Prohibited agreements, decisions and concerted practices in Bulgaria

The very customary fashion for the development of trade in the market is by concluding agreements between independent undertakings and the contractual freedom and independent economic behaviour are in themselves the very core of such relations. Their limitation is permissible only rarely where higher values, usually of imperative character and of prime importance, are deemed to have been affected negatively. Competitive relations and in particular the preservation of competition have been naturally raised to an imperative milestone of contractual relations between independent undertakings in the market.

In certain cases agreements, decisions and concerted practices between independent undertakings may have as their object or effect the prevention, restriction or distortion of competition, and as such they will be considered as prohibited by law. An agreement, concerted practice or a decision differ from one another only in terms of their form and intensity. Together they represent a catch-all concept covering the full spectrum of possible collusion between independent undertakings, the main emphasis being on the economic reality of the relations between undertakings rather than the form itself.

Delchev & Partners can provide you a thorough competition analysis and advice you with regard to the following:

Agreements

The concept of ‘agreement’ for competition law purposes is much broader than the one in civil law. This means that for competition law purposes an agreement may be in place even where none exists from a civil law perspective, i.e. it is only a draft one or it has not yet entered into force or even if it is non-binding upon the parties thereto. The correct understanding of that legal concept is of paramount importance to a correct line of any economic behaviour in the market.

The agreements may be horizontal, i.e. between competitors, or vertical, if the parties act at a different level in the production or distribution chain and the agreement concerns the purchase, sale or resale of goods and/or services.

All those agreements may be prohibited if they are concluded between independent undertakings and have as their object or effect the prevention, restriction or distortion of competition unless they are subject to a block or individual exemption provided that certain requirements for the application of such exemptions are fulfilled.

The most serious infringements of competition law in terms of prohibited agreements involve price fixing (e.g. price agreements, bid rigging, resale price maintenance etc.), market sharing (e.g. territory and customer allocation) and limitation of output, also known as ‘hard core’ restrictions.

Horizontal agreements

Horizontal agreements are entered into by competitors and may be a lucrative means for them  to join efforts for their co-operation and specialization. However, they may as well be a dark path to one of the most severe forms of anti-competitive behaviour – cartels. Horizontal agreements also usually involve the exchange of commercial information between competitors which nature and contents need be very carefully considered prior to such an exchange.

Vertical agreements

Vertical agreements are entered into by non-competitors which are active at a different level in the production and distribution chain. They are the ‘blood’ of product distribution intrinsic to the business process of production, wholesale and retail and as such are far more common than horizontal agreements.  The most common form of vertical agreements are distribution agreements. Any distribution is based on a certain distribution formula such as non-exclusive, exclusive, selective distribution, franchising and agency agreements. Each of those formulas may involve on-line and off-line trade as separate channels of distribution. All those formulas and channels of distribution and/or their combination may involve certain vertical restraints upon the supplier or the buyer. Such vertical restraints require a very careful and complex competition analyses in order to avoid infringement of competition law.

Vertical agreement consulting in Bulgaria is a service that we have been successfully practicing for the past decade and have thus amassed a considerable expertise in building, consulting and protecting businesses based on most various and complex kinds of distribution formulas and channels.

Decisions by associations

In certain spheres of commercial activity it is typical for undertakings to establish associations or even associations of associations. However, in certain cases their establishment, existence, decisions, acts and even sometimes their recommendations may be regarded as a means of anticompetitive coordination or collusion between independent undertakings.

Concerted practices

It is not always necessary for undertakings to arrive at the phase of an agreement or decision, to reach the same result in the market and negatively affect competition. The Court of Justice of the European Communities has defined such a pattern of behavior as “any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market“, i.e. a concerted practice.