As of 14 September 2012 Moldova has adopted new competition legislation. The Competition Act No. 183/2012 (Act No. 183) transposes the EU competition acquis and, thus, introduces supplementary rules meant to enforce the competition envi-ronment in Moldova.
In particular, Act No. 183 implements a new approach with regard to what practices contravene the requirements of a normal competition environment, attributions of the Competition Council (CC), and procedures for examining and sanctioning in-fringements. Also, the new act regards central and local public authorities as possi-ble subjects that can participate in the prevention, restriction or distortion of com-petition.
Act No. 183 is meant to operate in parallel with the State Aid Act No.139/2012, which shall enter into force as of 1 September 2013.
Different from the previous competition legislation, under Act No. 183 undertak-ings/state entities are obliged to notify and obtain prior clearance by the CC for those economic concentrations that meet certain turnover criteria (see below) re-spectively for state aid operations. For any other transactions, the undertakings have to observe at their own risk the rules of the competition environment based on their self-assessment when entering into transactions, under the sanction of fines.
Art. 5 of Act No. 183 prohibits agreements, decisions and concerted practices be-tween undertakings / associations of undertakings having as object or effect the prevention, restriction or distortion of competition on the relevant market or a part thereof. To this end, the new legislation draws a clearer distinction between legiti-mate market behaviours and the practices that constitute infringements. In parallel, agreements, decisions or concerted practices may be exempted from the above-mentioned prohibition if they meet certain cumulative conditions that warrant that the negative impact of the respective restrictions is outbalanced by the positive outcome (Art. 6 of Act No.183).
Also, depending on the actual market shares held by involved parties, an otherwise restrictive deal / contract that has insignificant effect of limitation on competition can also be permitted (Art. 8 of Act No. 183). Anticompetitive agreements of low importance are of novelty for the Moldovan legislation as well. On the other hand, this permission is not applicable if the parties agree on hard-core restrictions, e.g. fixing sales prices for third parties; limiting production or sales; sharing market(s) or clients, etc. (Art. 9 of Act No. 183).
Cartels are considered anticompetitive practices and are prohibited, without exception.
Pursuant to Art. 7 of Act No. 183, a cartel is a horizontal agreement that, directly or indirectly, has as its object or effects the fixing of sales prices for third parties; li-miting production or sales; sharing market(s) or clients; participating with rigged bids in auctions or any other forms of competitive tendering.
Compared to the former competition act, Act No. 183 is more detailed with the no-tion dominant position and cases when undertakings are abusing their dominant po-sition. In particular, one or several undertakings are presumed to hold a dominant position on a relevant market if the share of the undertaking or the cumulative mar-ket share of the group of undertakings exceeds 50% during the period under scruti-ny. The market share, however, is not the only factor in determining a dominant position. Various other factors are also relevant in deciding whether a dominant po-sition exists (Art. 10 of Act No. 183).
A dominant position does not constitute an infringement as long as there is no ab-usive conduct adopted by the undertaking in such position.
Pursuant to Art.20 of Act No. 183 a concentration consists of a long lasting change of control in an undertaking arising from: (i) the merger between (two or more) previously independent undertakings, or several parts of undertakings previously independent; or (ii) from acquisition of control, by one or several persons already controlling one or several undertakings or by one or several undertakings, either by acquisition of shares or assets or on the basis of an agreement or by other means, of the direct or indirect control over one or several undertakings or parts of thereof, including by creating a joint venture which will fulfill durably all functions of an au-tonomous economic entity.
Operations of economic concentration are subject to compulsory prior notification and clearance by the CC in case the total turnover of the undertakings concerned in the previous financial year exceeds MDL 25 million and at least two of the undertak-ings concerned had (in the previous financial year and per involved undertaking) a total turnover exceeding MDL 10 million (Art. 22(1) of Act No. 183).
Similar to the EU system, the notification has to be filed by the undertaking acquir-ing control. Examination of a notification is subject to a fee, the size of which de-pends on the undertaking’s registered turnover and cannot exceed MDL 75,000.
Unfair trading practices
The new law provides for a non-exhaustive list of actions that constitute actions of unfair trading practices: e.g. discrediting competitors, instigating the termination of agreement(s) with competitor(s), illegally using competitor’s trade secrets, creating confusion, etc. (Art. 14-19 of Act No. 183).
The request to the CC to initiate examination of acts of unfair competition is subject to a six months’ statute of limitation (Art. 14(5) of Act No. 183). The statute of limi-tation commences as of the moment the respective undertaking knew or should have known about the acts of unfair competition committed by other undertak-ing(s). Failure to submit the request inside the statute of limitation constitutes a ground for the CC to refuse examination. However, such failure does not constitute an impediment for the damaged undertaking to claim remedy for the damages caused separately in court by means of a civil (commercial) action (Art. 14(6) of Act No. 183).
Investigations of Infringements
According to Act No. 183, an investigation of infringement can be initiated either at the request of a damaged person, or ex officio by the CC (except with regard to acts of unfair competition practice, which can be initiated only upon submission of a re-quest by the damaged person).
The procedure of investigation generally consists of two phases: preliminary exami-nation and investigation.
Sanctions and the sanctioning mechanism for infringements of competition rules are absolute novelties for Moldova. Apart from setting the rules on determining the size of fines, Act No. 183 regulates mechanisms for the individualization of liability.
Depending on the seriousness of the infringement, the size of fine can range be-tween 0.15% to 0.45% of the total turnover of the breaching undertaking (for breaching procedural rules) and between 1% to 4% of the total turnover of the breaching undertaking (for breaching material norms of the law) (Art. 69, 72 of Act No. 183). The basic amount of a fine can decrease or increase depending on the du-ration of the breach and other circumstances (e.g. an increase coefficient of 1.4 is applied in case the duration of the breach exceeds five years, etc).
The right of the CC to apply sanctions is subject to statute of limitation as follows: one year for cases of unfair trade practices; three years for breaching procedural rules; and five years for other infringements (Art. 82 of Act No. 183).
Similar to the EU system, Act No. 183 recognizes the right of undertakings to file le-niency applications disclosing to the CC the anticompetitive agreements at which such participated. Depending on the circumstances of the case and the disclosing undertaking’s behaviour, the CC can grant total or partial immunity, resulting in to-tal or partial exemption from paying fines for the disclosing undertaking. Undertak-ings – parties to anticompetitive agreement – that cannot benefit from immunity but cooperate with the CC can benefit from a reduction of fines applied by the CC (Art. 84-92 of Act No. 183).
Act No. 183 radically changed the rules of the game inter alia introducing more de-tailed and less interpretable norms and mechanisms. On paper, it means that all entities concerned will have to reconsider their behaviour and adapt it to the new rules. In practice, however, the successful operation of the law will depend on how the CC organizes the enforcement of such rules, including by the timely adoption of the secondary legislation in the domain of protecting competition.