Competition and antitrust in the digital age

OnDemand

March 23 2017

Competition & Antitrust Bulgaria

While the digital economy offers abundant opportunities to customers and retailers alike, it also raises a number of competition concerns, including the impact on bricks-and-mortar businesses, the potential for abuse of market power by major digital platforms and the challenge of fostering online competition while preventing free riding. Competition authorities must evolve and adapt traditional antitrust principles and approaches to meet the challenges of the rapidly changing digital market.


What impact has the rapidly changing digital market had on competition in your jurisdiction, and how have legislators and competition authorities responded?

Online and digital services are well represented in Bulgaria and there is developed competition among different online retailers and online and mobile platforms.

However, no changes to the Competition Protection Act have been implemented or proposed as a result of the growth of the digital market, and no separate rules about online services have been issued or proposed by the Commission for Protection of Competition. The only text in the act that concerns online services is in the section about unfair competition. It provides that use of a domain or the design of a website that is identical or similar to other domains or websites and which misleads or may mislead competitors is prohibited.

Nonetheless, the development of digital services has led to changes in the Consumer Protection Act, meaning that there are specific rules regarding online sales and services. For instance, if a customer buys goods or services online, the customer has the right to cancel and return the order within 14 days, for any reason and with no justification. No similar right of return or cancellation exists for in-store purchases.

Online sales and purchases are regulated by the Electronic Commerce Act.

Some other laws also contain provisions regarding online services (eg, provisions about electronic money and electronic payment).

In terms of market definition, are online services considered to be in the same market as traditional services in your jurisdiction? What impact has this had on competition?

The Commission for Protection of Competition has assessed the market of different online services on a few occasions only. There is no single decision regarding all online services that states whether online services form one separate market or whether they are part of other traditional product markets.

Thus, in Decision 822 (October 15 2015) the commission assessed whether online and in-store sales form one or a number of different product markets.

The commission stated that the market cannot be divided into different channels for sales – specifically online and offline sales – since the products' prices are similar and customers often learn about a product online but purchase it in-store or vice versa. The commission outlined that for customers price is the key factor, not the channel for sale (online or offline). Thus, the commission found that the online and offline (ie, in-store) purchases form part of one product market (ie, the retail of non-food products).

In Decision 1106 (September 4 2013) the commission assessed online advertising and compared it to traditional advertising (eg, radio and television advertising). It found that the different advertising platforms (ie, Internet, radio and television) reach different customers and have different effects and therefore form separate product markets. Thus, online advertising forms a separate product market from traditional advertising.

In Decision 748 (June 27 2013) the commission found that electronic payment services via the Internet form a separate market, different from traditional payment services.

The commission's definitions regarding the relevant product markets have no binding character and the commission may adopt different market product definitions in the future.

Also, the above decisions do not present an explicit list of all commission decisions dealing with online services, but only illustrate that in some cases the commission found that online services form a separate market, while in other cases they were placed in the same product market as the traditional services.

What types of conduct constitute abuse of dominance in the online space and what practices are most likely to catch out unwary online players?

Abuse of dominance would be found when the online space is subject to general prohibition under the Competition Protection Act (abuse of dominant position under the act follows Article 102 of the Treaty on the Functioning of the European Union). No separate rules about the specific form of abuse of dominance online have been adopted or applied.

So far, no proceedings about abuse of dominance online have been opened by the commission.

The proceedings before the commission which concern online sales or services are typically cases for unfair competition in the form of unfair practices (eg, misleading discounts offered online or misleading online advertising). However, the fact that a breach was made online or through an online platform would have no effect on the commission's legal arguments or its final decision.

What steps are competition authorities in your jurisdiction taking to prevent online retailers and service providers from free riding on the investments of bricks-and-mortar retailers and service providers?

At present there are no such steps in Bulgaria.

How can competition authorities best ensure that these steps do not hinder innovation or consumer choice and promote the continued evolution of online services?

This question is not applicable in Bulgaria.

For further information on this topic please contact Galina Petkova at Advokatsko Druzhestvo Andreev Stoyanov & Tsekova in cooperation with Schönherr Rechtsanwälte GmbH by telephone (+359 2 933 1072) or email (g.petkova@schoenherr.bg). The Advokatsko Druzhestvo Andreev Stoyanov & Tsekova website can be accessed at www.schoenherr.eu.

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