Competition Law

Introduction

Cyprus' Law for the Protection of Competition has been in force since 1989 as a result of the Association Agreement between Cyprus and the European Union and has been regularly amended in order to effectively implement and enforce the acquis communautaire of the European Union and prepare Cyprus for accession.

The Commission for the Protection of Competition which has been established by the Law, has recently assumed a very powerful role in protecting the rights of consumers. This has been the result of an amendment of the Law in 2000 whereby public undertakings and undertakings for which the State has granted special or exclusive rights are no longer excluded from the application of competition rules. The effect of this amendment has been to grant the Commission extensive powers in regulating such undertakings and in a number of occasions it has imposed heavy fines on such undertakings for failing to change their ways and comply with their competition obligations.

Applicable Law

Protection of Competition Law of 1989

The Law provides protection against agreements and collusions of enterprises which have the aim of restricting competition in the market. Articles 4 and 6 of the Law are similar to Article 81 and 82 of the E.C. Treaty and provide for the restriction of collusion between undertakings which may affect trade and which have the object or effect of restricting competition, as well as the abuse of a dominant market position.

The Law also provides for the criteria for holding such an agreement compatible with the law such as the contribution to the interests of the consumer and technical or financial progress, etc. Article 7 of the Law provides that "agreements or acts of the state" and "agreements or practices of enterprises where activities are specially regulated by the law" are prima facie subject to the Cyprus competition rules unless they show that the application of the competition rules obstructs the fulfilment of their special mission assigned to them by the Law.

The Law also provides for the granting of negative clearance or negative clearance by category by the Committee as well as for the granting of individual exemptions. Furthermore, the Law contains provisions as to the notification of old and new agreements, for the powers of the Committee in case of infringement of the Law, for temporary measures, for the powers of the Committee to carry out investigations as well as for rights to damages of persons who have suffered loss due to an infringement of the Law.

Control of Concentration of Enterprises Law of 1999 to 2000

According to this Law, actions of merging which are of great importance have to be notified to the Competition Commission. The Law also provides what types of concentrations have to be notified and the time that a concentration is deemed to have been concluded, for the purpose of it being notified.

The Law also provides for the affected markets of goods and services offered in the Republic, the purchasing of the relevant products or services and the geographic market of reference. Furthermore, the Law provides for the estimation of the turnover of works and contains a list of the information that have to be included in the notification of the concentration, including, the name & address of enterprise, the nature of commercial activity of the enterprise, the details of representatives, copies of annual reports and financial records, details of the concentration: nature, extent, how it was created, if all the enterprises take part or only parts, if the was a public offer, if there is any financial support from other sources, the proposed structure of ownership, the turnover in the Republic and worldwide and the profits made

. Most significant recent developments in Competition Law and the manner in which they affect the market

Towards a More Decentralized Application of Community Law: Council Regulation 1/2003

In light of the new Council Regulation 1/2003 adopted by the Council on the implementation of the rules laid down in Articles 81 and 82 EC which creates a network of cooperation between national competition authorities, Cyprus’s national legislation is currently under legal reform in order to accommodate the new provisions, thus enabling the Commission for the Protection of Competition to effectively apply the EC competition rules.

As from May 1, 2004, the Regulation has direct effect in Cyprus’s legal system and the Cyprus Commission for the Protection of Competition as well as the national courts have a greater involvement in the enforcement of Articles 81 and 82 of the Treaty. As a result, the main elements of the Regulation, such as the abolition of the notification and authorization system, the strengthened application of Articles 81 and 82 at national level, the creation of network of competition authorities (ECN), and the cooperation with national courts, will enhance the Cyprus Commission’s involvement in enforcement.

With the new reform, national courts and the Cyprus Commission for the Protection of Competition also have the obligation to apply Articles 81 and 82 where national competition law is applied to agreements and abusive practices which may affect trade between Member States. The competence of the Cyprus Commission for the Protection of Competition to apply Articles 81 and 82 will be withdrawn when the European Commission opens proceedings in the same case, except where national competition law imposes stricter rules.

Secondly, the national courts and the Cyprus Commission for the Protection of Competition must not prohibit decisions of associations of undertakings and concerted practices which may affect trade between Member States under Cypriot competition law if these decisions and concerted practices are not prohibited under Community Law. Nevertheless, under national law, national courts and the Cyprus Commission for the Protection of Competition are free to apply stricter national competition laws in Cyprus on anti-competitive conduct undertaken by such undertakings.

Finally, agreements and practices prohibited by Articles 81 and 82 cannot be approved under Cypriot national law.

Amendment of the Cyprus Competition Protection Law:

Following the amendment of Cyprus' Competition Law in June 2000, it has become possible to report to the Cyprus Competition Committee "agreements or acts of the state" and "agreements or practices of enterprises where activities are specially regulated by the law". As a result, public undertakings are prima facie subject to the Cyprus competition rules, which are in line with the competition Articles of the Treaty of the European Community, especially Article 86 (ex-90).

Perhaps one of the most important cases is that of the milk and dairy product producers against the milk marketing board, an organisation regulating the production and trading of milk products in Cyprus and has been fixing their prices, quantities and terms of sale. In its decision, the Competition Committee decided that the milk marketing board was abusing its monopolistic position in the market and imposed a fine of 50.000 pounds CY, as well as an obligation to avoid repeating the abuse in the future.

As a result, the Committee for the Protection of Competition now has the jurisdiction to regulate the practices of semi-governmental organizations such as the Electricity Authority and the Telecommunications Authority and of many other boards which have been established by law and which for many years had a legal monopoly on the Cyprus market.

Another important decision is that of the Cyprus Competition Committee against CYTA, the Telecommunications Authority. The Committee has carried out an autonomous investigation against CYTA and has decided that CYTA has abused its dominant position on the telecommunications market by charging abusive prices in the provision of telecommunications services, especially in the provision of international communications and in the provision of mobile telephony which were the most profitable for CYTA. The effect of this decision is that according to article 35 of the Cyprus Competition Law, a legal right is created in favour of every person to claim damages for the damage suffered as a result of the CYTA's transgression.

In August 2004, the Committee imposed a fine of 5 million Cyprus pounds to 3 commercial banks (Bank of Cyprus, Popular bank of Cyprus and Hellenic Bank) which, as a result of their collusion or concerted practice, had infringed s.4 of the Protection of Competition Law in the field of retail and corporate banking services, financial services and other relevant services, by agreeing between them to fix, inter alia, interest rates for retail and corporate deposits and loans, as well as credit card and hire-purchase charges despite the liberalization of the market. The case was raised before the District Court of Civil Jurisdiction, which was dealing with an application by the Bank of Cyprus against a company for the issuing of a summary judgement for the payment of an outstanding amount under a hire-purchase agreement. The Court rejected the application for summary judgement holding that the defendant had the right to submit its defence.

Future Developments

Our Office perceives that one of the biggest future challenges within the competition area in terms of economic impact is that of the introduction of competition in the telecommunications market for the provision of services and networks, following the liberalisation of the said market.

Perhaps on an equal level rests the jurisdiction of the Competition Committee, after the Milk Marketing Board decision, to regulate all undertakings, private or public. It would be interesting to see whether the above will be upheld by the Supreme Court.