Contributed By DLA Piper Dinu SCA
Trends and Developments in Cartel Regulation in Romania
In 2018, the Romanian Competition Council (RCC) charged a total of EUR93.5 million in fines (3.5 times more than in 2017).
More specifically, five of the 15 investigations finalised by the RCC in 2018 concerned cartel cases, and 62% of the total fines charged were in cartel investigations. Of the total raised in fines in 2018, EUR53 million came from a single cartel investigation concerning the insurance sector and related to an exchange of sensitive information which the RCC alleged was used to increase prices for consumers.
For the second consecutive year, most of the cases analysed by the RCC concerned potential cartels and abuse-of-dominance cases, and not vertical agreements as was the practice before. This is clearly confirmation of the shift of focus of the enforcement activity of the RCC from the detection and sanctioning of vertical agreements towards enforcement in the cartel area.
One important point to mention is the increased number of leniency applications – which is a novelty in RCC activity. In this sense, 2018 was the year in which the highest number of investigations triggered by leniency applications was finalised, that is, 20% respectively of finalised investigations. The companies resorting to the leniency programme either offered evidence regarding the existence of anti-competitive practices or supplied additional evidence showing the infringement of competition law.
Furthermore, almost 50% of the companies fined in 2018 have acknowledged breach of competition law.
A series of investigations was launched in 2018 in sensitive sectors such as:
It is important to note that 62.5% of the total number of investigations launched by the RCC in 2018 concern cartel investigations. More specifically, 10 investigations out of the 16 initiated by the RCC concern potential cartel practices.
In addition, in 2019 the RCC extended several investigations concerning potential cartel cases. An example is the investigation into the wood sector concerning potential agreements for market/supply sources sharing and adjudicating the volume of wood destined for commercialisation at a minimum price in the tenders organised by Romsilva. This investigation was extended to include 35 additional companies, with a total of 94 companies currently being investigated
Continuous Focus on Bid-rigging Practices
The RCC continues its focus on practices concerning public procurement procedures.
In 2018 the RCC finalised three investigations into bid-rigging cases and imposed fines amounting to EUR4.5 million in cases concerning public procurement procedures organised by Transgaz, the General Inspectorate of Border Police and Romsilva.
Although the decision in the Transgaz investigation has not yet been published, the information below is based on the 2018 RCC activity report.
The Transgaz investigation was started in response to information provided by the prosecutor's office attached to the High Court for Cassation and Justice – the Directorate for Investigating Organised Crime and Terrorism. In this case, the RCC found that the 13 companies involved communicated information both directly and indirectly during the public procurement procedure, which allowed them to co-ordinate matters so that the company appointed as winner could be awarded the contracts according to the rotation principle established by the companies. These companies communicated directly before the deadline for submitting the offers in order to decide how these should be prepared and also prior to the electronic tender in order to establish their behaviour. The indirect communication between the companies was made through the representatives of the contracting authority, members in the evaluation commissions who were communicating to the bidders either the name of the company that was appointed to be the winner of the tender, or the way in which they were supposed to bid during the electronic tender, or the behaviour they were supposed to exhibit after the finalisation of the tender in order to ensure that the company determined in advance by the members of the cartel was the winner. One of the companies investigated fully acknowledged the infringement and benefited from a reduction in its fine. In this case, the RCC applied fines amounting to EUR2.2 million.
Five new investigations into potential bid-rigging practices were launched in 2018:
In 2019 other investigations were launched, including a recent investigation into potential bid-rigging in tenders organised by Energy Complex Oltenia for the acquisition of components for transporting coal. Based on information provided by the contracting authority, the RCC launched the investigation, suspecting that six companies had agreed to allocate the contracts awarded when participating in a consortium to public procurement procedures in order to eliminate competition between themselves.
Based on information submitted through the web-based Platform for Competition Whistle-blowers, an investigation was launched in 2016 into a potential cartel between travel agencies. According to Romanian Competition Law, natural persons who, on their own initiative, provide the RCC with information regarding potential breaches of competition law are considered whistle-blowers. Their identity is protected by the RCC.
Although the decision in this case has not yet been published, the information below is based on the 2018 RCC activity report.
In this investigation, the RCC found two distinct breaches of national and EU competition laws.
The first breach – involving 14 travel agencies – concerned an agreement and/or concerted practice to co-ordinate commercial policies regarding price, for the purpose of establishing a minimum level for the resale price to customers on the market for commercialisation of travel packages and/or travel services packages through travel agencies in Romania. The agreement was found to have been implemented by:
One travel agency applied for the leniency programme and received immunity from a fine, in exchange for providing evidence regarding the existence of anti-competitive practices. In addition, nine travel agencies fully acknowledged the anti-competitive practices and benefited from fine reduction. For the 14 sanctioned travel agencies, the RCC applied total fines amounting to around EUR2.7 million.
The second breach occurred in the behaviour of the National Association of Travel Agencies which imposed a minimum price to be used by its members. The National Association of Travel Agencies prohibited its members operating as resellers of travel packages and/or travel services packages from granting price reductions to customers in the form of sharing part of the commission that they were granted by the tour operators offering the products/travel packages. The discussions and steps at the level of the association for the purpose of prohibiting the sharingof commission mainly focused on:
Other measures were also found to have been used to sanction potential deviations, such as warning/exclusion from the association, which resulted in losing access to tourism fairs. The National Association of Travel Agencies fully acknowledged the anti-competitive practice and benefited from a fine reduction. The fine applied for this practice amounted to EUR11,400.
Exchange of Information in the Context of Associations
This is still a hot topic for the RCC.
One of the trends worth mentioning is the increased interest of the RCC in practices involved in the exchange of commercially sensitive information between competitors, either as a potential standalone infringement of competition law or as part of a potential cartel on price fixing/market sharing.
A cartel investigation concerning the exchange of information in the context of an association was finalised by the RCC with the largest fine applied in an investigation in 2018, namely EUR53 million in total.
Although the decision in this case has not yet been published, the information below is based on the 2018 RCC activity report.
The investigation was opened ex officio and focused on a potential breach of national and EU competition law by the National Union of Insurance and Re-insurance Companies in Romania (UNSAR), Media XPRIMM SRL, insurance company members of UNSAR, as well as other insurance companies participating in the commercially sensitive information exchange. The exchange of information concerned around 80 technical, financial and value of reserves indicators of insurance companies, and future intentions to increase the motor third-party liability insurance tariffs expressed in certain meetings of the motor insurance group in UNSAR and through media announcements. The information regarding the indicators was accessible to members based on user names and passwords. The information was available quarterly and in an individualised format (per insurance company and per insurance class). Information published by Media XPRIMM through the Insurance Profile magazine and on the Insurance Profile Interactive platform concerned 33 technical indicators and 34 financial indicators. The information was publicly available based on payment, in an individualised manner, and was published quarterly. In addition, nine member companies of UNSAR, authorised for motor third-party liability insurance, engaged in a concerted anti-competitive practice facilitated by the professional association, with the objective of increasing the premiums for this type of insurance. This practice consisted of an exchange regarding future intentions to increase the tariffs in meetings within UNSAR and also by press announcement. The RCC also looked at the characteristics of the motor third-party liability insurance market segment (inelastic demand based on price, the low number of competitors, entry barriers, increased transparency, increased demand, no negotiation power for consumers, and insurance products that are homogeneous). The investigation also used the Panzar-Rosse test to determine the correlation between the degree of competition in the general insurance and motor third-party liability insurance market segments and the behaviour of insurance companies. The result obtained from the test confirmed the hypothesis that the collusive behaviour of the companies was not independent of their market actions. One of the insurance companies fully acknowledged the anti-competitive practice and provided data and documents to the RCC, through the leniency programme, that made a significant contribution to proving the case. This company therefore benefited from fine reduction.
As regards Media XPRIMM and the other insurance companies investigated, which either were not members of UNSAR or were not authorised to conclude motor third-party liability insurance, the RCC closed the investigation without applying fines.
In addition, the competition authority made the following recommendations: for the Financial Surveillance Authority to eliminate from legislation the obligation to use the same price for motor third-party liability insurance irrespective of the distribution channel; and to maintain the black box mechanism for the exchange of information on the insurance market.
The RCC decision was challenged in court, however, and the trials are ongoing.
We note that the RCC also has two ongoing investigations involving the exchange of information, one on the financial services market and another concerning the possible co-ordination of commercial policies by price fixing and/or market sharing achieved through the exchange of sensitive information between competing companies which are active in the sector for operating leases and related services from Romania.
Firstly, we may expect the continued focus of the RCC to be on opening investigations into potential cartels. An important and noticeable trend in the activity of the RCC shows a shift from investigations into vertical agreements to cartel cases. In addition, measures have been taken to improve the techniques at the level of the RCC for detecting potential cartels. For example, the Big Data project approved by the Romanian government is designed to ensure capabilities at the level of the RCC in five areas of investigation and analysis:
For bid-rigging, the project aims to implement algorithms that are able to find correlations between structural screening indicators and behavioural screening indicators. The expected result is to be able to generate alerts based on which investigations can be opened. In the case of cartels, the objective is to apply data-mining techniques in order to detect cartel behaviour aimed at limiting or eliminating competition between companies active in the same sector.
Secondly, given that 20% of the investigations finalised in 2018 were through the leniency programme (companies offering information regarding anti-competitive practices or additional evidence in order to prove the breach of competition legislation), it is expected that the number of leniency applications will increase. In addition, given the benefits in terms of fine reduction triggered by the acknowledgement of anti-competitive practices (in 2018 almost 50% of the companies sanctioned opted to make a deal), it is expected that companies will continue to resort to this procedure in future RCC investigations.
Thirdly, we may expect an increase in the number of investigations triggered by information from whistle-blowers, through the use of a dedicated platform that allows individuals to alert the RCC about secret cartels while maintaining their anonymity. In 2018, 51 messages were received by the RCC on this platform concerning various sectors: insurance, spare parts, cable TV services, electrical power, and sanitation services. Since 2016 the RCC has started an investigation each year based on information received on the whistle-blower's platform. The investigation opened in 2018 concerns a potential cartel involved in the market for health and safety equipment in the workplace, with the authority suspecting price fixing, market sharing and customer allocation practices.
Last but not least, after the transposition of the Private Damages Directive into Romanian legislation, we may expect a possible increase in private damages actions in Romania. Until now, there has been only one successful action for damages related to a competition matter (a 'follow-on action'), confirmed irrevocably by the High Court of Cassation and Justice on 23 November 2016. The case concerned the alleged abuse of dominance through the imposition of discriminatory conditions by the incumbent postal service provider in its relationship with its customers (Mailers Serv v Compania Nationala Poşta Română).
In addition, it is expected that the transposition of Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of Member States to be more effective enforcers and to ensure the proper functioning of the internal market, will bring amendments to competition legislation as well as to the criminal code as regards the interplay between applications for immunity from fines and sanctions on individuals.