Abuse of dominance in Bulgaria

Abuse of dominance

How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?

Bulgarian law defines the abuse of dominance as a conduct of undertaking with monopolistic or dominant position that may prevent, restrict or distort competition and may affect consumers’ interests.

A non-exhaustive list of abusive behaviour is provided in the legislation. This includes:

• the imposition of prices or unfair trading conditions;
• limitation of the production, trade and technical development to the detriment of consumers;
• applying dissimilar conditions to equivalent transactions with certain trading parties, thereby placing them at a competitive disadvantage;
• making the conclusion of contracts conditional upon acceptance by the other parties of obligations or conclusion of additional contracts which, by their nature or according to normal commercial practice are not independently linked to the subject of the main contract or the execution thereof; and
• unjustifiable refusal to supply any goods or provide any services to an existing or potential customer, with the purpose of hindering their business.

Under Bulgarian law, abusive practices of dominant undertakings are not per se illegal. In most of its decisions the CPC follows an effect-based approach looking for actual or potential harm to competition or consumers’ interests in order to identify and sanction anticompetitive behaviour of dominant undertakings. So far in its practice, the CPC has not applied the concept of ‘by nature abusive behaviour’.

Does the concept of abuse cover both exploitative and exclusionary practices?

Under Bulgarian law, both exclusionary practices and exploitative conduct of dominant undertakings are abusive and prohibited. For example, in 2017 and 2018, there are several cases where, in the context of liberalisation of the Bulgarian energy market, the conduct of vertically integrated electricity companies (combining grid operation, distribution and supply) where they were imposing unfair trading conditions with the aim to gain unjustified financial benefits by delaying the registration of end-customers to the free (liberalised) market and administering a change of the end-customer supplier, if the latter was not within the vertically integrated group, was qualified by the CPC as an exploitative and discriminatory abuse. In another case, the CPC qualified as an exclusionary abuse the conduct of an undertaking (acting as a heat energy supplier and a heat consumption accounting company) where, by leveraging its dominant position on the upstream market for sale of heat energy, the undertaking adopted a strategy for restricting the access and removing from the heat consumption accounting market its competitor by unjustified termination of the established contractual relationship with the latter. In another recent 2018 case, the CPC assessed in detail whether the behaviour of a collective management organisation for IP and related rights (MUSICAUTOR) resulting in termination of supply of music works and related rights of use to the Bulgarian National Radio (BNR) owing to the latter not accepting new price tariff, should be qualified as exploitative abuse (ie, forcing BNR to accept higher tariff under threat of termination of supply) or an exclusionary one (ie, refusal to supply where the input is indispensable for the continuance operation of BNR). By the facts of the case, the CPC ultimately found that MUSICAUTOR was abusing of its dominant position in the form of exclusionary conduct (refusal to supply).

What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?

Bulgarian law prohibits abusive unilateral conduct of dominant undertakings or of an undertaking with monopolistic position. The case law of the Supreme Administrative Court (SAC; decision 1402/2007) held that there is a causal link between a dominant position and the abusive behaviour. The conduct would be considered abusive only where it was possible because of the market power of the dominant undertaking. In a recent decision (decision 15878/2018), the SAC upheld the decision of the CPC rejecting a refusal to supply claim by one of the largest wholesalers of medicinal products in Bulgaria against the US-based pharmaceuticals manufacturer Pfizer, on the argument that since Pfizer’s medicinal product is not in a dominant position on the relevant market as defined, no abuse can be further considered and confirmed that dominance is a constitutive element of all ‘abuse of dominance’ infringements.

According to Bulgarian law, the anticompetitive effect of the abusive behaviour of the dominant undertaking may occur in the market where such undertaking is dominant or in other markets, such as downstream or otherwise adjacent markets.

What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?

Bulgarian law does not provide explicit conditions for exclusion from liability for abusive behaviour of a dominant undertaking. In its practice, the CPC accepted certain justifications raised by dominant undertakings in their defence. For instance, objective justifications like poor creditworthiness of a customer or implementation of a new commercial strategy by dominant undertakings equally applicable to all customers are considered as objective justifications for refusal to supply. In decision 1133/2007, the CPC found that a pharmaceutical company had objective justifications of their refusal to supply their former distributors with medicines as a result of the changes in the distribution model applied by the company after the accession of Bulgaria to the EU. The company decided to supply the Bulgarian market through several large distributors and made a tender with objective selection criteria (volume of sales) equally applicable to all participants. In this case the CPC also considered that the market for supplying the medicines in question was not foreclosed, as the non-selected distributors had options to obtain the products from other distributors or by import. In a 2018 case for alleged abuse of dominance by a collective management organisation (PROFON) for IP and related rights, the defendant raised, among other things, the defence that the introduced price tariff (allegedly abusive and with significantly higher prices) was, by law, subject to prior approval by the Minister of Culture and, therefore, cannot be considered as an unilateral act by a dominant undertaking. Although this was not the decisive factor of the CPC when rejecting the complaint against PROFON, it was still credited as a strong argument in favour of the defendant.

The efficiencies defence is generally accepted by the Bulgarian competition authority. The efficiency gains are usually raised by dominant undertakings in their defence in ‘abusive pricing’ cases. However, in most cases, the CPC rejects the defence arguments based on the failure to provide sufficient evidence for efficiencies gains for consumers.