Bulgaria: "Abuse of stronger bargaining power"

The case

At the end of May 2016 the Bulgarian Commission for Protection of Competition (the “b>Commission” or the “CPC”) fined Siemens EOOD (“Siemens”) for abuse of stronger bargaining power, in the amount of BGN 35,000 (approx EUR 17,900) plus attorney fees of BGN 2,500 (approx EUR 1,280). This is the first case in which the Commission has dealt with abuse of stronger bargaining power, introduced to the Bulgarian Competition Protection Act (“CPA”) at the end of July 2016. Given the abstract wording of the provision about “abuse of stronger bargaining position” and the lack of any methodology or instructions about its application, the CPC’s decision can be considered as initial guidance on how the Commission will interpret the provision in the future.

The proceedings for abuse of stronger bargaining power against Siemens were opened on 07 March 2016 by a request from its competitor and commercial partner, Bright Engineering OOD (“Bright Engineering”) to the CPC.

Bright Engineering claimed that as a result of the unjustified refusal of Siemens to supply it with a Siemens SST-300 steam turbine, Bright Engineering was not able to supply its own contractor – EVN Bulgaria Heating EAD (“EVN”) with the same. Bright Engineering claimed further that it suffered damages (as did its customer, EVN) as a result of the unjustified refusal. According to Bright Engineering the refusal constituted an “abuse of stronger bargaining power” by Siemens.

Siemens’ arguments

Siemens, in turn, claimed that the elements for abuse of stronger bargaining power were not present. In particular, Siemens claimed that: (i) under the internal structure of Siemens it did not supply the steam turbines in Bulgaria, but they were supplied by another Siemens company to which Bright Engineering had been redirected; (ii) Bright Engineering may have been supplied with the steam turbines by other producers; (iii) Bright Engineering did not act with the due diligence of a “good merchant” because it did not ask Siemens whether it would be able to supply the steam turbines before entering into a contract with EVN; (iv) EVN does not fall within the definition of “customer”, as the definition is given under the Consumer Protection Act (the CPA does not provide for a definition of a “customer”). Hence, the entire provision about abuse of stronger bargaining position was not applicable.

The CPC’s decision

The Commission did not accept Siemens’ arguments and found that abuse of stronger bargaining power was in fact present in this case.

The CPC underlined that given potential competition, the number of alternative suppliers/purchasers, entry barriers, etc, the assessment of a “stronger bargaining power” has to be made on a case-by-case basis. In line with that, a stronger bargaining power is present where partners of a certain company are dependent on it, given the characteristics of the relevant market’s structure, the specific relation between the concerned undertakings, the character of their activities, and the difference in their scale of operations.

In addition, the CPC states that the stronger bargaining power can be found at each stage of the commercial relations between the parties, including during their negotiations.

The Commission ruled that in the case at hand, Siemens, as representative of Siemens AG had a “stronger bargaining power” since Bright Engineering was economically dependent on it in order to supply its own customer, EVN. The CPC further considered that according to the principles of good faith, and considering the existing relations between Siemens and Bright Engineering, Siemens had to (i) justify the grounds for its refusal and (ii) cooperate with Bright Engineering for the delivery of the Siemens steam turbine.

Further, given the lack of a definition for “customer” in the CPA, the Commission found that the sector-specific definition under the Energy Act should apply (and not the definition under the Consumers Protection Act, as claimed by the defendant).

The CPC further defined that by causing direct damages to EVN, Siemens may also have caused damages to the end consumers (consumers of EVN).

The sanction

Given that Siemens had a 0 % market share in the relevant market for 2015, the Commission sanctioned it with a fine of BGN 35,000 (approx EUR 17,900) plus attorney fees of BGN 2,500 (approx EUR 1,280).

What next?

The decision of the CPC is currently being appealed by Siemens before the Supreme Administrative Court (“SAC”).

If the CPC’s decision is upheld, this would automatically turn the case into a precedent on how abuse of a “stronger bargaining power” will be interpreted in the future. Certainly, the wide interpretation made by the CPC would put not only Siemens, but also many other companies on the spot with strong positions in the market, when they negotiate or do business with their partners and competitors.

"The CPC underlined that given potential competition, the number of alternative suppliers/purchasers, entry barriers, etc, the assessment of a "stronger bargaining power" has to be made on a case-by-case basis. In line with that, the stronger bargaining power is present where partners of a certain company are dependent on it […]"

author: Galina Petkova