The 2023 retrospective of the competition landscape in Romania and what to expect of 2024

The year 2023 was one of transition for the competition authority and was marked by 2 key moments – the first part of the year when the authority focused on closing some important investigations, and the second part of the year when a number of mandates of the Plenary members expired and the authority focused on technical issues concerning new or older investigations, the speedy approval of merger cases, as well as on a number of follow-ups on some measures taken by the Government in areas with social impact (such as the capping of discounts in food retail).

By Cătălin Suliman (partner), Silviu Vasile (partner), Filip & Company

In 2024 we are at a turning point generated by several factors (internal and external to the authority). The changes that will take place within the competition authority will determine its direction of action in the coming years. The Competition Council must remain a reputable watchdog of the relevant markets, which will require an increase in the number of new investigations and analyses, as well as the strict monitoring of anti-competitive behaviours. This scenario calls for an even greater commitment to promoting competition rules, maintaining a high standard of proof in respect to the sanctioning decisions, diversifying the markets under the authority’s scrutiny, but also maintaining institutional expertise and reputation and attracting specialised human resources.

Expectations for 2024 also include ensuring consistency in the application of the competition authority’s new powers, particularly in the digital, financial-banking, food retail, pharmaceutical and unfair competition areas. The position of the competition authority as a dialogue partner for the business community, including as regards merger control and foreign direct investments, continues to be essential.

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In terms of opportunities, the competition authority could provide a broader framework for compliance by promoting the competition rules, by increasing the application of leniency policy and by supporting economic agents that cooperate with the authority and actively participate in mitigating the effects of the anti-competitive practices.

Finally, we anticipate that the competition authority will continue its sector inquiries in key areas of the economy, in particular, those concerning markets with a major impact on the population.

In the first part of 2023, the competition authority focused on closing investigations that spanned over several years, with the total amount of fines imposed indicating a significant reduction in the sanctioning activity. The focus was mainly on cases where there were admissions of guilt made by some or all of the investigated parties or on cases related to public procurement issues.

Although there is a high number of ongoing investigations, the number of new investigations launched by the authority is likely to increase in 2024, given the relatively low number of new investigations launched in 2023. These may be the result of finalised sector analyses, complaints and referrals submitted to the authority or information received by the authority in the course of its duties.

At the moment, it is important to ensure the authority’s efficient management, including in terms of the Competition Council’s Plenum, by finalising the appointing of the remaining mandates of the deciding body of the Competition Council and by attracting staff, as the authority is at a point where it needs to attract expertise (legal, technical and economic) to support an increased number of new investigations. This will require the competition authority to identify the most effective ways to attract human resources, including from the private sector.

In terms of new investigations and analyses, we anticipate that the key economic areas to be targeted will be, mainly, the energy sector (covering its various branches), the digital sector, the pharmaceutical sector, the food segment, the construction sector, as well as the area of public tenders for new infrastructure projects (especially following the intensified implementation of the NPRP).

2023 continued to be a relevant year for sector investigations. In 2024, we expect market inquiries to continue, and they may concern elements of a purely local nature or even be prompted by analyses carried out by other competition authorities in the region or by the European Commission.

Sectors with an impact on society (electricity, natural gas, fuel, medicines and medical services, banking, online trade, transport services, construction materials or the insurance sector – especially MTPL) will remain under the authority’s scrutiny in 2024. Anticipated cost increases in these market segments will require close monitoring by the competition authority, in particular to check and prevent the emergence of behavioural coordination beyond the limits allowed by law.

The competition sanctioning system applicable in Romania allows for sanctions of up to 10% of the total turnover generated in the year preceding the sanction. We notice an increase in the proposed fines, including an increase in the liability of the sanctioned undertaking up to the worldwide turnover.

It is very important to have a balance in the process of setting fines to avoid them becoming an indirect form of disproportionate pressure on the business environment.

To the extent that the fines increase approach continues, we anticipate that the number of competition disputes will continue to increase, especially if the probatory presented by the case team is not sufficient to support significant penalties. A disproportionate increase in the percentage of fines imposed on companies under investigation, especially in cases where the allegations are unclear or the probatory is unsatisfactory, is a dangerous and irreversible process, which will seriously affect the markets where such sanctions will be applied (e.g. some companies will be driven out of the market or face serious difficulties as a result of the application of sanctions). In 2023, the courts issued several judgments where competition authority decisions were overturned in whole or in part. This is a normal process that will continue to ensure the necessary balance in terms of the probatory and the level of sanctions applied relative to the seriousness of the infringement.

It is also important for the competition authority to make efforts to identify ways of resolving the situations under investigation without imposing fines (e.g. by accepting commitments or self imposed remedies), especially in the current economic context, where Romania’s economy is likely to enter a period of stagnation or even recession.

2023 was a busy year in terms of mergers, with over 100 mergers being reviewed. Especially in the latter part of 2023, the competition authority achieved remarkable results in reducing the time for analysis and issuing clearance decisions in very short periods. The business community has positively perceived these efforts, which strengthened the confidence in the authority’s ability to react promptly to market trading needs.

On the other hand, in 2024, the Competition Council will have to respond to the challenges posed by the widening scope of control over foreign direct investments (which now formally covers both non-EU and European investors). Absent of clarifying guidance and given the broad interpretation of the areas with possible national security implications, there will be a large number of notifications which may generate deadlock at the level of the relevant authority and will unnecessarily delay the clearance process.

The golden solution could reside in certain guidelines issued by the competition authority and in strictly managing the response time, especially for transactions by European investors with limited or no impact on national security. Thus, the Romanian State’s wish to be informed will be satisfied without generating significant delays in the investment process. Foreign investment in Romania will continue to constitute a strategic chapter on which the balancing/sustainability of the local economy may depend. Any unnecessary barriers to such investments should be lifted and the Competition Council has a key role to play in implementing actions to streamline the screening process, including in relation to foreign direct investment.

Ensuring the proper functioning of the competition authority by finalising the membership of its Plenum will also impact the number of new investigations and, further on, the number of dawn raids.

Although difficult to estimate, the number of dawn raids should certainly increase compared to 2023, as this kind of investigation is expected to remain the main means of information gathering by the competition authority. At the same time, the competition authority is likely to apply the new powers in relation to dawn raids, conferred by the legislative changes at the end of 2023 (including in relation to the inspection of personal equipment).

It is important to note that there is some tendency for the courts to overturn part of the competition authority’s decisions, which is a normal phenomenon that will bring real benefits to competition investigations and, also, more predictability in this area – with the competition authority having to spend more time ensuring that the standard of proof applicable to competition cases is observed.

This process will continue into 2024, when several important decisions are expected.