ICLG to: Cartels & Leniency 2020 Bulgaria

„International comparative law guide“ на независимата медийна компания GLG, базирана в Лондон, публикува сравнителен наръчник за законовите разпоредби за картели и програмата за освобождаване от санкция и намаляване на санкциите в случай на участие в таен картел в различни държави. Разделът от наръчника, който описва състоянието на законодателството и практиката в Република България, е разписан от ръководителя на практиката „Конкурентно и потребителско право“ в Адвокатско дружество „Попов, Арнаудов и партньори“Христо Копаранов и управляващия съдружник – Емилиян Арнаудов.

По-долу е текстът на раздела за България на английски език:

1        The Legislative Framework of the Cartel Prohibition

1.1       What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal?

In Bulgaria, the cartel prohibition is set out in the Competition Protection Act (CPA), adopted in 2008 and it is in full compliance with European competition law.  In the Bulgarian legal system, participation in cartels constitutes an administrative offence and an administrative sanction is imposed.  It may be imposed on both undertakings that have breached the prohibition and individuals who have contributed to the breach.  On the other hand, actions for damages suffered as a result of someone’s cartel are subject to civil procedure.

1.2       What are the specific substantive provisions for the cartel prohibition?

According to the Act, all kinds of agreements between undertakings, resolutions of associations of undertakings, as well as concerted practices aiming to prevent, restrict or distort the competition on the relevant market, are prohibited.  Such agreements and resolutions are null and void.  The Act provides non-exhaustive examples of cases where agreements/decisions are prohibited.  This is when they lead to: determination of prices or other commercial provisions; allocation of markets or sources of supply; or restriction or control of the production, trade, technical development or investments, etc.

Following the logic of European law, the CPA also provides that the prohibition does not apply to agreements, decisions and concerted practices of inappreciable effect upon competition.  The Act also gives a definition of “inappreciable effect”.  Practically in the case of horizontal agreement, the CPA is only interested in the total share of all participants, while in a vertical agreement the share of each in its market is relevant.  In particular, the effect is insignificant when the total share of undertakings does not exceed 10% of the relevant market if the participants are competitors or 15% of each of the relevant markets, if the participants are not competitors.  However, this de minimis rule does not apply to hardcore restrictions of competition, i.e.: agreements or concerted practices that directly or indirectly set prices; allocation of markets and/or customers; and limiting production and sales.

The Act also provides for individual and block exemptions from the prohibition.  Block exemptions are made by CPC decisions.  The CPC, however, did not itself define the block exemption cases, but explicitly stated that the European exemption regulations apply.  In this way, the Bulgarian Commission has practically extended their scope to purely Bulgarian cases.

As regards individual exemption, the Act does not prohibit agreements, decisions and concerted practices that contribute to improving the production or distribution of goods or the provision of services or to the development of technical and/or economic progress by providing to consumers a fair share of the benefits received.  In addition to these positive preconditions in the CPA, there are also negative ones.  The agreements are required: 1) not to impose on the participating undertakings restrictions not necessary to achieve these objectives; and 2) not to enable the participating undertakings to prevent competition in a substantial part of the relevant market.  Actually, the CPC does not have the practice of recognising agreements that are individually released.

1.3       Who enforces the cartel prohibition?

The Bulgarian Commission on Protection of Competition (CPC) is competent to ascertain a breach of the cartel prohibition and to impose sanctions for such breaches.  It is competent for the application of the CPA for Bulgarian cases and it is also competent for the application of Regulation 1/2003.  The CPC’s decisions are subject to judicial review before the administrative courts at two instances.  In making the final decisions on each case, the CPC always acts in plenary.  The investigations are conducted by staff from the CPC administration under the direction of a Commissioner. 

1.4       What are the basic procedural steps between the opening of an investigation and the imposition of sanctions?

The proceedings before the CPC go through two phases.  Although the CPC is a body which should protect the public interest and investigate cartels as an administrative offence, such files can be initiated both at the initiative of the Commission and as a result of a complaint by a third party.  Where a third party has initiated the proceedings, it shall acquire all the rights of a party to the trial.  However, even if the originator of the file decides to withdraw his complaint, the Commission may continue the investigation.

In the first phase of each cartel proceeding, after sufficient evidence has been gathered in a closed session, the Commission decides on the further course of the proceedings.  At this meeting, the Commission may take a decision stating that no violation has been committed or that there are no grounds for taking action for a violation under the Treaty.  It may also adopt an act by which it returns the file for further investigation or submit the Statement of Objections for an alleged infringement to the respondent.  This act shall specify a period of not less than 30 days, within which the parties have the right to submit their written objections and the constituted interested parties, the right to submit their opinion.  At this stage the parties gain access to the materials.  After an open session the CPC can ascertain a violation and impose a sanction.  It may also impose additional measures on the parties in addition to the sanction, or it may approve their commitment proposal without imposing a sanction. 

1.5       Are there any sector-specific offences or exemptions?

The CPA itself does not provide for specific rules for different sectors.  However, in its block exemption decision on certain categories of agreements, the CPC has stated, with respect to certain categories of agreements in the motor vehicle sector, that same agreements shall be deemed to be exempt from the prohibition when they fulfil the conditions under Regulation (EU) No 1400/2002 or Regulation (EU) No 461/2010.  Similarly, the CPC refers to European regulations in relation to the insurance sector as well as in connection with specialisation agreements, those for research and development and technology transfer.  The CPC, however, has not regulated how the expiry of these regulations will affect their implementation in relation to Bulgarian cases.  Therefore, it can be assumed that it is unclear whether special exemption rules apply in Bulgaria, for example, in the insurance sector. 

1.6       Is cartel conduct outside your jurisdiction covered by the prohibition?

The legal prohibition applies to all cartel agreements that may affect competition in the Bulgarian market, whether they affect only Bulgaria or other jurisdictions. 

2        Investigative Powers

2.1       Summary of general investigatory powers

Table of General Investigatory Powers

Investigatory power Civil / administrative Criminal
Order the production of specific documents or information Yes N/A
Carry out compulsory interviews with individuals Yes N/A
Carry out an unannounced search of business premises Yes* N/A
Carry out an unannounced search of residential premises No N/A
Right to ‘image’ computer hard drives using forensic IT tools Yes* N/A
Right to retain original documents Yes* N/A
Right to require an explanation of documents or information supplied Yes N/A
Right to secure premises overnight (e.g. by seal) Yes* N/A

Please Note: * indicates that the investigatory measure requires the authorisation by a court or another body independent of the competition authority.

2.2       Please list specific or unusual features of the investigatory powers referred to in the summary table.

Please provide answer.

2.3       Are there general surveillance powers (e.g. bugging)?

CPC staff do not have the power to eavesdrop or use various forms of special intelligence to identify cartels.

2.4       Are there any other significant powers of investigation?

To date, the CPC has quite broad powers of inquiry, which are also tightened with penalties if there are any impediments of the investigation.  The conduct of dawn raids, requires the permission of a judge from the Administrative Court – Sofia City.  It is noteworthy that the court of first instance exercising judicial review is one administrative court (Administrative Court – Sofia Region), while the search authorisation is granted by another administrative court, namely the typical metropolitan court: Administrative Court – Sofia City.  The forcible seizure of documents or copies of them, as well as of computer files, is regulated precisely within the framework of the dawn raids, which require a judicial authorisation and which can be assisted by the police if necessary.  Nevertheless, without such a dawn raid, the Commission may require copies of documents and questions to be answered.  Following the transposition of Directive 2019/1, it is expected that the CPC will also be given the power to search personal, not business, premises and vehicles.

2.5       Who will carry out searches of business and/or residential premises and will they wait for legal advisors to arrive?

On-the-spot checks shall be carried out by Commission officials designated by order of the CPC Chair.  If necessary, the police authorities assist the Commission staff.  The Act expressly provides that the taking of evidence shall be carried out in the presence of representatives of the undertaking, its employees or another person having the right to be present at the premises.  However, the general legislation in the country stipulates that before public institutions, every citizen may appear with a defender.  It is recognised that each undertaking has the right to receive legal assistance during the inspections.  However, at the sole discretion of Commission officials, it is left whether to wait for the arrival of an external legal advisor before the inspection begins.

2.6       Is in-house legal advice protected by the rules of privilege?

The CPA itself is frugal in the regulation of lawyer’s secrecy.  Nevertheless, the Bar Act stipulates that any kind of correspondence between a lawyer and his client, cannot be used as evidence.  The same applies to lawyer’s papers.  In addition, a lawyer cannot be questioned in a procedural capacity regarding his conversations and correspondence with a client, the affairs of a client, etc. 

2.7       Please list other material limitations of the investigatory powers to safeguard the rights of defence of companies and/or individuals under investigation.

The main means by which the rights and legitimate interests of the inspected persons are protected is the requirement of judicial authorisation for the inspections carried out.  It is provided that the court verifies the purpose of the inspection and must be provided with a justification for the reasons for carrying out the inspection.  It is also envisaged that the original documents, material evidence and information in electronic or digital media will be returned to the undertaking after the entry into force of the Commission decision.  On request, they may be returned before the decision of the Commission comes into force.  In all cases, the Commission shall return the original documents seized when the exercise of the rights thereto is related to their actual holding. 

2.8       Are there sanctions for the obstruction of investigations? If so, have these ever been used? Has the authorities’ approach to this changed, e.g. become stricter, recently?

The Act provides for sanctions for any impediment to inspections, including damaging the integrity or destroying the seals.  The Act provides that the Commission imposes a pecuniary penalty of up to 1% of the total daily turnover for the previous financial year on each day on which a violation occurs.  The CPC has used in its practice the imposition of sanctions for this type of infringement, and it cannot be said that there is a significant change in its approach in this regard.  It should be noted that the courts are particularly rigorous in the judicial review of decisions imposing such sanctions.

3        Sanctions on Companies and Individuals

3.1       What are the sanctions for companies?

The penalties imposed on undertakings take the form of pecuniary sanctions, and the law provides that for cartel agreements their amount is up to 10% of the total turnover for the previous financial year of an enterprise.  In the methodology that the CPC has issued for determining the amount of penalties, the specific percentage of turnover is conditioned by how severely the CPC infringement has been assessed.  It is envisaged that the CPC would initially determine one basic amount of the sanction, and then, taking into account various mitigating and aggravating circumstances, reach the final amount.  It should be noted that the methodology indicates that the determination of the amount of the penalty takes into account the turnover of the products affected by the infringement.  For infringements committed in the course of the proceedings and related to, for example, obstruction of the investigation or failure to provide information, separate penalties shall be imposed for each day of the infringement. 

3.2       What are the sanctions for individuals (e.g. criminal sanctions, director disqualification)?

The law also provides for administrative fines for individuals who assisted in committing an offence.  Liability is administratively criminal.  Specific sanctions are also provided for persons who do not provide the information requested.  A peculiarity is that in order fines to be imposed to an individual, a prerequisite is a breach by the respective company be ascertained.  It should also be noted that an individual may be punished if he or she did not act as a representative of the company. 

3.3       Can fines be reduced on the basis of ‘financial hardship’ or ‘inability to pay’ grounds? If so, by how much?

In determining the specific amounts of the sanctions, the CPC shall take into account the gravity and duration of the infringement, as well as the mitigating and aggravating circumstances.  The CPC methodology explicitly stipulates that the specific amounts of property sanctions should not go beyond what is necessary for the effective punishment and to achieve a sufficient deterrent effect, but in order to have this effect, they must exceed the possible unlawful economic benefits which may be acquired as a result of the infringement.  With the exception of mitigating circumstances and leniency, there are no additional options for reducing the amount of penalties due to the impossibility or great difficulty of paying them.

3.4       What are the applicable limitation periods?

The penalty period is five years from the Commission of the infringement and, in the case of infringements related to the proceedings before the Commission, three years.  However, these deadlines do not run during productions.

3.5       Can a company pay the legal costs and/or financial penalties imposed on a former or current employee?

Please provide answer.

3.6       Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties imposed on the employer?

The Act does not stipulate exactly who should pay the sanctions on behalf of the person being punished.  Usually, individuals who are personally punished (although this is not usually a case of cartels but of unfair competition) are either managers or owners of the companies’ capital.

3.7       Can a parent company be held liable for cartel conduct of a subsidiary even if it is not itself involved in the cartel?

The Act itself only provides for the imposition of sanctions on the cartel participants themselves and does not regulate possible sanctions against the parent companies of the cartel participants.  However, the CPC has an interesting and controversial practice in this regard.  In some acts, the CPC acknowledges that, where unincorporated joint ventures have engaged in prohibited agreements, penalties may be imposed on the parent companies of the joint ventures.

4        Leniency for Companies

4.1       Is there a leniency programme for companies? If so, please provide brief details.

The law provides for a leniency programme and the CPC has issued such a programme.  According to the CPA the Commission may, upon application grant immunity from the pecuniary sanction for participation in a cartel if the undertaking provides prior to any other cartel participant crucial for the investigation evidence.  The evidence submitted must be such that on that basis the Commission can carry out a dawn raid or to enable the CPC to prove the alleged violation.  In order to be exempt from sanction, an undertaking must not have taken any action to compel other undertakings to participate in the cartel and must comply with all the conditions laid down in the leniency procedure.

The CPC may also apply a reduction in the sanction.  This may be done in respect of an undertaking which voluntarily provides before the conclusion of the proceedings, evidence, which has significant added value for proving the infringement.  The reduction shall be for the first company from 30% to 50%; for the second company from 20% to 30%; and for each subsequent undertaking, from 10% to 20%.

The whole procedure is only applicable provided that the undertaking ceases to participate in the cartel, unless the CPC deems that continued participation is necessary for the investigation.

4.2       Is there a ‘marker’ system and, if so, what is required to obtain a marker?

In Bulgaria, a marker system is provided and if an enterprise has information about a cartel, but does not have the necessary evidence at the time of submitting its application, it may request a deadline within to provide evidence to the CPC.  During this period, the position of the undertaking in the order of submission of information is maintained.  In its request for a marker, the company only provides the CPC with the minimum amount of information about the enterprise itself and other participants in the cartel and regarding the cartel itself.

4.3       Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil damages follow-on litigation)?

The request may also be made orally.  The contents of the oral request shall be recorded by a suitable technical means and recorded on paper.  The request shall be accompanied by all the evidence.  The record of the oral requests shall not be made available until the Commission issues a Statement of Objections.

4.4       To what extent will a leniency application be treated confidentially and for how long? To what extent will documents provided by leniency applicants be disclosed to private litigants?

The identity of the petitioner is kept confidential.  Insofar as the court has to obtain the applicant’s identification, this is done in a separate folder marked as a confidential.  In the course of the proceedings, before the issuance of the Statement of Objections, the applicant’s identity is not indicated in the Commission’s official correspondence.  The secret of the enterprises contained in the application, as well as in the evidences provided, is protected by the CPC on a general basis and this information is not disclosed to other parties.  However, the CPC has the right not to recognise that information is secret, despite the request for its treatment as confidential.  The information contained in the request, as well as the evidences attached to it, can only be used for the purposes of the CPA.

4.5       At what point does the ‘continuous cooperation’ requirement cease to apply?

In order to be lenient, an undertaking must cooperate with the CPC on a voluntary, correct and complete basis by providing, without delay, all information and any evidence relating to the cartel.  It should allow the Commission to provide oral explanations to all possible staff and members of management or supervisory bodies.  The undertaking must not disclose in any way whatsoever the fact that it intends to participate in the leniency programme.  The applicant is obliged to comply with the CPC’s instructions to terminate or continue its participation in the cartel in order to preserve the effectiveness of the investigation.

4.6       Is there a ‘leniency plus’ or ‘penalty plus’ policy?

In connection with the investigation of a cartel, an undertaking may provide the CPC with information regarding its participation in a second cartel.  In this way, it may receive a reduction of up to 10% in penalties for its participation in the first cartel.  This 10% can be added to the reduction of sanctions under the general scheme provided for by the leniency programme.  If an enterprise has notified the CPC of more than one cartel, the CPC may reduce the penalty for the first cartel by up to 10% for each subsequent cartel reported, but not more than 30% in total.

5        Whistle-blowing Procedures for Individuals

5.1       Are there procedures for individuals to report cartel conduct independently of their employer? If so, please specify.

In 2009, the CPC adopted Internal Rules for the Protection of the Identity of Persons who provided explanations or provided data on violations under the CPA.  Such persons receive the status of a protected informant.  Privacy shall be applied where there are reasonable grounds for believing that disclosure of the identity of the informant would result in serious adverse effects on his activity or personality.  This has to be proven by himself.  The confidentiality of the identity generally continues after the case is completed.  Special procedural rules have been laid down for the imposition of this safeguard measure and for the use of information obtained from such a protective witness.

6        Plea Bargaining Arrangements

6.1       Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements changed in recent years?

In addition to leniency, another opportunity, a CPC investigation to be closed without ascertainment of infringement and imposing a sanction, is related to the ability of the defendant to propose to assume obligations for the purpose of terminating the conduct in respect of which the proceedings were initiated.

The CPC has the opportunity to approve these obligations by decision.  The Act stipulates that the Commission cannot take such a decision in the event of a serious breach of the law, i.e. if the violation may affect considerably and on a lasting basis the competitive environment in respect of a significant part of the national market.  If the Commission agrees commitments to be assumed by the undertakings, it shall terminate the proceedings without finding any infringement.  By the decision, the CPC may also determine the duration of the commitments.  However, if there is a change in some of the circumstances in which the CPC agreed to decision-imposing obligations, or if the obligations are not fulfilled, the Commission may resume the proceedings.  The CPC gives a clear preference to structural measures rather than behavioural ones, but in practice, there are decisions in which it closes the proceedings without imposing sanctions but only behavioural measures.  This type of decision ended proceedings in cases related to the insurance market as well as to the retail fuel market.  If the CPC does not agree with the commitments, it has no practice to state its reasons for doing so.

7        Appeal Process

7.1       What is the appeal process?

Although the CPC ascertains an administrative violation and, accordingly, imposes an administrative sanction, the judicial appeal goes in standard administrative proceeding.  The Act provides for special jurisdiction and, since the beginning of 2019, a special first instance court has been settled.  In the event of a breach found, the case law of the courts is that if one of the parties to the cartel has not lodged an appeal, it should also be involved as an interested party.

7.2       Does an appeal suspend a company’s requirement to pay the fine?

Payment of the sanction imposed by the CPC can only take effect after the decision enters into force.  The law provides for the preliminary enforcement of the decision, but not with regard to the payment of penalties. 

7.3       Does the appeal process allow for the cross-examination of witnesses?

Any evidence of fact-finding may be collected at first instance.  This may include experts and witnesses being questioned.  For this reason, it is relatively rare for a court to return files to the CPC to remedy procedural violations.  However, in the second instance, the presentation of evidence is extremely limited.  The Supreme Administrative Court assessed the application of the substantive law on the basis of the facts established by the court of first instance.  However, when it overturned the decision at first instance, the Supreme Administrative Court decided the merits of the case.  The court is not entitled to ascertain an infringement and, if the judges deem it to be present, they must return the case to the CPC with instructions.

8        Damages Actions

8.1       What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow on’ actions as opposed to ‘stand alone’ actions?

According to the Bulgarian legal system, any claim can be brought under the standard lawsuit.  The general rule is that the perpetrator owes compensation for damages caused by violations of the law.  Any persons who have been harmed have the right to full compensation.  Nevertheless, a decision of the Supreme Administrative Court, which upholds the Commission’s decision, has binding force on the civil court as to the fact of the offence and the offender.  Also, the court in damages cases can use the evidence collected by the CPC.  However, it is not allowed to collect evidence that is internal documents of the competition authority.  Some of the evidence collected by the CPC may be required by the court only after the conclusion of the administrative proceeding.  The law also contains special restrictions as to when a person may use in damages cases evidence obtained by him solely as a party to administrative proceedings.  For some of this evidence, this was not admissible at all before the CPC decision. 

8.2       Do your procedural rules allow for class-action or representative claims?

The CPA itself does not regulate group actions, but the general procedure applies.  Pursuant to Code of Civil Procedure, a class action lawsuit can be brought on behalf of persons harmed by an infringement, when, according to the nature of the infringement, their scope cannot be determined precisely but is identifiable. 

8.3       What are the applicable limitation periods?

The CPA contains a regulation on how the time limits run, but it does not specify specific limitation periods.  According to CPA, the term begins to run from the day of termination of the violation, provided that the plaintiff is aware of the violation, the damage caused to him and the offender.  The limitation period is interrupted by the initiation of infringement proceedings before a competition authority.  During the proceedings before the Commission, the statute of limitations does not run, with a new statute of limitation beginning one year after the entry into force of the decision about the infringement or the completion of the proceedings before the CPC.  Insofar as the CPA does not regulate special limitation, a general limitation period of five years is applicable. 

8.4       Does the law recognise a “passing on” defence in civil damages claims?

A defendant may plead that the plaintiff has transferred all or part of the overcharge in the supply chain.  The defendant must prove the facts on which he bases his objection.  In general, compensation for the losses incurred at each level of the supply chain may not exceed the mark-up at this level. 

8.5       What are the cost rules for civil damages follow-on claims in cartel cases?

In the damage cases, the general rules on costs apply.  It is further provided that the court may also admit proven facts on which the party has created obstacles to the taking of evidence, and award the costs of the case to the burden of the inefficient party. 

8.6       Have there been any successful follow-on or stand alone civil damages claims for cartel conduct? If there have not been many cases decided in court, have there been any substantial out of court settlements?

The amendments to the LPC, which regulate the new order for claiming damages from violations of competition law, are quite new.  For this reason, there is no practice in their implementation.

9        Miscellaneous

9.1       Please provide brief details of significant, recent or imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims.

In the field of competition protection, Bulgarian law seeks to strictly follow the logic of European competition law, and there is an aspiration for harmonisation with the directives in the field.  In January 2018, although delayed by the deadlines provided for in the Directive, the Bulgarian CPA included an explicit detailed regulation of compensation for damages from violations of competition law.  An interesting feature is that the entire legal framework of the court proceedings is contained in the CPA, although in the Bulgarian legal system, in principle, all civil proceedings are governed by a separate Code of Civil Procedure.  As regards infringement proceedings, the approach is different and for the judicial stages of such proceedings the CPA explicitly refers to the Code of Administrative Procedure.  Although there are many criticisms of the legal technique used to transpose the directive, in early 2019 the European Commission accepted that with this change Bulgaria had fulfilled its obligations.

In view of the transposition of Directive 2019/1, a further amendment of the law is expected in the direction of strengthening the powers of the CPC.  The expected changes are, first and foremost, towards introducing the ability to carry out inspections in the private homes of the management of the undertakings. 

9.2       Please mention any other issues of particular interest in your jurisdiction not covered by the above.

There are no further issues.

Вашият коментар

Вашият имейл адрес няма да бъде публикуван. Задължителните полета са отбелязани с *