Legislation and jurisdiction
The Protection of Competition Law 13(I)/2008 ("the Law") is the applicable legislation in Cyprus. The Law has incorporated the provisions of Council Regulation 1/2003 into the national legal order and has re-established the Commission for the Protection of Competition ("CPC"), which is the competent body for the enforcement of the legislation.
The Law provides, inter alia, for the determination of the CPC as the national competition authority of the Republic responsible for the application of the Law, of Regulation 1/2003 and of Articles 101 and 102 TFEU (ex 81 and 82 EC), where necessary. Specifically, it should be noted that the Law provides for the CPC's competences and powers in line with Article 5 of Regulation 1/2003.
The CPC consists of five members, namely the Chairman and four members who are appointed by a decision of the Council of Ministers on a proposal of the Minister of Commerce, Industry and Tourism. The Chairman must be a lawyer of high standing and is appointed on a full-time basis. The members, at least two of whom must come from the private sector, must have specialist knowledge and experience in law, economics, commerce or industry and are appointed on a full-time basis for a five-year term renewable once. The CPC is assisted in the execution of its duties by its Service, which is composed of the Secretary, the officers and the secretarial staff.
Section 3 of the Law (which reflects art. 101 TFEU) provides that all agreements between undertakings or associations of undertakings, all decisions of associations of undertakings and any concerted practices, having as their object or effect the elimination, restriction or distortion of competition within the Republic shall be prohibited and shall be void ab initio. Section 3(1) of the Law specifies such prohibited agreements, decisions or concerted practices as including:
- direct or indirect fixing of purchase or sale prices or other trading conditions;
- limiting or controlling production, distribution, technical development or investment;
- sharing markets or supply sources, geographically or otherwise;
- applying dissimilar conditions to equivalent transactions; and
- making the conclusion of contracts subject to acceptance by other parties of supplementary obligations that by their nature or according to commercial practices have no connection with the subject matter of such contracts.
Agreements, decisions and concerted practices prohibited under s. 3(1) fall under the notion of 'collaboration' defined pursuant to s. 2 of the Law. Under the said definition, collaboration can constitute any agreement, formal or informal, written or unwritten, executed by the law or not, the concerted practice of two or more undertakings or associations of undertakings or the decision of an association of undertakings.
An 'agreement' is further defined pursuant to s. 2 of the Law as being any arrangement between at least two undertakings or associations of undertakings, by virtue of which one of the parties has willingly undertaken the obligation to restrict its freedom to act in respect of one of the other parties.
Pursuant to s. 2, 'concerted practice' is defined as a form of collaboration between undertakings which, without having been taken to the stage where an agreement per se has been concluded, knowingly substitutes for the risks of competition. It should not be considered a straightforward task for the CPC to prove, on the evidence of parallel behaviour on the market that a concerted practice exists as this can simply be the natural commercial behaviour of undertakings which are trying to match the behaviour of their competitors so that their business does not suffer.
Pursuant to s. 4 of the Law, conjunctive requirements can lead an agreement, decision or concerted practice prohibited by virtue of s. 3(1) to evade such prohibition and be valid without necessitating the CPC to issue a decision in that regard. These requirements, which must be conjunctively met, are that the agreement, decision or concerted practice:
- contributes, while allowing consumers a fair share of the resulting benefit, to the improvement of production or distribution of goods or to the promotion of technical or economic progress;
- does not impose, on the undertakings concerned, unnecessary restrictions towards achievement of the above mentioned purposes; and
- does not afford the undertakings, to which the agreement relates, the possibility to eliminate competition from a substantial part of the market of the product concerned.
1. Industry-specific offences and defences
Under s. 7 of the Law, agreements which refer to salaries and conditions of employment and undertakings that are responsible for the administration of services of general economic interest or that have the nature of a public monopoly are excluded from the prohibition of s. 3.
Block exemptions can be granted pursuant to section 5(1), which provides for the issuing of an Order by the Council of Ministers towards that effect, following a justified opinion by the CPC. Even before the enforcement of the 2008 legislation, under the previous regime, orders covering various industry sectors and providing for exemptions subject to the satisfaction of certain conditions had been enacted.
Moreover, the Cypriot legal order is subject to the provisions of the relevant EU Regulations in force providing for various block exemptions in particular industry sectors.
Application of the law
The Law applies to 'undertakings', defined under s. 2 thereof as including every natural or legal person that exercises economic or commercial activities irrespective of whether these activities are profitable or not. It also includes every undertaking regulated by private or public law over which the State can have a decisive impact either directly or indirectly by virtue of ownership, economic contribution or the provisions regulating it.
Collaboration between undertakings forming a uniform economic entity, such as between a parent and a subsidiary company that does not enjoy real freedom of determination over its own activities or concerning the allocation of activities between the parent and the subsidiary company, or between two or more subsidiary companies, does not fall under the concept of collaboration prohibited by virtue s. 3 of the Law.
Extraterritoriality
The Law applies to actions outside the jurisdiction of Cyprus that have as their object or effect the prevention, restriction or distortion of competition within the Republic.
Moreover, pursuant to the provisions of Regulation 1/2003 and in relation to instances where agreements, decisions by associations of undertakings or concerted practices may affect trade between Member States within the meaning of the provisions of Art. 101 TFEU, the CPC has competence and shall also apply Art. 101 TFEU to such agreements, decisions or concerted practices. Upon establishing an infringement of Art. 101 TFEU, the CPC can impose the sanctions provided under s. 24 of the Law upon the involved undertakings, which are the same sanctions it is able to impose for infringement of the Law's provisions under s. 3, discussed supra.
Investigation
The CPC, either acting on its own initiative or following a complaint, will instruct its Service to conduct an investigation on behalf of the CPC if it is of the view that there is a prima facie case. The CPC has the necessary powers to obtain the information or data that will enable the Service to carry out the investigation.
Specifically, for the purposes of its investigations, the CPC is entitled to collect all the necessary information by addressing a relevant written request to undertakings or other natural or legal persons. The request must clearly state the required information, the provisions of the Law or of Regulation 1/2003 upon which the request is based, the grounds for the request, a reasonable time limit for the provision of information which may not be shorter than 20 days and the possible sanctions in case there is no compliance with the obligation to provide information. The addressee of the request is required to provide the requested information in a timely, full and precise manner, unless the provision of the information prejudices any professional or other secret protected by law. The CPC is under a duty to ensure adequate protection for the rights of the undertakings under investigation, in particular as to secrecy and confidentiality of the information provided and to use the information purely for the purposes of the investigation.
Upon conclusion of the preliminary investigation, the Service will prepare and submit its report to the CPC and the latter, upon establishing the existence of a prima facie infringement, will forward a statement of complaint to the undertakings concerned. The undertaking is also allowed to have full access to the case file and to the documents upon which the CPC will base its case. The formal hearing of the matter proceeds by way of written submissions, while the involved undertakings have a right to appear before the CPC for oral submissions upon obtaining the relevant leave of the CPC to do so.
Upon conclusion of all the procedural stages described, the CPC issues a fully reasoned decision. A decision of the CPC is subject to administrative recourse before the Supreme Court. The decision of the Supreme Court is final.
The CPC may conduct unannounced visits ('dawn raids') to the premises of undertakings in order to obtain information it needs or to follow up a written request for information. Officers of the Service of the CPC conduct such visits following written authorisation by the CPC. The term 'premises' is prescribed by the Law to include, inter alia, business premises and vehicles of undertakings. Searches at residential premises can only be carried out upon obtaining a court order.
On arrival at the premises, the investigating officers must show evidence of their identity and authorisation and hand over a notice explaining the subject matter and purpose of the unannounced visit. Undertakings subjected to such visits may consult their lawyers during the visits but omitting to do so does not invalidate the visit nor does it constitute a defence for not conforming to the visiting officers' requirements.
The investigating officers have statutory power to enter the premises and can require the undertaking to halt its business or part thereof until completion of the unannounced visit. Once they have gained access, they can require anyone present to produce any documents (and in any form, electronic or otherwise), that they consider is relevant to the subject matter of the investigation. This may include letters, diaries, travel records and other documents, which the officers conducting the visit can copy irrespective of the medium these are stored.
The investigating officers can also ask for oral explanations on the spot. A person who receives a request from the CPC to provide information must provide the information within the time limits stipulated in the request and make a full and frank disclosure, unless any rules on privilege apply. In case of an omission to provide the requested information within the specified time or intentionally or negligently providing inaccurate or misleading information, the CPC has the authority to impose a maximum fine of €85,000 on the concerned undertaking. In addition, the CPC may impose a fine of €17,000 for every day that the said undertaking omits to comply with the CPC's investigative request.
An undertaking that intentionally or negligently produces incomplete books or professional documents, refuses to comply with a request for information by the CPC, or destroys, falsifies or withholds books or records shall be liable on conviction to a term of imprisonment not exceeding one year or a fine of up to €85,000, or both.
Adjudication
A cartel matter is adjudicated by the CPC pursuant to the procedures as mentioned above. Upon the conclusion of the investigation, a hearing of the matter takes place before the CPC by way of written submissions. The involved undertakings have a right to appear before the CPC for oral submissions upon obtaining the relevant leave of the CPC to do so.
The CPC's decisions may be challenged by means of recourse before the Supreme Court, the rulings of which are final. The party challenging the CPC's decision before the Supreme Court must file such recourse within 75 days of publication of the CPC's decision or of receiving notification of same.
The burden of proof is with the party appealing the decision to the Supreme Court.
Sanctions
Any person who omits to comply with or acts contrary to an issued decision of the CPC regarding an infringement of s. 3 of the Law, including interim measures, shall commit a criminal offence punishable with imprisonment of up to one year or with a pecuniary penalty not exceeding €430,000, or both.
An undertaking that intentionally or negligently produces incomplete books or professional documents, refuses to comply with a request for information by the CPC, or destroys, falsifies or withholds books or records shall be liable on conviction to a term of imprisonment not exceeding one year or a fine of up to €85,000, or both.
Criminal sanctions provided under the Law can be directed not just against the undertaking concerned but also against all members of its board of directors and its managing director.
Upon finding an infringement of s. 3 of the Law and/or Art. 101 TFEU, the CPC has the power to impose the following sanctions:
- impose an administrative fine, according to the gravity and duration of the infringement, not exceeding ten percent of the combined annual revenue of the undertaking concerned or not exceeding ten percent of the revenue of every undertaking member of the association of undertakings, in the year within which the infringement took place or in the year which immediately preceded the infringement;
- require that the undertakings or association of undertakings bring the infringement to an end within the set time period and avoid repetition in the future. Where the infringement has been brought to an end before the decision of the CPC, the CPC may condemn the undertakings with a reconnoitring decision;
- impose terms and behaviour and /or structural remedies, according to the infringement, necessary to bring the infringement to an end;
- where the infringement continues by the participating undertakings or association of undertakings, the CPC may impose and administrate fine up to €85,000 for every day the infringement continues;
- where the Commission intents to adopt a decision requiring that the infringement is brought to an end and the undertakings concerned provide commitments to meet the concerns expressed to them by the CPC in its preliminary assessment, the CPC may by decision make those commitments binding on the undertakings. Such a decision may be adopted for a specific period and shall conclude that there is no longer action by the CPC;
- in case of refusal or by negligence of the undertakings or association of undertakings concerned to comply with the measures set by the CPC pursuant to points (b) or (e) above, the CPC may impose an administrative fine up to €85,000 for every day the infringement continues.
Private damage claims and class actions
A person suffering loss as a result of the conduct of a cartel has a right of action for damages for the losses suffered as a result of the cartel conduct. Such claims can be raised within the context of a civil action before the competent District Court in Cyprus. The Law provides that the decision of the CPC finding an infringement of s. 3 and therefore the existence of the cartel in relation to which any such claimant intends to claim damages constitutes rebuttable evidence in that regard.
A claimant pursuing damages for loss suffered as a result of a cartel the CPC has adjudicated on, may apply to the competent Court for an injunction to stop the continuance of such cartel. Class actions are not expressly provided under the Civil Procedure Rules but any such actions could be joined under leave of the Court, upon a relevant application.
Recent fines and penalties
The CPC has recently been more willing to impose deterrent fines. Section 24(a) of the Law provides that the fines the CPC is empowered to impose shall be imposed according to the gravity and duration of the infringement and shall not exceed ten percent of the combined annual revenue of the undertaking or not exceeding ten percent of the revenue of every undertaking member of the association of undertakings, in the year within which the infringement took place or in the year which immediately preceded the infringement.
In late 2009, the CPC imposed the largest fine in its history in the 'oil companies case', totalling €42,904,000. The said amount is the aggregate of the separate fines imposed on each of the four undertakings which the CPC found to have violated s. 3(1)(a) of the Law over both the engagement in a concerted practice between them having their object the fixing of fuel prices and the conclusion of agreements with their resellers (gas stations) on that basis and with the same object. This violation constituted a serious infringement of competition rules and as such carries monetary fines of the highest levels, within the context of the CPC's competence as such derives by the Law.
Thus far, there have been no instances of criminal sanctions having been pursued against either natural or legal persons.
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