EU-Report Accession Bulgaria

Chapter 6: Competition policy

Since last year's Regular Report, Bulgaria has made further progress in this area.

In the area of anti-trust, no further legislative developments can be reported as the Bulgarian legislation was already largely in line with the acquis.

The Commission for the Protection of Competition (CPC), which is the national competition authority in Bulgaria, has continued to build on its anti-trust enforcement record over the past year. In 2001, 53 decisions were adopted, including six prohibitions (all with fines) and one conditional merger approval. However, fines that act as a more effective deterrent are needed, and work should focus on the most serious distortions of competition.

In the area of state aid, important progress has been made on the legislative side with the entry into force of the Law on State Aid in June 2002. The new law provides a good procedural framework for state aid control. It does not, however, provide details on the substantive criteria that should be used for the assessment of notified aid. In this respect, the Council of Ministers has adopted substantive implementing rules for the application of the law, intended to transpose the EC's substantive state aid acquis. Bulgaria has also proposed for adoption under the Europe Agreement mechanisms a regional aid map in line with the acquis. The state aid report for 2001 follows the methodology and presentation of the ``Survey on State Aid in the European Union''.

The new Law on State Aid confirms that the State Aid Department within the Ministry of Finance is responsible for ex post state aid monitoring (annual report and inventory). The State Aid Directorate within the Commission for the Protection of Competition is in charge of ex ante state aid control (authorising or prohibiting aid projects after compulsory notification). Co-operation between the two bodies has improved during the reporting period. The state aid enforcement record of the Commission for the Protection of Competition is still emerging. Since the last report, important efforts have been made to improve the ex ante notification practice of aid-granting bodies. The Commission for the Protection of Competition took 39 state aid decisions between October 2001 and the end of August 2002. Both the quality and quantity of the decisions need to be improved.

Regarding steel, Bulgaria has confirmed that it will apply for an extension of the period during which aid can be granted for restructuring, as provided for in Protocol 2 to the Europe Agreement. An overall restructuring plan needs to be prepared, along with individual plans notably concerning Kremikovtsi, Bulgaria's main steel industrial complex (see also Chapter 15 ­ Industrial policy). In the steel industry aid for restructuring can only be given if the national and individual restructuring programmes of the companies would include necessary measures for reaching viability and necessary cuts in production capacity, in line with the requirements set out in Protocol 2 of the Europe Agreement.

Overall assessment

As regards anti-trust, the overall assessment is positive, with some further efforts still required. The Bulgarian Law on the Protection of Competition of 1998 contains the main principles of the EC's anti-trust rules as regards restrictive agreements, abuse of dominant position and merger control. As regards implementing legislation, in 2001 Bulgaria introduced a block exemption for vertical agreements that is compatible with the new EC policy. Further efforts are needed with respect to the approximation of implementing legislation on horizontal agreements. The Commission for the Protection of Competition is a fully independent authority. It has broad powers to enforce competition rules. In the area of anti-trust, the most important challenge for the Commission for the Protection of Competition is to continue building on a record of effective implementation and enforcement of the rules, giving priority to cases concerning the most serious distortions of competition. Efforts to ensure a more effective and deterrent sanctions policy should also be continued. It is important to do more to increase awareness of the rules, especially within the business community. In view of the planned modernisation and decentralisation of the application of EC anti-trust rules, training efforts should be pursued, in particular with regard to the judiciary.

As regards state aid, the overall assessment is not yet satisfactory because there is not yet a solid enforcement record. The new Bulgarian Law on State Aid entered into force in June 2002. It provides a good procedural framework for the control of state aid. Under this law, the Commission for the Protection of Competition (CPC) has broad powers to enforce state aid rules. The CPC needs to make additional efforts, in particular to upgrade its expertise in the area of state aid control and to improve the quality of its state aid decisions. Whilst there have been improvements in co-operation between the Commission for the Protection of Competition and the State Aid Department of the Ministry of Finance, this needs to be further intensified; the ultimate aim is to exchange information on a day-to-day basis, and in particular to share the state aid inventory online. Following the entry into force of the new State Aid Law, one of the main priorities of the CPC should be to assess all existing schemes in Bulgaria under which state aid is being granted. Incompatible existing aid schemes should be brought into line with the acquis. It is important to increase awareness of the rules, in particular among aid grantors, the business community and the judiciary.

Conclusion

In its 1997 Opinion, the Commission concluded, in the field of anti-trust, that Bulgaria had made some progress with the institutional and legislative requirements, but also that the implementation, enforcement and control of the legislation would require sustained structural reforms. In the field of state aid, the Commission concluded that progress had been limited in all aspects and that considerable efforts were necessary to meet the requirements of credible control of state aid, in particular as regards transparency in the granting of state aid and the establishment of a well-functioning monitoring authority with sufficient powers to monitor state aid and a sufficiently qualified staff.

Since the Opinion, Bulgaria has made steady progress in adopting anti-trust and state aid legislation, in developing the administrative capacity of the Commission for the Protection of Competition and in establishing an enforcement record. However, overall Bulgaria is only partially in line with the EC requirements as regards legislative alignment, administrative capacity and enforcement record, in particular in relation to the enforcement of State aid discipline.

Negotiations on this chapter continue. Bulgaria has not requested any transitional arrangements in this area.

Bulgaria should focus further efforts in particular on improving the enforcement of state aid rules and developing administrative capacity in order to develop a credible state aid enforcement record.

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