New Compliance Guidelines by the Bulgarian Commission Aim to Help Businesses

Goal of the Compliance Guidelines

The new Compliance Guidelines (Guidelines) by the Bulgarian Competition Protection Commission (CPC) aim to encourage the development of compliance programmes by businesses. The compliance programmes are a set of internal action plans and procedures on how to avoid sanctions by running a business that is compliant with the complex Bulgarian and European competition laws.

Essence of the Guidelines

The Guidelines set out a process for developing compliance programmes by following six procedures, each of which has its specific purpose, as outlined below.

First, the company should conduct an internal competition compliance audit and a risk analysis of its business. The aim of the audit and the risk analysis is to collect information on the size, organisation, and legal structure of the company’s business; the markets on which it operates; and the competition environment in these markets (ie, suppliers, customers and competitors, and their market shares). Then, the company should identify the potential competition risks associated with its business given the specifics of the markets on which it operates and the manner in which it operates, and given the limitations imposed by competition law.

Second, once the company has identified the potential competition risks, the company’s management should develop high-level action plans and internal procedures for avoiding such risks. These action plans and internal procedures should be set out in a compliance programme to which the management should clearly and explicitly commit itself. The management should also inform all relevant employees about the compliance programme and determine a budget, timing, and responsible persons for its development and implementation.

The third procedure deals with control. Companies are advised to develop, as they consider appropriate, an internal organisation for reporting any non-compliance of the employees with an implemented compliance programme. The internal organisation may require: (i) appointment of a compliance officer, (ii) adoption of a code of conduct for employees with specific obligations for competition compliance, (iii) development of internal system for reporting of contacts with competitors, suppliers, and customers, and (iv) a competition compliance audit of commercial contracts.

Next step

As a next step, companies are advised by the CPC to develop internal rules for cooperation with the competition authority in the event of a potential competition investigation. Such internal rules are aimed at facilitating faster and more structured communication between the company and the authority.

The CPC also encourages companies to hold internal compliance trainings and seminar for their employees.

Finally, the CPC recommends that the companies regularly monitor and evaluate the effectiveness of their compliance programmes.

No guarantee of better treatment

However, the CPC expressly mentions that the adoption of a compliance programme does not guarantee a more favourable treatment by the authority in case of a competition infringement. In particular, a company will not be able to argue in favour of a lower sanction in case of a competition infringement by referring to the fact that it has adopted a compliance programme.

Benefits of compliance programmes

Still, compliance programmes are important as they increase companies’ awareness of competition law risks, which is associated with a number of benefits:

• as competition law sanctions may be extremely high (up to 10% of a company’s turnover), a better awareness of the competition law risks translates into a better preparation of the company to deal with these risks;
• compliance programmes set up an early warning system that allows competition law infringements to be identified and dealt with at very early stages, thus minimising the risks of sanctions; and
• a company that implements a competition compliance programme is generally recognised as more ethical, which attracts ethically conscious consumers and investors.

Although implementing an effective compliance programme coupled with meaningful internal control procedures may be costly and often cumbersome, the benefits usually outweigh the risks of potential sanctions in case of an infringement. To reduce the compliance costs, an individual approach should be applied by each company. Often, measures taken by large multinational companies may not be as useful or effective in smaller or medium organisations. An individual approach is always recommended.

New Compliance Guidelines teach companies how to deal with competition risks, but the burden of implementation stays with the companies.

author: Ilko Stoyanov