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13 December 2018
The Commission for the Protection of Competition (CPC) recently imposed a Lev840,340 fine on A1 Bulgaria for cancelling a partnership agreement with its main commercial representative, Handy-Tel EOOD (Handy) (Decision 1308 of 22 November 2018). The CPC held that the cancellation had effectively violated Article 37a(1) of the Protection of Competition Act, which prohibits the abuse of a dominant position when contracting.
Subject to a 2005 agreement, Handy has conducted its business mainly as an exclusive commercial representative of A1 by:
A1 (formerly Mtel) is one of three major mobile operators in Bulgaria and part of A1 Telecom Austria Group – a telecoms supplier in Central and Eastern Europe with more than 24 million customers.
According to Handy, on 22 February 2018, at the time of a scheduled meeting between the two companies aimed at renewing their ongoing partnership agreement and reviewing its terms, A1 unexpectedly notified Handy of its intent to cancel the agreement. According to A1, the reasons for the cancellation included:
Handy denied A1's claims, maintaining that, among other things, it had fulfilled its annual targets each year during the term of the agreement and thus A1's cancellation:
Handy held that it had acted loyally and correctly throughout its partnership with A1.
Several requirements must be fulfilled in order for a violation of Article 37a(1) of the Protection of Competition Act to occur.
First, one of the parties to the agreement must possess а larger market power than the other. During its thorough economic assessment, the CPC discovered that A1 possessed significantly more power on the telecoms market compared with Handy – in fact, A1 is Bulgaria's leading provider of telecoms services, with a market share of approximately 38%.
Second, it must be proven that the specific commercial actions or omissions of the dominant entity have or could adversely affect the interests of the weaker party and consumers. The CPC found no evidence that Handy had been unable to meet its annual targets for 2017. Further, it acknowledged that A1's notification for cancelling the 13-year relationship with no forewarning and the unproven statements regarding Handy's failure to meet annual targets constituted an abuse of its dominant position.
The CPC held that the cancellation of the agreement had effectively ended Handy's activity on the market because it had been an exclusive commercial representative of A1 and relied heavily on this partnership for an extended period. A1 was deemed to have violated the Protection of Competition Act, which prohibits the abuse of a dominant position when contracting.
While the CPC has ruled in Handy's favour – A1 was fined 2% of its annual turnover for 2017 (approximately Lev840,340) – what is significant in this case is whether, going forward, the CPC will require undertakings that could have a dominant position to cancel any partnership agreements only where strict rules of justifiability are complied with.
For further information on this topic please contact Galina Petkova or Rosen Manchev at Advokatsko Druzhestvo Andreev Stoyanov & Tsekova in cooperation with Schönherr by telephone (+359 2 933 1072) or email (firstname.lastname@example.org or email@example.com). The Advokatsko Druzhestvo Andreev Stoyanov & Tsekova website can be accessed at www.schoenherr.eu.
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