Until recently, the Bulgarian legal framework with regard to remedies for preserving competition in concentration procedures between undertakings, was different from the supranational framework in this area, and respectively, from the practice of the European Commission (“EC/ The Commission”). This called for a revision of the national legislation and led to the adoption in February 2021 of an Amending and Supplementing Act of the Bulgarian Protection of Competition Act (“Amending and Supplementing Act of the PCA”) (1).
One of the main differences prior to the adoption of the Amending and Supplementing Act of the PCA consisted in the envisaged power of the Commission on Protection of Competition (“CPC”) to impose remedies directly related to a concentration in case it deemed them necessary to preserve effective competition(2).
Pursuant to the rules established at the European level(3), remedies to preserve competition in concentrations between undertakings are proposed by the parties and are only approved by the EC. Therefore, the EC cannot impose such remedies unilaterally - it can only approve them. Nevertheless, the Commission can communicate its competition concerns to the parties in order to provide them with the opportunity to formulate appropriate and corresponding remedies proposals(4). In cases where the parties do not propose remedies to preserve effective competition, or they do not completely eliminate the competition concerns identified by the EC, the Commission may prohibit the concentration.
In contrast to the established European norms, the national regulation in force prior to the latest changes, stipulated that the CPC has the power to impose such remedies. It should be noted, however, that a possibility for the parties to propose remedies themselves and for the CPC to approve them was also provided for(5).
The draft Amending and Supplementing Act of the CPA is based on the conclusion that the approach established by the EC can definitely be qualified as more objective and that it leads to more effective results when it comes to the introduction of remedies in the procedure for issuing approval for a concentration between undertakings. For this reason, Art. 86, para. 1 was amended with the adoption of the Amending and Supplementing Act of the CPA. As a result, the CPC's power to impose remedies to preserve competition in the event of a concentration between undertakings was repealed, and the more effective EC approach was adopted, pursuant to which the CPC can only approve such remedies and not impose them on its own initiative.
In Art. 86 of the CPA, another significant change was introduced with the adoption of the Amending and Supplementing Act, which further develops the legislation by explicitly regulating the figure of the special representative in the procedure for issuing approval for a concentration between undertakings. In accordance with Art. 86, para. 3 of the CPA "the special representative is an independent controlling manager who monitors the implementation of the remedies approved by the commission and serves as a guarantor that the concentration will be carried out with the necessary degree of certainty." Therefore, in order to ensure the implementation of the remedies and the achievement of their objective, there is a necessity for specific expertise, which can be provided by a designated individual (expert), who is independent of the parties to the concentration, as well as of the CPC.
According to Art. 86, para. 4 of the CPA "the procedure for approval of remedies and appointment of a special representative shall be regulated by rules adopted by the commission". In view of this and taking into account all the changes adopted with the promulgation of the Amending and Supplementing Act of the CPA, the CPC needed to revise a significant part of its secondary legislation, including its Rules on imposing remedies to preserve competition in concentrations between undertakings(6). For this reason, they have been repealed in their entirety(7) and replaced by the new Rules for the approval of remedies to preserve competition in concentrations between undertakings (the "Rules"), which regulate the following major changes to the procedure for issuing approval for a concentration between undertakings:
► additional requirements have been added to some remedies known from the old Rules, such as the "divestiture" remedy;
► a possibility to review the remedies for preserving effective competition is provided for;
► the procedure for appointment/dismissal of the special representative and their activity is envisaged;
The new rules supplement the requirements to the “divestiture” remedy, as their adoption introduces an opportunity for the parties to offer a second alternative divestiture, which they are obliged to carry out in case they are unable to complete the first divestiture within the time limit determined by the CPC.
Pursuant to Art. 7, para. 12 of the Rules, “the alternative divestiture, the so-called "crown jewel" must be at least as good as the first divestiture in terms of creating a viable competitor and must not be related to uncertainty with regard to timely implementation." It is envisaged that the remedy will contain a clear estimate of how and when the alternative divestiture will take effect, as the CPC sets shorter deadlines for its implementation.
Art. 12 of the Rules provides for the possibility of including a clause for revision of the remedies for preserving effective competition, regardless of their type. With the inclusion of such a clause, the parties have two options - to request an extension of the deadlines or to be fully exempted from the remedies, or for the CPC to change or replace them.
To extend the deadlines for implementation of the imposed remedies, the parties should submit a special request to the CPC, stating compelling reasons for the need for an extension. The CPC accepts that there are compelling reasons "only if the parties are unable to meet the deadline for reasons beyond their responsibility and if it can be expected that the parties will subsequently be able to divest the business in the short term."(8)
The CPC may change or replace the already established remedies, as well as completely exempt the parties to the concentration from the already imposed remedies, only in the presence of exceptional circumstances. In accordance with Art. 12, para. 3 of the Rules, “exceptional circumstances may be considered as such if the parties demonstrate that market conditions have changed significantly and permanently, i.e., for a sufficiently long period of time, at least several years between the Commission decision and the request. Exceptional circumstances also exist if the parties are able to demonstrate that the experience gained in the implementation of remedies for preserving effective competition shows that the pursued objective will be better achieved if the conditions change."
The figure of a special representative in the procedure for issuing approval for a concentration between undertakings is regulated in Art. 25 to 28 of the Rules. Two separate types of special representatives are differentiated. In case of need for implementation of monitoring functions, it is envisaged to appoint a monitoring trustee.
The monitoring trustee performs the following main functions:
► monitors the implementation of the remedies for preserving competition approved by the CPC and periodically reports on their progress;
► monitors the process of unbundling of the divested business, and supervises the extent to which it is managed as a separate economic unit;
► monitors and supervises the preservation of the economic viability, saleability and competitiveness of the business which must be carved out and divested; minimises, as far as possible, any risk of loss of competitive potential; monitors whether action has been taken to retain all key personnel in this business;
► determines all necessary safeguards to ensure that the parties to the concentration do not receive confidential information relating to the divested business after the date of entry into force of the decision; decides whether such information may be disclosed or stored by such persons and to what extent the disclosure is reasonable and necessary in order for the divestiture to take place or in case disclosure is required by law.
In the cases when on the grounds of Art. 7 of the Rules the "divestiture" remedy is imposed, it is envisaged to appoint a divestiture trustee. Its main functions are:
► independently performs and/or assists the parties to the concentration in finding a suitable purchaser of the divested business;
► ensures that potential purchasers receive all the documentation and information necessary for reliable due diligence of the divested business;
► carries out the divestiture under the best offer, without being bound by a minimum price or other instructions by the parties to the concentration; the purchaser must comply with the requirements laid down in the decision approving the remedies for preserving competition.
In case there is a need to appoint both types of special representatives, the CPC assesses whether one person can fulfil both mandates (Article 25, paragraph 2 of the Rules).
The special representative is nominated by the parties to the concentration and appointed by the CPC with a ruling on the basis of which a tripartite mandate agreement is concluded.
With the adoption of the new Rules, the CPC has supplemented and further developed the existing regulations on the types of remedies for preserving effective competition in the procedure for issuing approval for a concentration between undertakings, having fully complied with all changes introduced by the Amending and Supplementing Act of the CPA. The regulation of a new figure in the procedure – the one of the so-called special representative has created the need for rules regulating the conditions and manner of their appointment and dismissal. Two main types of special representatives are distinguished, differentiating the specific functions each of them has within the procedure.
(1) Promulgated, SG, issue 17 of 26 February 2021
(2) Regulated in the previous text of Art. 86, para. 1 of the CPA (amended, SG, issue 17 of 26 February 2021)
(3) The procedure for imposing measures for preserving competition in concentrations between undertakings is regulated at the European level in Art. 6, paragraph 2 and Art. 8, paragraph 2 of Regulation (EC) No 139/2004, Articles 19 and 20 от Regulation (EC) No 802/2004, as well as in paragraph 6 of Commission notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004 ("The Notice")
(4) Paragraph 6 of the Notice
(5) Regulated in the previous text of Art. 86, paragraph 2 of the CPA (amended, SG, issue 17 of 26 February 2021)
(6) Adopted with Decision No. 1776 of 20 December 2011 of the CPC
(7) Decision No. 689/1 July 2021 of the CPC, promulgated, SG, issue 60 of 20 July 2021
(8) Pursuant to Art. 12, paragraph 2 of the Rules