Bulgaria tightens competition rules on pricing power and supply chains

Joint dominance 

A core development is the statutory recognition of joint dominance. The amended PCA clarifies that two or more legally independent undertakings may hold a jointly dominant position whereby economic interdependence or other factors create a connection between them, allowing them to act jointly to a significant extent independently of competitors, suppliers or buyers, and hindering effective competition in the relevant market. 

A rebuttable presumption of joint dominance applies where the undertakings collectively hold a market share of at least 60%. A separate presumption of individual dominance applies where an undertaking holds a market share of at least 50%. Once dominance or joint dominance is established, PCA rules prohibiting the abuse of this position will apply, including the new ban on imposing excessively high prices. 

Prohibition on excessive pricing

A ban on imposing excessively high prices by undertakings holding a monopoly, dominant position or joint dominant position has been introduced. An excessive price is one that significantly exceeds economically justified costs, including a reasonable profit margin and is unfair in itself or relative to comparable products. The PCA codifies several assessment criteria including cost‑plus pricing, comparative and historical pricing, economic value and other relevant economic and legal criteria. The prohibition does not apply where the undertaking can prove objective economic reasons, such as production cost increases, logistics or external market factors. 

Unfair trading practices

The list of prohibited unfair trading practices in the agri-food supply chain has been extended with 17 new practices. These include the buyer imposing discriminatory or unreasonable prices and sales terms on the seller, and the buyer demanding subsequent, retroactive or conditional bonuses, discounts or payments not included in the invoice price at the time of delivery, which are not related to a specific, measurable and provable service provided by the supplier. The rules on conditional prohibitions have also been updated to clarify the conditions that each such practice must meet to be permitted. 

Supply chain traceability register

For the first time, the amendments of the PCA establish the creation of an electronic central registry for traceability of agricultural and food products in the supply chain, known as the “supply chain registry”. “Business operators”, including food importers, producers and distributors, must submit data in the registry on each initial product placed on the market and its subsequent wholesale distribution. The registry will use algorithmic and AI tools to detect indicators of market dominance, unfair practices and competition violations. The relevant authorities will have access to pricing data in the registry for possible inspections.

Implementation measures to determine the scope and details of the new regime should be adopted in the coming months, and are expected to include:

• A methodology setting out the criteria, indicators and analytical approach for determining when a price is considered “excessively high”, which will be completed within two months of the amendments' entry into force.
• An ordinance setting out the scope, reporting content, operating rules and phased rollout of the supply chain registry, which should be issued within three months of the amendments' entry into force;
• Technical specifications, creation and launch date of the supply chain registry, which are still to be confirmed. 

For more information on the recent amendments and their impact on businesses, contact your CMS client partner or the CMS experts who contributed to this article: Nevena Radlova, Anna-Maria Spasova, Elina Kostadinova.