Wednesday, June 23, 2010

Short introduction into the competition regulation in Moldova

It is not an overstatement to say that a complex competition regulation is usually a feature of a country with the developed market economy. So, it is not a surprise that the rules on competition and anti-monopoly regulations in Moldova are still at their initial stage of elaboration. However, for the last several years competition law has become more apparant and feasible for many Moldovan companies. And with the lapse of time more and more complicated competition rules are likely to gain ground as compared to other branches of economy regulation.

The first law in Moldova that governed the issues of monopolistic and anti-competitive behaviour was the Law no. 906-XII of 29 January 1992 "On the limitation of monopoly behaviour and the development of competition". It first introduced the definition of a dominant position in the market, provided for some rules designed to prevent the abuses of dominant position, etc. Though not formally anulled this law does not play any significant role in the market regulation any more since the Law on the Protection of Competition no. 1103-XIV of 30 June 2000 came into force in the end of 2000. 

Basic principles of the Law on the Protection of Competition:

The Law on the Protection of Competition is a basic legal act in the Republic of Moldova laying down the rules of competition between market participants in the Republic of Moldova. Competition as such is defined by this Law as a contest between undertakings in which their independent activities effectively limit each other's possibility to influence unilaterally the general conditions of goods turnover in the respective market.

Unfair competition is defined as any actions performed by undertakings to gain unfair benefits what causes or can cause damages to other undertakings or harm their business reputation. 

Articles 2 and 4 of the Law stipulate the principles of competition regulation in Moldova. They provide for the state to recognize fair competition as a key factor in developying the economy. The state implements the policy designed to ensure free entrepreneurship and protection of fair competition.

It is forbidden to use one's rights for the purpose of limiting competition, abuse dominant position and infringe legitimate consumers' interests. The state should contribute to developing and protecting fair competition and protect undertakings and citizens (consumers) from monopolistic activities and unfair competition.

The Law stipulates certain types of anti-competitive activities:

1. Monopolistic activity:
    - abuse of the dominant position in the market;
    - anti-competitive agreements.
2. Unfair competition.
3. Public authorities' activities limiting competition.

These types of anti-competitive activities will be explained and considered in other posts. However, it is worth mentioning here the definition of dominant position which plays a pivotal role in competition regulations in all countries. The dominant position in the market is considered (by virtue of art. 2 of the Law) as an exclusive position of an undertaking in the goods market that enables it to influence decisively (solely or together with other undertakings) the general conditions of goods turnover in the respective market or to hamper the access to the market for other undertakings. For a company to be declared as holding the dominant position it should have a market share of not less than 35 %. At the same time the term goods should be interpreted broadly as the same art. 2 of the Law includes works and services into its definition.

The main public authority created to implement the state's competition policy is the Agency for the Protection of Competition. And though the Law providing for the establishment of the Agency was adopted in 2000 it was only in 2007 when the Agency's board was approved and it started it activity.

The Agency is entitiled to control the functioning of the markets, their structural modifications and the creation of transnational corporations and financial and industrial groups. It carries out supervision of certain types of mergers and acquisitions and also may, under certain cicumstances, lodge applications with the court for undertakings division. And it is the Agency that should intervene in cases of violations of competition regulations committed by undertakings.

Coming back to the definition of the dominant position it is necessary to mention that beside the existence of the definition in the Law on the Protection of Competition, there has not been yet approved a clear methodology for determining it. The Agency elaborated the methodology and uses it, however, this methodology was not officially published as a legal act in the Official Monitor of the Republic of Moldova, and many lawyers claim it cannot have any enforceable legal power. In any case the methodology has been actively used by the Agency in order the dominant position of many companies in various markets. 

So far, the competition regulation in Moldova lacks clarity and foreseeability. Representatives of many companies claims that the Agency's policy is inconsistent. This mostly happens because of 2 reasons:

1 - insufficiency and lack of clarity of existing acts governong the rules of competition, and
2 - lack of necessary experience of the Agency, which only recently started to actively implement any competition regulations in Moldova.

However, the situation is likely to change in the future, particularly under the influence of the EC competition policy and regulations that would be implemented in the Republic of Moldova.



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