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Moldova: Will Higher Competition Fines Improve Competition?

Moldova: Will Higher Competition Fines Improve Competition?

Issue 10.6
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By the middle of 2023, Moldova will likely have a modified Competition Law. The existing Competition Law dates back to 2012, and its material and procedural norms are almost intact in their original form. Since then, however, the Moldovan economy and society underwent profound changes.

After Directive 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the member states to be more effective enforcers and to ensure the proper functioning of the internal market was enacted in 2019, the Moldovan Competition Council started a drafting process to modernize the national competition legislation, but the process picked up speed only after Moldova became an EU candidate state in June 2022.

Firstly, Directive 2019/1 is intended to be fully transposed. Most of its provisions are already part of the current Moldovan Competition Law, as it originally transposed the fundamental EU competition norms, including Articles 101-106 of the TFEU, Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, and Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings. Existing discrepancies that are going to be addressed referred, among others, to the maximum levels of fines, worldwide turnover as a basis for calculating fines, and entities that can be held responsible for competition infringements.

Secondly, the draft law intends to respond to evolutions in the Moldovan economy and society and resolve the procedural challenges in the implementation of the existing Competition Law. Notification thresholds for economic concentrations and the notification tax will be doubled, in line with the overall GDP dynamics and accumulated inflation. Procedural rules for the investigations will evolve, making them more resemblant to the ones used by the EU Commission in its competition investigations.

A notable absence in the draft law is direct clauses ensuring that the competition authority has indeed a sufficient number of qualified and motivated staff and necessary financial, technical, and technological resources for the effective performance of their duties. Although the need for sufficient resources is recognized in the document, the draft does not go as far as to change the existing budgeting procedures and principles.

Fair competition rules for all are the cornerstone of the common European market. It is quite obvious to anyone in Moldova that becoming an EU member and getting full access to its common market is impossible without a due synchronization of the competition rules. So, the debate sparked by the draft law is not about the direction of change. Rather, it is about the need to synchronize the moment when EU rules enter into force in Moldova with the accession to the common market, and about the possibility to raise the levels of fines only after the competition authority is given sufficient human and material resources to effectively investigate anti-competitive actions and avoid costly mistakes.

The critics of the immediate ad litteram application of the directive note that EU competition rules are crafted for the world’s biggest and most affluent common market with strong and reliable institutions. As such, they cannot be mechanistically transplanted without severe drawbacks into an incomparably smaller and less attractive economy, dependent on foreign investments and still outside of the common market, with underdeveloped institutions.

For example, setting fines based on the worldwide turnover of the undertaking or its mother company will likely make foreign investors reconsider the risk profile of their investments in Moldova. However certain of their internal compliance systems international corporations are, they may not disregard the risk that an underfinanced and understaffed national competition authority will apply the potentially lethal fines incorrectly, inconsistently, or arbitrarily. Critics of the draft law fear that, if enacted, under existing conditions of uncertainty and inconsistency in the application of competition legislation, it will become a major deterrent in investors’ decisions to invest in Moldova.

The need for fines to be effective, proportionate, and dissuasive cannot be overestimated. However, eliminating the risk of their arbitrary or inconsistent use by an understaffed and underfinanced national competition authority is of paramount importance and should be of primary concern. No matter how big the fines for anti-competitive infringements will be, they will be neither effective nor dissuasive if no institutional capacity to consistently target them in the right direction is in place.

By Emil Gutu, Competition Manager, ACI Partners

This article was originally published in Issue 10.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here

ACI Partners at a Glance

ACI Partners is a leading law firm in Moldova with an expanding network of partners throughout Europe. ACI Partners was established in 2006 and since then has managed to build a very strong and competitive legal practice. Our business strategy strives to deliver a solid and reliable service, going beyond merely grasping the law, which the clients may turn to whenever they need. In reaching this goal, ACI Partners employs a personalized approach to each client, showing a genuine respect for their values and unqualified commitment to their interests and needs, steadily investing in knowledge and data management and ensuring a working environment consistent with our clients’ quality demands and high expectations.

ACI Partners is a one-stop shop law firm proficient in all possible legal matters a business might come across in Moldova, starting with incorporation of a business, and obtaining of all the necessary regulatory permits, continuing with various daily matters, such as contracts, labor, and migration, and finishing with dispute settlement, insolvencies, and criminal investigations. But we pride ourselves especially for our unmatched expertise in most innovative and complex areas for Moldova, as Modern Financial Products, Data Protection, Renewable Energy, Competition, Clinical Studies, Public Procurement, and Regulatory. In our work, we always involve a team of professionals with the relevant skill-mix, which enables us to provide our clients with an integrated and comprehensive advice, superior to our competitors.

ACI Partners has advised the Government of the Republic of Moldova, businesses, international organizations, and other institutions on most challenging transactions, assignments and projects.

ACI Partners is not just another law firm. Over the course of our existence and working in Moldova, and on the international stage for our non-Moldovan clients, we have developed a strong set of core values which, we believe, guide us in everything that we do and, moreover, gives us a competitive advantage – differentiating us from other firms on the market.

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