Банкеръ Weekly

Briefs

CPC COUNTS ON HUGE FINES

Petko Nikolov, CPC Chairman, to the BANKER weeklyIN FIGURESThe Commission for Protection of Competition (CPC) issued 230 decisions last year, 117 of which were for unfair competition, 49 for state assistance, and 64 under the antitrust case. Only 21 of them were appealed at the Supreme Administrative Court, CPC Chairman Petko Nikolov pointed out.In 2003 the CPC imposed property sanctions worth a total of BGN1.4MN, of which BGN253,000 for unfair competition, BGN161,000 for abuse of monopoly position, and BGN490,000 for setting up cartels. As more serious violations of the Protection of Competition Act Mr. Nikolov mentioned the agreement between several insurance companies as of the end of 2003 for fixed prices of the Green Card insurance, and of bakers from Yambol for a unified price of bread, as well as the abuse of monopoly position on the part of Metro Cash and Carry and Sofia Water.CPC's Chairman pointed out the three priorities in its activities this year: successful closure of the Competition chapter in the preaccession negotiations with the EU, specifying the decisons about state assistance and cartel agreements, and synchronization of its operation with the other state-run institutions. The CPC has already signed agreements for joint activities with the Commission for Regulation of Communications, the Chief Taxation Directorate, the Union of Employers, and the State Commission on Energy and Energy Resources. By March CPC's experts will prepare an analysis of the grain, electricity amd heating energy markets: participants, their market share in the respective sector, the existence of cartel agreement between them (if any) and if any of the players abuses his minopoly position. In the developed countries ads games are banned, especially those that mislead customers or promise them quick and easy winnings. According to European legislation, supplants the main principle of the market economy, i.e. the free and reasonable choice. In that respect Bulgarian laws are far more liberal (Mr. Nikolov would flatly disagree with that). Therefore, consumers in this country are offen flooded by unfair ads, promising attractive winnings, such as flats, cars, roasted pigs, electic appliances, etc... which in many cases cost many times more than the advertised product. Thus, producers diplace the subject of competition. Yet, Bulgarian legislation defines a misleading, supplanting or unfair advertisement in article 34, item 6 of the Protection of Competition Act. It bans a sale when together with it something is offered or promised, whose getting depends on ... running a lottery with awards in cash or in kind, which are worth considerably more than the price of the offered commodity or service. How many are then the companies in Bulgaria, which are unfair to consumers and which aim at increasing their sales in that way?Mr. Nikolov, can you explain the ads game phenomenon?- According to me, any new ads game could be called a phenomenon, because it does not aim at satisfying the customers' interest regarding the quality of the offered product, but targets at the profit. The ads game rather ignores the quality of the commodity and directs the attention to the promised winning. Therefore, the CPC is ambitious to stop (if that is possible at all) that infringement of the Protection of Competition Act. Even when an alternative for participation in the lottery other than the purchase of the product is projected, we believe that article 34, item 6 of the law is violated. An alternative opportunity cannot be considred a kind of a mitigating circumstance, governing a lower size of the fine. I am adamant that the CPC will be imposing fines to all big companies which use that practice for increasing their turnover. I say big because only they can afford to run such lotteries, which injure the interests of smaller ones that are not able to offer expensive winnings. This means that the only losers are those that do not run lotteries and observe the law.- Exactly. Therefore, we in the CPC are convinced that such acts are detrimental to the relations on the market. Some say: yes, but this is interesting to the customers, as they are offered an opportunity to win something. But if a certain participant on the market violates the legal requirements, we have to punish him. Working on a number of such cases we have established that during the period of the game the respective company increases its sales and makes considerable profits.Don't you think that the firms which violates the law has also calculated the eventual fine? So, aren't the legally stipulated fines of up to BGN500,000 inadequately efficient?. - We have completely changed our policy of sanctioning. While the former team of the CPC prefered to impose the lowest size of stipulated fines in order to avoide lawsuits, we sanction by imposing the highest size. That is why all our decisions are presently appealed at tge Supreme Administrative Court. Our activities are meant to have a double effect: first of all to punish the firm that has infringed the law, and secondly - to act preventively to the other participants on the market in order to stop violations of the same legal provisions. I hope that policy will have a positive result. Don't have the feeling that the CPC has been dragged into an absurd situation - extending it ruling on a certain case from four or five months ago, the sanctioned company has meantime run several more games? The law projects a sanction only for a repeated violation, and some companies run lotteries each month. - The lowest size of the fine for a repeated violation is BGN100,000. We imposed such a fine to Zagorka as within a year since CPC's decision entered into effect the brewery carried out a second violation. We have to observe the set terms of two or three months in order to gather the necessary proof, question the sides, etc. At the same time an ads campaign lasts one month. The sanctioned companies may appeal our decision in court. Thus, the collection of the fine is delayed. If the size of the fine is small, it won't make any particular impression to the violator. Therefore, we have set as our ambition to improve CPC's santioning policy and try to prevent those frequent infringements of the Protection of Competition Act. Breweries seem to be most frequently hurt by the law.- Other companies also offer similar games, but we have not yet extended our ruling about them. Which according to you are the most striking cases of violating the legislative regulations?- They are those on which we made a decision during the last months of 2003 (editor's note: the fixed prices of the Green Card insurance, the agreed unified price of bread in Yambol, the abuse of monopoly position in Metro and Sofia Water). It's a fact that they have been staying in the CPC for quite a long time. We found strength and proof to extend a ruling on them. All companies appealed our decisions at the Supreme Administrative Court and the magistrates will say if we were right or wrong. Do you have any information about the collectibility of the imposed fines?- The percentage of voluntarily remitted fines is about zero as far as I know. But the money is collected in accordance with the provisions of the Tax Procedures Code, which as you know are quite severe.

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