Can the court replace CPC in establishing violations of the competition law?
The Protection of Competition Act (CPA) provides the opportunity any natural or legal person who suffers damages, caused by infringement of competition rules, to claim compensation. The right to compensation is available to every person who suffered damages, even person to whom the infringement was not specifically directed. The essential question relating to such type of claims is whether the violation of the competition rules must be established by an effective decision of the Commission for Protection of Competition (CPC), authorized to monitor for compliance with the national competition law and Art 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). In case of CPC considering that a person by its own conduct has committed a violation of the CPA, CPC gives its decision by which imposes sanctions on the offender and usually also provides for the termination of the infringement
What is particularly interesting however, are the cases in which civil court is seised of a claim for damages caused as a result of actions of abuse of dominant position or unfair competition, in absence of decision by CPC declaring the infringement. The question in such cases is whether the civil court is competent to replace CPC in establishing the existence of the violation. The Act does not provide an answer to this question, therefore clarification may be sought in the case law, albeit it being scarce.
Abuse of dominant position
Dominant position of an enterprise is defined as a position of economic strength, enjoyed by the enterprise, which enables it to prevent the maintenance of actual competition in the relevant market. This, to a large extent, allows the enterprise to behave independently of its competitors, suppliers and buyers. The national legislation (CPA) on abuse of a dominant position is fully consistent with the provisions of Art 102 TFEU and Regulation (ЕО) № 1/20031 which implement binding EU rules on competition. The Supreme Court of Cassation (SCC)in its Ruling № 520/28.07.20142 provides an answer to the question whether a civil court is competent to establish the existence of a dominant position in relation to a claim for damages. The Ruling clarifies that the Act institutes the exclusive competence of the CPC to make assessments and determine in which cases a dominant position is present, and states that a civil court cannot replace CPC in this regard. SCC takes the view that our national legislation has set CPC as the body responsible for the implementation of Art 101 and 102 TFEU and the Supreme Administrative Court (SAC) as the body which acts as an instance for judicial review in relation to the types of acts of CPC. Accordingly, the civil court hearing the claim for damages as a result of anti-competitive behaviour is bound by the binding force of the decisions of SAC, confirming or rejecting the established by CPC violation. The claimant however, shall convince the court that there was a breach from the violation, to prove the causation between the breach and the damage and to justify the amount of the damage. The conclusion from the aforementioned Ruling of SCC is that the court has no jurisdiction and that it cannot replace CPC in establishing the abuse of a dominant position. This conclusion is entirely logical, since the opposite solution to the question will virtually mean that CPC would be deprived of its special competence to monitor the compliance with the competition law.
Unfair competition is any act or omission in the conduct of business which is contrary to fair trade practice and which harms or may harm the interests of the competitors. Unlike abuse of a dominant position, unfair competition as a violation is not listed as such in the provisions of Art 101 and 102 TFEU and thus the binding EU rules on competition does not apply to this type of violation. In this respect, in Germany, for example, there is a separate Law against unfair competition, and in France in case of damages caused by unfair competition, the civil court applies the general rules of tort governed by the French Civil Code. In Bulgaria there is no explicit legislative regulation and binding case law. What is particularly interesting however, are several civil court decisions based on tort law on claims for damages resulting from unfair competition. In these cases, the civil court held that it had jurisdiction to establish violations of the CPA.
Thus, for instance, in connection with the decision of the District Court – Burgas dating 20133 , the court heard a case regarding a claim for damages caused by a breach of an agreement for the protection of trade secrets and carrying out unfair competitive activity. The court analyzed in its decision and examined whether, in this particular case, an unfair competition was carried out, stating that violation of the competition rules has not been proven.
The question whether an unfair competition has been carried out or not is discussed also in a decision of Sofia City Court from 20154 . The court points out that there is an unfair competition, aimed at attracting clients, resulting in termination or violation of contracts, or preventing the signing of contracts with competitors. The court has established an outflow of customers and orders for supply of goods from one company towards a second company, which has created an unfair advantage in favour of the latter on the geographic and product market developed by the first company, and this behaviour constituted a violation of the fair trade practice.
In a decision of the Regional Court – Varna (2015), the court has found that the operator of the electricity distribution network, carrying out the activities of supplying and transmitting electricity as well as connecting producers to the network, has an obligation to implement a shut-off system that must be able to ensure an equal and uniform limit to all producers, so as to avoid the possibility one or more producers to be restricted to a greater extent compared to others. The court held that any failure to comply with this obligation constitutes unfair competition.
In the aforementioned court decisions, the findings of unfair competition were made by the court during the general claim proceedings and not pursuant to the special Protection of Competition Act by the specialized body CPC. In this process, if the person concerned can prove damages in causal connection with the conduct constituting unfair competition, that person will be compensated directly without the need of having an effective decision taken by CPC establishing the infringement, which would definitely delay the awarding of compensation by the civil court after that.
The provision of faster and more effective protection to victims suffering damages should be a priority for the Bulgarian courts, something that “justifies” the abovementioned decisions. On the other hand, currently the legislative solution, giving rise to seek damages from both the abuse of a dominant position and unfair competition is contained in the same legal provision (Art 104 CPA) which actually means that the order for compensation of damages in both cases is the same. The absence of any explicit legal distinction between the two situations and the lack of any binding case law creates legal uncertainty as to what would be the outcome of the claim brought directly before the court. However, the balance is currently tipped in favour of the court in cases of unfair competition.
The article has been published in Bulgarian, in Capital Daily: