Living in a small country like Bulgaria may give the impression that everyone knows and makes deals with everyone else. When asked, any Bulgarian would say that authorities and business are “all criminals”, tightly interconnected. However, it is not until some malfeasance is – somehow – revealed that people realise how much truth may lie in this otherwise typical mumbling.
Such an event happened on July 30, when the Commission for Protection of Competition (CPC) punished the Association of Dairy Processors in Bulgaria (ADPB) and the National Association of Milk Processors (NAMP) for forming a cartel. The sanctions imposed were, respectively, 15 000 leva and 10 000 leva and came about after numerous media reports and information from various state institutions tipped off authorities about the sudden increase in the prices of sirene (feta-like cheese) and kashkaval (aged yellow cheese) in July and August 2007. ADPB members raised the prices two months before the real increase in the price of raw cow milk, while NAMP members agreed on minimal prices of cheese and purchase price of milk, CPC said in a statement.
The dairy processors’ sanction was the last in a series of sanctions on cartel formation that CPC has imposed since mid-July 2008.
First it was the insurance companies branch. On July 15, CPC fined 14 insurance companies a total of 2.45 million leva for adjusting the third-party liability insurance fees. The sanctions imposed varied between 100 000 leva and 250 000 leva.
According to CPC, insurance companies had signed a memorandum in December 2007 providing a minimal premium under the third-party liability insurance and high commissions for insurance mediators. CPC banned the memorandum in what became its first decision, according to the Treaty of Rome that established the original European Community, because of the possible impact of the memorandum on trade among European Union member states.
Two days later, on July 17, CPC came up with another decision against a cartel formation, this time in the poultry products market. The decision was against 29 poultry-breeding companies; the total amount of the sanction was 303 000 leva. Five companies were fined 30 000 leva; another five were fined 10 000 leva; two were fined 8000 leva; one, 7000 leva and 16 companies were fined 5000 leva.
CPC suspected that the sudden increase in the price of poultry products in August 2007 was a result of the actions of Bulgarian Poultry Union and one of the fined companies, Gradus. Representatives of both repeatedly gave prognoses and recommendations for the poultry products market to the media, as well as the exact moments that prices should rise. Research into the period 2002/2007 showed that Bulgarian Poultry Union held numerous meetings at which its members co-ordinated the prices that they would offer. Egg farms had elaborated a common plan for control of the market, defining the prices and the production amounts, CPC research showed.
While insurers and poultry breeders were still explaining that there was nothing like cartel formation in their fields, CPC imposed sanctions to bread producers and confectioners’ unions with the same charges.
The Federation of Bread Producers and Confectioners in Bulgaria was fined 15 000 leva, while the Bourgas Regional Union of Bread Producers and Confectioners and the Association of Bread Producers and Confectioneries were fined 10 000 leva. The three unions played active roles in the price fluctuations and prognoses in the bread-making market, CPC said. They created a mechanism for anti-competition co-operation among members, and in numerous media statements made between 2003 and 2007, members of the three unions recommended that certain prices be introduced. The unions broadcast instructions for scheduled increases in the price of bread, CPC said.
The commission decided that the activity of the unions alone did not have an anti-competition effect, but analysed together in the context of the market, they could lead to violation, limitation or hindrances for competition in the country.
Sanctions for cartel formation are not something new for Bulgaria. In January 2008, CPC fined 14 cooking oil producers 1.85 million leva on the same charges. In May 2008, the commission launched an investigation into the Bulgarian Petroleum and Gas Association and its members for possible cartel formation.
Another market entity investigated by the commission is Lukoil Neftochim Bulgaria. The company is being investigated for monopoly. CPC was going to investigate all possible markets of oil products for cartels, the commission’s head Petko Nikolov said at the time.
As can be seen, given that the latest decisions of CPC referred to malfeasances in 2007, cartel investigation takes quite a lot of time. CPC, however, would try to shorten the terms, Nikolov said in May.
After the developments of the past two weeks, there is hardly a sector in the country where CPC has not found cartel formation.
