December 2023 – Facing EU infringement concerns, Romania has finally adopted an ordinance amending the Competition Law no. 21/1996 (the “Competition Law”), aimed at fully transposing into local law EU Directive 1/2019 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market (the “ECN+ Directive”).
This was carried out through Government Emergency Ordinance no. 108/2023 (“GEO 108/2023”), published in the Official Gazette on 6 December 2023.
GEO 108/2023 goes further than merely transposing the provisions of the ECN+ Directive (as some of the principles in the directive had already been reflected under national law previously) and further includes government views on competition enforcement, as well as addresses and streamlines issues that the Romanian Competition Council (the “RCC”) has encountered in applying the Competition Law.
As such, GEO 108/2023 brings important amendments to the Competition Law and other related acts, with relevance, among others, to dawn raids, the computation of fines, the RCC’s investigative powers and the investigated parties’ right of defence, and the screening of foreign direct investments (“FDI”) in Romania. See our comments here on the main changes brought by GEO 108/2023 to the local FDI screening regime.
Below we summarise the main amendments to the Competition Law, together with context and insights into where such changes are stemming from and what they may entail for market players.
Dawn raids and new inspection procedures
- Dawn raids outside a formal RCC investigation framework may now be conducted by the RCC at the government’s request for a “case analysis” and subject to obtaining a court authorisation; following the “case analysis” (and, presumably, the carrying out of the dawn raid), the RCC may (i) draft recommendations and proposals on specific regulations to the government, or (ii) if there are sufficient legal and factual grounds, launch an investigation that will be resolved as a matter of urgency and priority.
Practical effects of potential political interference into competition enforcement matters in specific sectors may be difficult to predict and should be closely scrutinised by the courts when issuing the dawn raid judicial mandates. Also, such new tool introduced by GEO 108/2023 should be used with caution by both the government and the RCC.
- The RCC may now also conduct announced inspections with no prior court authorisation, if the undertaking concerned agrees.
- Claimed attorney-client privilege over particular documents and information may be disregarded by RCC inspectors during dawn raids if the arguments raised by the undertaking do not match EU case law or are based on blatantly erroneous factual statements. In such cases, RCC inspectors are entitled to immediately read the content of the communication with the attorney and make a copy thereof.
Such an approach may appear rather surprising, particularly in light of European developments (such as the CJEU’s Orde van Vlaamse Balies ruling) trending towards extending attorney-client privilege rather than constraining it.
- Furthermore, the RCC may access during dawn raids any information accessible to the undertaking concerned, regardless of where it is placed (e.g., even digitally in the cloud). Such provisions already existed in RCC secondary legislation, but the authority appears to have felt the need to also include these in the Competition Law, potentially given practical difficulties and debate encountered by officials during dawn raids. The RCC also applied earlier this year significant fines for the obstruction of dawn raids, with the investigated parties arguing against the authority’s jurisdiction to access group-stored files—fines that were recently upheld by the first instance courts.
- It is further expressly provided that if an undertaking refuses to grant access to the RCC to conduct a dawn raid, RCC inspectors may enter any premises in the presence of police officers and witnesses, and RCC inspectors may be assisted by special structures of the Romanian Police.
- Furthermore, the statute of limitations for applying sanctions will be suspended during the time the RCC president’s decision on whether attorney-client privilege applies to certain documents is disputed in court. However, this will not impede the RCC from further carrying out the investigation.
Further strengthening of the investigated parties’ right of defence and proportionality of the RCC’s investigative powers
- The RCC is carrying out its prerogatives in applying Art. 101 and 102 of the TFEU while also observing the proportionality of the investigated parties’ liability.
- Furthermore, there is an express provision that requests for information must be proportional and not force the recipient to acknowledge a breach of the law. Similarly, persons interviewed by the RCC cannot be forced to acknowledge a breach of the law.
- Another express provision was introduced stating that when the RCC imposes corrective behavioural or structural measures, in cases where the RCC may choose between two equally efficient corrective measures, the RCC will opt for the one least burdensome for the undertakings, in accordance with the principle of proportionality.
- The RCC procedures regarding the breach of the Competition Law, including the exercise of powers by the RCC in the enforcement of the law, observe the general principles of EU law and the EU Charter of Fundamental Rights.
- On the same note, while exercising its powers, the RCC ensures compliance with the appropriate guarantees regarding the defence rights of undertakings, including the right to hearings and the right to an effective remedy before a court.
Updates on the computation of fines
- Fines to potentially apply to worldwide turnovers – fines of up to 10% of total global turnover for competition law infringements may be applied to a “single economic unit” as defined and applied under EU case law (i.e., all natural and legal persons constituting a single economic unit). More specifically, the persons that are part of the economic unit are liable personally and jointly with the other legal persons that constitute the respective economic unit for the payment of the amount of the fine applied for the violation committed. The execution of the fine may begin with priority on the assets in Romania belonging to the economic unit held responsible for the breach, without the insolvency of the first executed legal person influencing the advancement of the execution procedure.
- Fines for providing false or misleading information or obstructing dawn raids may now be applied between 0.1% of total revenues achieved in Romania and 1% of the total worldwide turnover achieved in the year prior to the sanction being applied. These sanctions now also apply (i) for providing misleading information during announced inspections, (ii) if the representative of an undertaking does not partake in the interview requested by the RCC, and (iii) other conduits provided by law (e.g., breaking of seals, refusing to submit to a newly introduced dawn raid following the government’s request for a case study, etc.).
- Undertakings now have the possibility to acknowledge the above-mentioned breaches, provided in Art. 53 of the Competition Law, in exchange for a 10%–30% reduction of the fine (the overall fine cannot be less than 0.04% of total Romanian turnover in the year prior to the fine being applied).
- Furthermore, there is now an express provision that, as an exception to the principle of personal liability, the RCC will apply the criteria of economic continuity and legal continuity, as defined under EU case law. The RCC already applied such principle in practice (e.g., where one of the investigated undertakings was acquired during the investigation by another investigated undertaking).
- Provisions were also introduced on the computation of fines imposed on associations of undertakings.
New provisions on leniency and immunity to fines for undertakings and their representatives
- Leniency-related provisions have been added to the Competition Law. Previously, such provisions were detailed in RCC secondary rules only.
- We particularly note that Art. 23 of the ECN+ Directive has been transposed in the Competition Law. As such, within the framework of administrative procedures and non-criminal judicial procedures in relation to involvement in an anti-competitive practice, the current and former directors, managers and other members of the staff of the undertaking that submits to the RCC a request for immunity from fines for the respective practice are not sanctioned, if the conditions under Art. 23 (a) to (c) of the ECN+ Directive are met. This is without prejudice to the right of victims suffering harm from an infringement of competition law to claim full compensation.
- Furthermore, current and former directors, managers and other members of staff of applicants for leniency before the RCC may also benefit from immunity or at least mitigating circumstances under criminal law (depending, for instance, on their cooperation with both the RCC and the criminal authorities). Such benefit would appear to apply to both the relevant company representatives’:
- criminal liability under the Competition Law for wilfully conceiving or organising cartels; and
- their criminal liability under the Romanian Criminal Code for taking part in bid rigging.
Extended powers and attributes for the RCC
- The RCC may adopt a decision on the breach of competition provisions and impose measures on public authorities distorting competition on the market. Public authorities may now also propose remedies.
- RCC sanctioning minutes are enforceable titles within 15 days from communication (previously, there was an express provision in this respect for RCC sanctioning decisions only).
- The RCC will be further handling national Member State prerogatives with respect to (i) the EU Foreign Subsidies Regulation, except for public procurement, where the National Agency for Public Procurement is responsible, and (ii) the Digital Markets Act – in this regard, the RCC may launch an ex officio investigation, with prior notice to the European Commission, for the potential breach on the territory of Romania of Art. 5–7 of the Digital Markets Act.
- An express provision that the RCC may reject complaints that are not a priority for the institution has also been introduced.
- The RCC may now request information directly from natural persons potentially holding such relevant information for investigations or analysis of complaints of economic concentrations. However, information from natural persons either following requests for information or through interviews) cannot be used as evidence to impose sanctions against such natural persons or their family members.
- An express provision that information requests must be proportional and should not force the recipient to admit to a breach of the law has been introduced—this applies to both legal and natural persons, as well as public authorities.
- The consent of natural persons to attend RCC interviews is no longer required under the law, and natural persons may be fined between RON 500 (approx. EUR 100) and RON 3,000 (approx. EUR 600) for not taking part in such interviews (or for not providing/providing misleading information to an information request).
- Introduction of a non-exhaustive list of evidence that is admissible before the RCC, e.g., written documents, oral statements, electronic messages, recordings, and any other objects containing information, regardless of its form and regardless of the type of support on which the information is stored.
- The National Competition Centre is established within the RCC, as a competition and state aid preparation hub, with the goal of organising professional competition and state aid courses, or organising competition and state aid events, among others.
- Other changes have been brought to legislative acts regarding state aid and the implementation of Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services.
- Express provisions were also added on the reciprocal assistance between the RCC and other national competition authorities (“NCAs”) or the Commission (e.g., the RCC may conduct dawn raids or interviews at the request of/on behalf of other NCAs, the RCC may exchange information with other NCAs under certain conditions, etc.).
The adoption of GEO 108/2023 marks some of the most significant changes brought to the Competition Law in recent years. In addition to strengthening the RCC’s investigative powers and addressing other aspects in the ECN+ Directive, GEO 108/2023 appears to “go the extra mile” in some matters, giving the authority even more prerogatives in scrutinising market players’ behaviour.
This should come with added balance and responsibility from authority representatives in applying the law and respecting due process, in light of the investigated parties’ right of defence further enshrined now in the Competition Law. Also, national courts’ oversight powers become even more paramount in ensuring that investigated parties’ rights are not merely illusional, but effectively observed in light of EU principles and judicial practice.