The position of the Confederation of Employers and Industrialists in Bulgaria-KRIB on the draft Law on Amendments and Supplements to the Law on the Protection of Competition published on 14.06.2012 is that at the moment there is no need for changes in the PPE. What's more, the amendments proposed by the ZID of the ZZK create serious risks for the Bulgarian economy and the investment climate in the country.
We think, the arguments in support of such a thesis they look like this:
1. The bill is provoked bythe objections to a very narrow range of economic entities (certain suppliers of fast moving goods, mainly cosmetics and foodstuffs) without taking into account thatThe Civil Code as a general law applies in all industriesof the country's economy. The bill is supported by an unconvincing analysis of the expected effects of its introduction on the economy, which covers a relatively small part of the market. The specific impact of the specific texts of the bill have not been analyzed either.
2. The retail market for fast-moving goods in Bulgaria is currentlyoptimal structure - numerous competing participants, none of which has more than a 3-4% market share, and the total market share of modern trade in Bulgaria is about 30-35% (for comparison, in a number of developed European countries, the share of modern trade reaches exceeds 85%). There is no economic data for a supply chain problem, which justify the need for state intervention.
3. The proposed new rules significantly violate the freedom of contractfor a vague and extremely wide range of situations falling within the scope of the ambiguous wording "significant market power" by introducing a ban on the inclusion of certain commercial clauses in contracts. In practice, this means replacing market mechanisms with administrative regulation and is incompatible with the principles of a free market economy.
4. The proposed "temporary measures" that will aim to stop a possible "abuse of significant market power" represent another serious concern, which is characterized by two main aspects. On first place the question of whether the CPC has the necessary resources to ensure that the proceedings in which possible temporary measures are imposed will be completed on time has not been resolved. Otherwise, this would lead to severe economic consequences for companies and serious disturbances in the functioning of the market. As a consequence, which is also the second important aspect of this question, The bill enables unscrupulous trading partners, by submitting numerous complaints to the Commission, to completely block the activities of supplier companies in various sectors of the economy, including those with an oligopoly structure, which can lead to the suspension of commercial activity in entire branches of economic activity.
5.Derogates from the principle of consumer protection – rules have been proposed that only protect the interests of certain market participants, without considering the consequences for consumers. This goes against the basic principle in competition law that the competitive environment (not competitors) should be protected in the interests of consumers.
6. The proposed regulation is fulfilled with unclear wording ("dependent suppliers","unfair conditions" etc.). It is envisaged that the main part of the rules will essentially be drawn up in by-laws by the CPC – the same body that will then implement them. There is a risk of arbitrariness in law enforcement and confronting Bulgarian business with serious restrictions and endless legal disputes, and this will jeopardize the normal business climate in the country. The effect on competition will be polarizing certain markets, so large participants will be forced to work primarily with large partners, and small enterprises - with small ones, respectively.
7. The experience of the limited number of European countries that have introduced similar regulations shows negative consequences for the respective economies: increase in imports from countries with more liberal trade rules, supplies from large and established companies at the expense of small, innovative and start-up companies, increase in prices, increasing inflation at the end negative effects for consumers. Many of these countries have already repealed or are in the process of rethinking these regulations.
8. The bill ignores the recommendations of the European Commission, which has been working since 2008 on the topic of supplier-retailer relationships in the food supply chain. The High Level Forum, formed at the initiative of the EC, at this stage recommends self-regulation, voluntary rules of good practice and dialogue between producers and traders. In a separate annex to this position, we present principles of good practice in vertical relationships in the food supply chain.
Due to the above arguments KRIB offers:
- Do not adopt changes in the PPE, because this will lead to a number of adverse effects such as an increase in the prices of goods and damage to the interests of the end user, blocking of markets and activation of corrupt practices.
– The problems in the relations between commercial chains and small producers-suppliers to be eliminated by way of free competition within the framework of ethical codes, good practices and created forums such as associations and groups of interested parties, in which in a natural market way and according to the specifics of the segment (trade in food and daily consumer goods) problems to be resolved through negotiations. Such an approach would be more flexible than undertaking legislative changes because it is associated with lower administrative costs, lower costs for businesses to comply with positive practices, tailoring the rules to the specific needs of trading partners and greater speed in their application and amendment.
– If indeed the purpose of the PPE EPA is to resolve issues between manufacturer-suppliers and retail chains, the steps taken by retailers should be taken into account. The Association for Modern Trade, which is a member of KRIB, announced publiclyDeclaration of economic growth by supporting domestic and European production by stimulating consumption, with which its members propose 10 principles as a model for cooperation and good practices in their relations with manufacturers and suppliers. The principles are in line with the recommendations of the European Commission and the High Level Forum. At this stage, the Initiative Committee for Fair Trade and the Association Made in Bulgaria, which are displayed in the public space as the driving force behind the changes in the PPE, have adopted a counterproductive position and rely on state intervention from a position of strength. We consider that the dialogue between the interested parties is not exhausted and the state as arbitrator should guide them to reach a mutually acceptable solution in accordance with European practices.
- We suggest that the interested parties unite in the Fair Trade Charter under the auspices of the Minister of Economy, Energy and Tourism. Such a pact should involve not only the companies from the retail trade sector, but also the widest possible range of market participants, because free competition is the most effective mechanism for consumer protection. We propose that the effect of such a pact/charter be limited in time until the adoption of the relevant directives by the European Commission, which will then have to be transposed into the Bulgarian legislation.
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