions for individuals participating in cartels
According to GEO 75, those individuals who fraudulently and intentionally participate in the organization of a cartel may receive greater sanctions than those imposed by the former law. The prior provisions, which established that individuals fraudulently and intentionally participating in the organization of a cartel may receive either imprisonment from 6 months to 4 years, or a fine, have now been enhanced with provisions that allow them to also be sanctioned with the interdiction of the right to occupy a position or to perform a profession or to accomplish an activity similar to the ones they used in violating the law. The harsher sanctions are meant to discourage such unlawful behavior. Note that members of a cartel can obtain leniency if they denounce the cartel. This is not a new provision as the legislation in the field of leniency has been amended so as to be in accordance with European Regulations in 2009.

Sudden inspections performed by the inspectors of the Competition Council
As previously noted, the increased powers granted to the Competition Council by the new amendments to the Competition Law permit it to perform, through its inspectors, unannounced inspections to companies located in Romania. This may be done, however, only at the request of the European Commission or at the request of national authorities in the competition field of other member states of the European Union.

These provisions reflect the fact that the Council is part of a network created at the European Union level, which includes all the national competent authorities in all the Member States, and that this network cooperates under the supervision and with the support of the European Commission. Needless-to-say, anti-competitive behavior often exceeds the national boundaries of one state, and often needs the support of the competent authorities in other countries in order to be able to efficiently put an end to such behavior.

Agreements and concerted practices between undertakings
Mention should be made that all regulations under Romanian law regarding agreements between undertakings and concerted practices which have previously been adopted in Romania in line with the specific legislation adopted at the European Union level, have been abolished. Currently the European regulations apply directly in Romania with no need for further approval of this legislation by the Romanian authorities. Furthermore, there is no longer a possibility for agreements and concerted practices to be reported to the Competition Council. The parties have to analyze them themselves and determine if they are in compliance with competition laws and regulations. The Competition Council will only sanction parties to agreements and concerted practices that breach competition law.

[ Up to Contents ]

The new amendments introduced by GEO 75 have raised some controversy. Even if the increased role of the Competition Council has a positive impact on the business environment leading to increased control over potential anti-competitive behavior, it is important that such increased control does not develop into rigid and inflexible procedures. On the contrary, processes before the Competition Council should be characterized by more flexibility and less bureaucracy.

It is unfortunate that the new amendments did not focus also on simplifying the notice requirements or on permitting less formalistic contacts with the staff of the Competition Council.

Due to the changes in the policy regarding agreements and concerted practices, there will probably be a sudden and dramatic increase in the work of specialized competition attorneys who will be asked by undertakings to evaluate their agreements. For the same reason, all actors in the competitive business environment will become much more careful regarding how they behave, as serious consequences can follow from unlawful competitive actions.

[ Up to Contents ]

News Alert on the Property Fund
On September 6, 2010, the shareholders of Fondul Proprietatea finally got the chance to appoint Franklin Templeton Investment Management Limited as investment manager and administrator of the fund. The shareholders also approved the listing of the fund on the Bucharest Stock Exchange, as well as with on international stock exchanges. According to Mark Mobius, the executive chairman of Franklin Templeton Investment Management Ltd., the Property Fund will be listed on the Bucharest Stock Exchange early next year and on the London Stock Exchange by the end of next year.

[ Up to Contents ]

Editors Note: It is our policy not to mention our clients by name in The Romanian Digest™ or discuss their business unless it is a matter of public record and our clients approve. The information herein is correct to the best of our knowledge and belief at press time. Specific advice should be sought from us, however, before investment or other decisions are made.

Copyright 2010 Rubin Meyer Doru & Trandafir, societate civila de avocati. All rights reserved. No part of The Romanian Digest™ may be reproduced, reused or redistributed in any form without prior written permission from the publisher.

societate civila de avocati
Str. Putul cu Plopi, Nr.7, Sector 1
Bucharest, Romania
Tel: (40) (21) 311 14 60
Fax: (40) (21) 311 14 65
E-Mail: office@hr.ro

The Romanian Digest Archive



Herzfeld & Rubin, P.C.
125 Broad Street
New York, New York 10004
Tel: (212) 471-8500
Fax: (212) 344-3333

Long Island Office
Herzfeld & Rubin, P.C.
1225 Franklin Avenue, Suite 315
Garden City, New York 11530
Tel: (212) 471-3231

Herzfeld & Rubin LLP
1925 Century Park East
Los Angeles, California 90067
Tel: (310) 553-0451
Fax: (310) 553-0648

Chase Kurshan Herzfeld & Rubin
354 Eisenhower Parkway, Suite1100
Livingston, New Jersey 07039-1022
Tel: (973) 535-8840
Fax: (973) 535-8841

Israeli Affiliated Law Firm
Balter Guth Aloni & Co.
96 Yigal Alon Street,
Tel Aviv, 67891, Israel
Tel: +972-3-511-1111
Fax: +972-3-624-6000


New York — California — New Jersey — Romania
If you no longer wish to receive emails from us, please send an e-mail with UNSUBSCRIBE in the subject line to Romanian.Digest@hr.ro.