Commercial Legal And Institutional Reform (CLIR) - Economic Growth

COMMERCIAL LEGAL AND INSTITUTIONAL REFORM
Diagnostic Assessment Report for the Republic of Bulgaria March 2002
adopted in May 2000. The main instrument of consumer protection policy is the Law for
the Protection and Rules for Trade (consumer law).
The LPC was adopted as part of the program for the harmonization of Bulgarian
legislation with European Union (EU) laws. It is closely modeled on the basic
competition provisions of the European Community (EC) competition law and its
secondary legislation. The EC, in turn, has borrowed heavily from the U.S. Sherman,
Clayton and Federal Trade Commission (FTC) Acts.
Like the EU and U.S. antitrust laws, the LPC focuses on three areas: anticompetitive
agreements (e.g., cartels), abuse of dominance (use of monopoly power to maintain or
enhance power), and merger controls. Unlike the U.S. and EC laws, the Bulgarian law
also prohibits competitors from engaging in unfair practices that harm other competitors
(e.g., copyright and trademark infringement and tortious interference with business
relationships).
The LPC stands out as a good framework law in several respects.
1. Executive Branch of Government Subject to LPC. Article 2 expressly includes the
actions of the executive branch of government and local governmental authorities within
coverage of the law. With so many enterprises still wholly or partially owned or
controlled by the government, this provision plugs a potentially huge gap in the law.
2. Agreements. Article 9 prohibits anticompetitive agreements. In keeping with the
European civil law tradition of defining in detail what is prohibited, Article 9 lists a series
of agreements that are prohibited, such as price fixing and customer allocations, and
several other types of agreements. Significantly, the introductory language states that the
enumerated agreements are prohibited only if they prevent, restrict, or distort
competition. Thus, the law makes no absolute or per se prohibitions. Article 10 even
accepts agreements among entities whose aggregate market share is less than 5 percent.
This de minimis exception avoids many wasteful investigations. Article 13 also sanctions
agreements, such as joint ventures, that may encourage the development of products or
technologies that require competitor cooperation, provided that the net impact is
procompetitive.
Unfortunately, Article 11 requires parties to all types of agreements enumerated in
Article 9 to notify the CPC of the agreement and seek an exemption. Some agreements
are almost always compatible with the LPC. To make the procedure for their exemption
more efficient, the CPC adopted a group exemption for certain categories of vertical
agreements. This decision generally follows the principles and logic of the EC block
exemption 2790/1999 and uses the same methods and tests. Thus, if a particular
agreement fulfills predetermined criteria, it will be granted an exemption automatically.
The Bulgaria law, however, creates unnecessary burdens for business. Bulgaria requires
all parties to an agreement to notify the CPC. In the EU, notification is optional. In
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