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Competition policy in Romania after the eu accession

COMPETITION POLICY IN ROMANIA AFTER THE EU ACCESSION

Nela Ramona Grigore,1
Elena-Mihaela Pavel2
Abstract
Prior to Romanias accession to the EU, the Competition Councils activity was mostly
concentrated on the Romanian legislations compatibility with European competition legislation.
After January 2007, since the Competition Council has acquired the power to directly apply the
common rules on competition, attention has shifted to its effective contribution to competitions
protection on Romanian market by monitoring, identifying and sanctioning any distortive behaviour
under competiton laws provisions. In this context, the main purpose of this paper is to analyze
Competiton Councils activity during the pre and post accession period taking into account the
number and also the types of issued decisions and comparing it with other European jurisdictions
(Poland, Czech Republic, Hungary and Germany).Our analysis revealed that the Competiton
Councils activity has been concentrated mostly on mergers and acquisitions, the same situation being
registered also in other new members states analysed. In Romania, decisions covering economic
concentrations are still at a significantly higher level than those regarding other anticompetitive
practices.
Keywords: competition policy, Competition Council, decisions
JEL Classification: F15, L40
1. Introduction
Competition policys development and implementation represents a process by
which governments seek to enhance competition and create the right environment
for it by prohibiting or restricting certain types of commercial practices which may
restrict competition. Thus, the objectives for any competition policy should be
concentrated on the development of competitive markets and promote innovation,
with implications for prices, welfares determinants and sustainable economic
growth. (OECD, 2007)
In the current context marked by deep economical and political changes
determined especially by the challenges posed by the economic and financial crisis,
the EU is designing a new model of competition policy which focuses on a
coordinated set of group actions to ensure transparency and a level playing field both
for countries and for companies operating within the single market. The regulatory
and institutional frameworks modernization requires an assessment of the
1
2

Teaching Assistant, Romanian-American University, Bucharest, ichim.ramona@profesor.rau.ro

Teaching Assistant, Romanian-American University, Bucharest, pavel.elena@profesor.rau.ro

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implementations results of the common competition policy at the group level but
also at the level of each Member State.
Since Romanias accession to the European Union, once the Competition
Council has the power to directly apply the Community rules regarding competition,
attention has shifted from the efforts made by this institution towards Romanian
legislation compatibility with European competition law to the effective contribution
of this institution to protect and enhance competition in Romania in order to ensure
a normal competitive environment.
If in terms of legal and institutional framework convergence with the EU acquis,
studies have shown a high degree of concordance of Romanian legislation with the
acquis in the field ever since the accession negotiations on Chapter 6 - Competition
and State Aid, EU accession removing some incompatibilities due to compulsory full
harmonization of legislation in this field, not the same can be said regarding the
effectiveness of the competition policy enforcement and its effective contribution to
improve the competitive behavior. (Fuerea et al., 2004)
The main conclusion of some recent studies highlighted that at the EU level
there is a gap between the new member states and EU15 group in terms of the
quality of actions undertaken to ensure a level playing field for companies. (Hlscher
and Stephan, 2009; Ichim, 2010). Thus, for the newcomers to the EU, a more
detailed analysis is required regarding national competition authorities work by
reference to criteria related to number of investigations initiated, training of
personnel, financial resources or the coordination degree between actions undertaken
by competition authorities and other public institutions towards improving the
overall economic performance.
2. Competition policys enforcement in Romania
Until Romanias accession to the EU, the Competition Councils activity was
appreciated largely in positive terms only regarding the efforts made towards
Romanian legislations compatibility with the European competition law,
contribution recognized by the European Commission in its monitoring reports.
After January 2007, since the Competition Council has acquired the power to directly
apply the common rules on competition, attention has been focused primarily on its
effective contribution to protect and stimulate competition in Romania in order to
ensure a normal competitive environment. Until January 2007, the Competition
Council's work in this area, and other public authorities, was appreciated as deficient
and lacking the support of business representatives and consumers. (Vass, 2007) In
this context it cannot be considered surprising the results of a study carried out in
2007 which aimed to identify the level of knowledge and use of anticompetitive
practices and which confirmed the low level of economic agents knowledge
regarding competition laws provisions and actions taken by the Competition
Council.
The same study highlighted, however, that the Romanian business environment
expected some changes regarding the Competition Councils activity after the EU

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Competition policy in Romania after the eu accession

accession due to the adoption of the EU standards, market sizes increase and
consequently competition, developing cooperation with the EU institutions working
in the field of competition, lower influence of politics and higher transparency in
Councils decision making process and not the least the improvement of Council's
credibility among the business community. (Dima, 2007) This attitude of the
Romanian business environment seems justified as long as in transition countries the
legal and institutional framework is very dynamic and competition law is applied in
an economic environment marked by the presence of the state both as public
authority and economic player. (Oprescu, 2003)
After joining the EU and taking into account the membership at the European
Competition Network, established under Regulation 1/2003, the main priority of the
Competition Council was to provide the legal and institutional conditions in order to
adapt the competition policy to the new status of Romania. This commitment had to
be supported by coordinated activities of the Romanian Competition Council with
other Member States competition authorities and more compelling actions regarding
the preventive and corrective Council's role in maintaining a normal competitive
environment by monitoring markets and supervising companies behavior.
An overview of the number of decisions taken by the Competition Council
since the entry into force of the Competition Law no. 21/1996 shows a significant
increase of the number of decisions issued by this institution since 1999, with an
average of about 450 decisions per year until 2003. After 2003 a downward trend
started with a minimum number of decisions, 59, registered in 2010. These changes
in the number of decisions issued by the Competition Council can be related to
several economic and political aspects that were required by the acceleration of
privatization process, national competition law compliance with EU acquis, as an
accession criteria during the negotiation process on Chapter 6 regarding full
harmonization of the Romanian legislation with the European competition law until
the completion of the negotiations, the results of the negotiation process on different
chapters and the economic reforms programs launched during this period. (Fig.1)
Fig. no.1: Number of issued decisions, 1997-2012

Source: Competition Council, Annual Reports, 1997-2012

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Comparing the situation of Romania with other three newcomers in the EU

(Poland, Czech Republic and Hungary) it can be seen that the activity of the
Competition Council assessed through the number of decisions issued has the same
trend with other three jurisdictions analyzed, a large number of decision adopted
being characteristic for the pre-accession period, Poland registering a total of 2178
decisions in 1998, much higher than the average of any other new member states
analyzed, and more than the number of decision issued in Germany, a jurisdiction
with tradition in this field, taken as a basis for comparison from the EU15 group.
During 2004-2009 all new Member States analyzed registered a stabilization of the
number of issued decisions in the field of competition. (Fig.2)
It should be noted that the comparison based on the number of issued decisions
has a some limitations determined on one hand by the impact of the economys size
on the number of decisions and on the other hand by the particularities of the
investigated cases and decisions implementation in each jurisdiction. However, what
seems to be defining for the the new member states is the fact that the competition
authorities focused their work especially on the control of mergers and acquisitions, a
normal consequence of the privatization program launched and increasing FDI flows
after EU accession. The number of decisions regarding the cartels, abuses of a
dominant position and state aid was considerably lower in the pre-accession period
than those covering mergers, the situation being opposite in the EU15 group. After
joining the EU, specialized agencies, due to a lower number of notifications of
mergers and acquisitions, have redirected their resources towards other areas of
competition law enforcement. Thus, in Poland, the Office of Competition and
Consumer Protection granted priority to the investigations regarding abuses of
dominant positions, in Czech Republic, in addition to the increasing number of
decisions on abuses of dominant positions investigations have concentrated on
cartel, while in Hungary the number of decisions sanctioning the participation in
cartels or bid rigging increased.
Fig. no. 2: Number of issued decisions - Romania, Hungary, Czech
Republic, Poland, Germany 1997-2009

Source: Annual Reports, national competition authorities, 1997-2009

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Competition policy in Romania after the eu accession

A more detailed analysis of the structure of decisions issued by the Competition

Council during 2006 - 2012 shows that it still focuses primarily on mergers, the
number of decisions authorizing, non-objection or nonintervention covering mergers
being at a significantly higher level than the number of decisions sanctioning abuses
of dominant position or other anticompetitive agreements. The only exception was
in 2011 when the number of sanctioning decisions was higher than the number of
decisions on economic concentrations. (Fig.3) Also, during 2010-2011 the
Competition Council imposed the highest fines for the abuses of dominant position
of Orange and Vodafone and Romanian National Post Company. Before and after
2011 the value of the sanctions was significantly lower.
Fig. no.3: Type of the issued decisions, 2006 2012

Source: Annual Reports, Competition Council, 2006-2012

If we take into account only these figures, we can conclude that the competitive
environment in Romania is not distorted by serious anticompetitive behaviors and
consumers benefit of a fully functional competition. However a series of
reorientations in the activity of the Competition Council, launched since 2009,
concentrated on intensifying market monitoring actions can be a sign of suspicion
regarding the quality of the competition process on certain markets. The main
analyzed markets were those of shipping services, the Romanian drug distribution
market, automotive parts, electricity market, banking sector, telecommunications,
food retail sector, insurances, pharmaceutical sector and public procurements. All
these fields are very important for the Romania business environment and their
fluctuation can affect significantly the overall evolution of the national economy.
Many of these initiatives can be correlated with the challenges posed by the
economic and financial crisis that has forced the market surveillance authorities, and
the Romanian Competition Council also, to be more vigilant regarding the behavior
of economic agents on the market, taking into account that during this period
companies are likely to resort to practices that can distort competition as a means to
mitigate the effects of the economic crisis. Even if these sectors were positively

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assessed by the Competition Councils analysis in terms of competition policy

framework, consumers perception regarding competition on different markets may
provide some additional warning likely to confirm that consumer welfare is affected
and therefore new measures to stimulate the competitive process in these markets
might be required. Identifying and sanctioning anticompetitive behaviors in these
sensitive sectors may be difficult for the Competition Council which hasnt yet the
required expertise and institutional maturity in order to launch some ample
investigations on these markets mainly characterized by the existence of a limited
number of big companies.
3. Conclusions
After the EU accesion, as the above analysis revealed, the Romanian
Competition Councils activity concentrated mostly on economic concentrations, the
same trend being also registered in other european jurisdictions like Poland, Czech
Republic and Hungary. During 2004-2009 all new members states analyzed registered
a stabilization of the number of issued decisions in the field of competition, for the
Romanian competition authority decisions covering mergers being still at a
significantly higher level than those regarding other anticompetitive practices. The
only exception was in 2011 when the Competition Council issued a higher number of
decisions than in the previous years sanctioning abuses of dominant position or
other anticompetitive agreements. Although the number of decisons in this field is
still at a lower level than those covering economic concentrations, the Competiton
Council proves to be more active on the Romanian market in terms of monitoring,
identifying and sanctioning anticompetitive behaviours both of private actors and
public institutions.
For an operational competition authority, the promotion of a proactive
competitive behavior, which gradually becomes a fundamental pillar of the new
competition culture, should be a key component of competition policy as a whole.
On one hand, such actions should be directed towards public authorities to convince
them not to adopt anticompetitive measures that have negative effects on
competition and consumers, and on the other hand to the business environment and
consumers in order to familiarize them with the competition rules and its benefits on
their welfare
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Competition policy in Romania after the eu accession

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