Cyprus: Competition Law In Cyprus

Last Updated: 8 November 2006

The main legislation in the area of competition in Cyprus is The Protection of Competition Law 207(I) of 1989 ("the Competition Law") and the Control of Concentrations between Enterprises Law 22(I) of 1999 ("the Control of Concentrations Law"). The Competition Law was amended in 1999 and 2000 and its key provisions are summarised in the following paragraphs.

The Competition Law

The Competition Law establishes the Commission for the Protection of Competition ("CPC") and sets out its duties and powers. These include investigating infringements of the provisions on restrictive agreements and abuse of dominant position, reaching decisions and giving opinions on these matters. The CPC has extensive powers to obtain information, by making written requests, by inspecting and making copies of the books and records of an enterprise or trade association or requiring oral explanations from its staff. For this purpose the CPC is empowered to enter all premises and means of transport used by an enterprise.

Section 4 of the Competition Law prohibits any agreement having as its object or effect the elimination, restriction or distortion of competition, and in particular agreements aiming to:

  • fix prices;
  • restrict or control production;
  • geographically distribute markets or other resources of supply;
  • unfairly discriminate between customers; or
  • impose additional obligations on contracting parties which by their nature or according to commercial usage have no connection with the subject matter of the contract.

An agreement contravening section 4 may nevertheless be allowed either by Ministerial Order or by decision of the Committee for the Protection of Competition if it is in the overall public interest (for example by promoting technical or financial development), if the restrictions it imposes are no more than are absolutely necessary for the achievement of these purposes and if it does not allow for an elimination of competition in a substantial part of the market.

Section 6 of the Competition Law prohibits abuse of a dominant market position, defined as any act of one or more enterprises which possess a dominant position in the aggregate or part of the domestic market of a product, having as its object or effect or a likely effect:

  • the direct or indirect fixing of unfair purchase or selling prices or other unfair terms of business;
  • the restriction of production, supply or technological development, to the detriment of consumers;
  • unfair discrimination between customers or suppliers;
  • the imposition on contracting parties of additional obligations which by their nature or according to commercial usage have no connection with the subject matter of the contract.

Section 7 of the Law exempts:

  • agreements or acts of state;
  • agreements or practices of enterprises whose activities are specially regulated by law to the extent that they are specifically provided for in the relevant legislation;
  • agreements relating to wages and terms of employment and working conditions;
  • enterprise agreements exclusively aimed at export promotion.

Section 7 also exempts mergers between enterprises, subject to their being notified to the CPC within 3 months of coming into effect, since these are subject to the Control of Concentrations Law.

Block exemptions

Under the powers conferred by the Competition Law the Council of Ministers has made block exemptions in relation to vertical agreements as well as liner shipping companies and consortia, liner shipping conferences, insurance, road transport, air transport, agricultural products and the motor vehicle sector. These block exemptions are published in the Official Gazette of the Republic.

Sanctions

Sections 32 to 34 of the Competition Law define a number of offences under the law:

  • Under section 32, it is an offence for any person to continue to apply an agreement which is prohibited within the meaning of section 4 or to abuse a dominant position within the meaning of section 6, in contravention of a decision of the Commission which orders the termination of the agreement or the abuse.
  • Section 33 makes it an offence to knowingly provide false, inaccurate or deficient information or withhold information for the purpose of misleading the Commission.
  • Under section 34, any person who, intentionally and for the purpose of gaining an unlawful benefit, contravenes the duty to secrecy under section 26 (this section provides that the Chairman and members of the Commission, as well as other public officers, are prohibited from divulging information which is confidential in nature and which they obtained by reason of their office), commits an offence.

All these offences are punishable on conviction with imprisonment of up to one year, a fine or both.

Cartel Immunity and Penalty Reduction Programme

The CPC is particularly concerned about secret cartels between two or more ostensible competitors aimed at fixing prices, production or sales quotas, sharing markets including bid-rigging or restricting imports or exports. If a participant in a secret cartel comes forward and volunteers information to the CPC which leads to the finding of an infringement and to the imposition of fines on the other undertakings in the cartel, the CPC will consider granting the informant immunity from or reduction of any fine that would otherwise have been imposed on it. The incentive varies according to the undertaking’s role in breaking the cartel: an undertaking that proactively provides information leading to the opening of an investigation or to the finding of an infringement may receive immunity from any fine, whereas cooperation with an investigation that is already in progress may merit a reduction in the fine.

In order to be granted immunity from a fine the applicant must not have coerced another undertaking to participate in the illegal activity and must not have acted as the instigator or have played the lead role in the illegal activity. In addition the applicant must:

  • come forward before the CPC has gathered sufficient evidence to reach a preliminary prima facie finding that there has been an infringement of section 4 of the Competition Law;
  • take effective steps, approved by the CPC, to terminate its participation in the illegal activity;
  • do nothing to alert its former associates that it has applied for immunity under the programme; and
  • co-operate fully and promptly throughout the course of the CPC’s investigation and the hearing proceedings.

In order to benefit from the immunity programme the applicant should contact the CPC or the Competition Service and present an outline of the facts of the case. In practice the facts may initially be presented in hypothetical terms by the applicant’s advocate so as to preserve the applicant’s anonymity. Joint applications from two or more co-conspirators will not be entertained.

Undertakings that do not meet the conditions for immunity may be eligible to benefit from a reduction of any fine that would otherwise have been imposed. In order to qualify for a reduction, an undertaking must provide the CPC with information of significant additional value in relation to the evidence already in the possession of the CPC. It must also terminate its involvement in the infringement being investigated, in accordance with the directions of the CPC. The concept of additional value refers to the extent to which the evidence provided materially enhances, whether by its nature or its level of detail or both, the CPC’s ability to prove the facts in question.

The CPC will finally decide whether the undertaking’s evidence materially contributed to a finding of an infringement and the level of reduction the undertaking will benefit from, relative to the fine which would otherwise have been imposed. For the first undertaking satisfying the necessary requirements the reduction will be between 50% and 70%, for the second it will be between 30% and 50% and for the third it will be no more than 30%.

An applicant wishing to benefit from a reduction of a fine should contact the CPC or the Competition Service and submit the relevant evidence. The CPC will consider submissions of evidence by an applicant for a reduction of a fine only after it has made a decision on any existing application for a conditional immunity from fines in relation to the same suspected infringement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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