Bulgarian Competition Authority Fines a Major Food Retailer for Abuse of Superior Bargaining Position
On 20 December 2016, the Bulgarian Commission for Protection of Competition (“CPC”) imposed a pecuniary sanction for abuse of superior bargaining position on Kaufland Bulgaria EOOD & Cо (“Kaufland”).
Under Bulgarian competition law, abuse of superior bargaining position relates to any act or omission of an undertaking with a superior bargaining position, which is contrary to good faith and damages or may damage the interests of the weaker party and consumers.
The assessment of superior bargaining position
The claimant was one of six Kaufland suppliers in the ‘market for supply of alcoholic drinks in the low price category’. Kaufland was by far the claimant’s biggest client and its main distribution channel.
In the decision, the CPC affirmed that in order to assess whether or not a company is in a superior bargaining position, the possibility for the weaker party to find alternative business partners shall be taken into account. According to the CPC, Kaufland’s behaviour caused the claimant to constantly operate at a loss and lack the financial resources to switch to another big distribution channel.
Interestingly, although the CPC stated that Kaufland ‘obviously is not exposed to serious competition pressure on the distribution market’ and that it operates on and ‘determines its pricing policy by taking into account only its own business interest’ it did not qualify Kaufland’s position as dominant. Instead, the CPC concluded that Kaufland held a superior bargaining position, a notion which does not require dominance but does not seem incompatible either.
Behaviour contrary to good faith
Under Bulgarian competition law, an undertaking in a superior bargaining position is deemed to act contrary to good faith if the act lacks objectively justifiable economic grounds. In the present case, the CPC found that the following acts lacked objectively justifiable economic grounds:
- Unilaterally decreasing supply costs, including through the imposition of bonuses, rebates and annual improvements with unclear calculation methodology and counterpart;
- Blocking an important part of the supplier’s range of products; and
- Eventually terminating a long-term commercial relation with the supplier.
Behaviour actually or potentially damaging the interest of the weaker party and the consumers
The CPC found that, by different mechanisms leading to a decrease of the supply costs, Kaufland forced the supplier to sell below costs, which generated losses for the supplier and therefore, limited its capacity to expand its production and its development perspectives. Further, instead of passing on the cost reduction to the consumer, according to the CPC, Kaufland used it to its own benefit.
Moreover, according to the CPC, by blocking the sales of some of the supplier’s products, Kaufland damaged consumers’ interests because it ‘did not offer substitute products’. However, due to the broad definition of the product market (‘the market for supply of alcoholic drinks in the low price category’) we can assume all low price alcoholic drinks would be substitutable.
This decision is one of the CPC’s first decisions on abuse of superior bargaining position and case law in such cases is yet to be shaped.