The CPA allows items or services which according to commercial practice are an attribute to the goods sold or services provided to be offered or granted as free supplements or at ostensible price.
An attribute is commonly interpreted by the CPC as a good or a service which serves the main good or service in such a manner that the attribute cannot be used separately and individually without the main product or service, thus making this category closer to the meaning of the term “consumables” (e.g. a toner cartage given as a free supplement to a printer machine).
Although no limitations with respect to value and character of the attribute are imposed, a tendency toward narrowing the application of this exception can be noticed in CPC’s case law, especially having in mind the interpretation line accepted by the competition authority3.
Goods or services given as a rebate
The third exception from the ban applies when additional goods or services are given free of charge as a rebate for sales in higher quantities.
The assessment is made on case-by-case basis, as most often these are cases of enduring links between two economic operators whereby sales of higher quantities are realized. However, the CPC has provided some guidelines in clarifying the conditions of this exception.
First of all, the CPC has noted that principally there are two types of rebate – (i). reducing the price or (ii). giving additional items for free. The CPC has also underlined that the common commercial practice of giving rebates is to reduce the price when larger quantities are sold, i.e. if the single price of a product is BGN 10, then the CPC accepts that it would be a common practice to sell 100 products at the price of BGN 900, instead of BGN 1,000.
In case an additional product is given for free when higher quantities are sold, i.e. 100 products plus 1 at the price of BGN 1,000, this additional product should not be deemed a supplement if only it is the same type as the main product sold. That is to say that if one sells 100 loaves of bread he is allowed to offer one or more loaves of bread in addition at the same price (i.e. for free) but not a laptop or a TV. The latter would be treated as a prohibited supplement.
3. CASE LAW
The abovementioned exceptions from the ban are explicitly stipulated by article 36, paragraph 2 of the Bulgarian CPC. Nevertheless, the CPC and the Bulgarian courts in their numerous judgments on the matter have established some additional prerequisites which are required to be present in order to consider infringement of the ban.
The lack of these prerequisites, born from the case law, may turn to be extremely helpful in cases when a conduct formally represents a breach of law but no penalty would be imposed for a reason. They are established on case-by-case basis and most of them cannot be generally applied, as attention should be paid to the specific circumstances of each case. Some are reviewed below.
The supplement as a distinct product or service
The exact wording of article 36, paragraph 2 of the CPA prohibits selling goods or service while offering or granting in addition to them another good or service.
Of course, this should not be interpreted as to giving two goods or two services in addition should be allowed. What is important is that the CPC and courts have underlined that the supplement which is given for free or at ostensible price should be a distinct, separate product or service differing from the main ones sold.
For example, if a telecommunication operator is providing a subscription plan including 2000 hours call time for BGN 20 per a month and offers additional 100 hours each month for free, i.e. 2100 hours for the same price, this should not be considered as a supplement and respectively an infringement of the ban. This would not be the case if the same operator is offering 2000 hours call time plus a TV for free or at ostensible price together with the subscription plan.
Fulfilling the purpose of the prohibition
The justification of the prohibition of offering supplement was already discussed in this publication. It should also be noted that the provision of art. 32 of the CPA is named “Unfair solicitation of clients” which means that the supplement offered should have as an overall result at least the potential risk of soliciting clients and thus distorting consumer demand.
On these grounds, the CPC and Bulgarian courts had several cases in which it was held that provided the character and value of the good or service given as a supplement, it could not eventually attract the consumer and influence his rational choice based on personal taste, quality and price.
The most recent example is the case in CPC Decision 227/2013 referred to above. There, a branded pint glass given for free with some bottles of beer was not found capable of influencing the economic behavior of consumers and redirecting consumer demand, i.e. not considered a prohibited supplement.
4. QUESTIONS AND COMMENTS
The reviewed regulation raises a lot of questions as to how adequate is this prohibition in the modern economic conditions in Bulgaria and the market behavior of most of the companies, especially during holidays such as Christmas time when the market is literally flooded with promotions offering products as “free gifts”.