Following several weeks of intensive public and political debate, the National Assembly has adopted, at second reading, the amendments to the Consumer Protection Act (“CPA”) and the Protection of Competition Act (“PCA”). The amendments were proposed as part of a broader package of measures aimed at remedying unjustified price increases and strengthening oversight of the commercial conduct of businesses operating on the Bulgarian market.
In previous editions, we have examined the principal mechanisms envisaged by both legislative proposals, as well as the preceding draft initiatives. Following their final adoption, it can now be confirmed that the legislator has maintained its overall approach of enhanced administrative oversight, both over traders’ pricing policies and over commercial relationships throughout the supply chain.
What do the amendments specifically provide?
Within the consumer protection framework under the CPA, a prohibition on economically unjustified increases in the prices of goods and services offered to consumers has now been formally introduced. In the course of inspections, traders will be required to demonstrate the existence of objective economic factors justifying the respective price increase, including, but not limited to: changes in production and supply costs, labour costs, energy costs, raw material costs, taxes, social security contributions and any other relevant circumstances.
In addition, the expanded supervisory powers of the Consumer Protection Commission have also been confirmed, including its authority to require detailed information regarding the trader’s pricing methodology and the economic factors that have influenced the determination of the final consumer price.
The obligation for large retailers to publish, on a daily basis, information on the retail prices of goods included in the so-called “consumer basket” has also been retained, together with the intention to maintain a public electronic price monitoring portal. In this way, the legislator places particular emphasis on transparency as a tool for limiting speculative practices and enhancing public oversight of pricing developments.
From a competition law perspective, the amendments to the PCA significantly broaden the scope of the regime governing unfair trading practices. The Act provides for a wider range of situations constituting expressly prohibited practices, expands the regime of the so-called “conditional prohibitions” (i.e. practices which are, as a rule, prohibited unless certain additional statutory conditions are satisfied), and introduces a general prohibition allowing other acts or omissions of a buyer that are contrary to good commercial practice and that harm or may harm the supplier’s interests to likewise be qualified as unfair trading practices.
Accordingly, the so-called “anti-circumvention mechanism” has also been retained. It allows contractual arrangements or commercial conduct whose ultimate economic effect, in substance, results in the circumvention of the statutory restrictions and consequently produces the same outcome as the expressly prohibited unfair trading practices to likewise be treated as unfair trading practices. Furthermore, the Commission for Protection of Competition will be vested with enhanced enforcement powers, including the authority to impose interim measures during pending proceedings and to intervene more proactively where there are suspicions of infringements of the competitive environment.
The proposal for a broader application of the concept of “collective dominance” has likewise been retained. In other words, the regulator will be able to assess not only the individual market power of a particular undertaking, but also the existence of economic interdependence or coordinated market conduct among several market participants that, acting jointly, may exercise significant influence over the market. This has the potential to considerably expand the scope of competition law enforcement in highly concentrated markets.
Although the final adoption of the two statutes provides greater certainty regarding the future regulatory framework, a number of important issues remain unresolved. These include the criteria for assessing the economic justification of price increases, the anticipated intensity of regulatory inspections, the methodologies for determining individual pricing indicators, as well as the practical standards that the competent authorities will apply when exercising their newly conferred powers. Some of the measures discussed above, particularly those relating to economically unjustified price increases, already existed in one form or another, whether wholly or partially, under the existing legislative framework. It will therefore be particularly interesting to observe the actual practical impact of the newly adopted amendments.
This article has been prepared for and is part of the Legal Digest issued by Penkov, Markov & Partners. The publications therein do not constitute legal advice and are not binding. Penkov, Markov & Partners reserves all rights to this material, and any distribution thereof is subject to the prior written consent of the law firm.
