Competition Law

Introduction

The enforcement of competition rules in Cyprus was ensured for the first time in 1983 with the adoption of the Competition Law, Law No. 63/1983. This Law was replaced in 1989 by the Law for the Protection of Competition of 1989, Law No. 207/1989 (hereinafter referred to as the "Law of 1989''). More recently, in April of 2008, this Law was replaced by the Law for the Protection of Competition of 2008, Law No. 13(I) of 2008 (hereinafter referred to as the Law of 2008).

Applicable Law

• Protection of Competition Law of 2008

The principal legislation on competition in Cyprus is the Law to Provide for the Control and Suppression of Restrictive Trade Agreements and Practices, the Protection of Competition, the Establishment of a Commission for the Protection of Competition and Enforcement of Regulation 1/2003 (the "Law''), which was enacted by the House of Representatives on April 18, 2008, and which entered into force on June 8, 1990, thereby replacing the previous Competition Law of 1989.

Historically speaking, the enactment of competition legislation for Cyprus was necessary for the creation and promotion of conditions of healthy competition with a view to protecting consumers more effectively, and developing commerce and the economy in general. The obligation to enact such legislation emanated from the Protocol of the Application of the Second Phase of Cyprus in the EU Association Agreement. The previous Competition Law of 1989 was based on EC competition rules and Sections 4 and 6 of the said Competition Law were identical to the provisions of Articles 81 and 82, respectively, of the EC Treaty.

The Competition Law of 1989 aimed at defining the framework within which free competition, as the cornerstone of the economic system, would function.

Section 4 of the Law prohibited agreements between undertakings which have as their object or effect the restriction of competition within the Republic of Cyprus. It applied to both vertical and horizontal agreements. Section 6 of the Law prohibited the abusive exploitation of a dominant position by one or more undertakings.

The Law was amended in 1999 by Amending Law 111(I)/1999, which expanded the prohibition under Section 6 of the Law in relation to abuses of dominant position and introduces the essential facilities doctrine into the legislation. Another important amendment was effected towards the end of 2000 with the implementation of Amending Law 155(I) of 2000 to the Law of 1989, which enabled the legislation and the Competition Commission to function in accordance with EU harmonization guidelines and standards. Pursuant to this amendment, the Competition Commission was established as an independent body and the Chairman was appointed as a full-time head of its Service.

During the same period, the Law of 1989 was also amended by Law 87(I) of 2000 to include a provision mirroring Article 86(2) of the EC Treaty, thus eliminating the immunity given to public undertakings under Sections 4 and 6 of the Law. Several other reforms increased the Competition Commission's investigative powers and imposed stiffer fines and penalties.

On the 18th of April 2008, the new legislation on the Protection of Competition (Law no. 13(I)/2008, came into force. With the enactment of the new legislation the competencies and powers of the Commission are enhanced and extended, since according to Regulation 1/2003, which is provided within the new law, the Commission is the designated competition authority responsible for the application of articles 81 and 82 of the Treaty. The main priority was to structure the Commission properly by reconstructing it almost entirely, by increasing the number of official members of the Commission and by choosing the right people.

All EC block exemptions are also part of Cyprus's national legislation. This has been achieved by the issuing of orders on the basis of Section 5 of the Law of 1989. Moreover, the Protection of Competition (Applications, Notifications, Complaints, and Publications of Decisions and Applications) Order of 1990 was issued by the Ministry of Industry and Commerce. These Orders remain in force despite the adoption of the new Law of 2008 by virtue of section 53 of the Law entitled Provisional Provisions.

• The Competition Authority

The Competition Commission was initially established in 1990 following the enactment of the Law of 1989. The Law of 2008 re-established the Competition Commission.

It has the exclusive competence for the harmonious operation of the Cyprus market, within the rules of fair competition far from any anticompetitive distortions as means to boost economic growth and social welfare.

The Law of 2008 entrusts the Competition Commission with the obligation for the fulfillment of the objective of maintenance of effective competition within the Cypriot market in order to create the conditions for offering consumers with goods and services of higher quality at competitive prices. In this manner, productivity and investments of enterprises are to be increased as well as the creation of a climate which favours research, innovation and technological progress.

The Law of 2008 specifically appoints the Competition Commission as the competition authority of the Republic as the authority that is responsible for the application of Regulation 1/2003, and of Articles 81 and 82 of the EC Treaty

• Merger Control – The Control of Concentration of Enterprises Law of 1999 to 2000

Concerning merger control, the principal legislation in force is the Control of Concentrations Between Undertakings Law of 1999, Law 22(I)/99 (the "Concentrations Law''), which entered into force on March 19, 1999, and was amended in 1999 by Law 107(1)/99, and, again, in 2000 by Law 54(1)/2000. The Concentrations Law is based on Regulation 4064/89. The object of the Concentrations Law is to introduce a system of state control on all significant concentrations of undertakings, with the object of preventing those concentrations which tend to create or strengthen a dominant position in the market that would impede to a great extent effective competition in the affected markets within the Republic.

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.

• Other Statutes Containing Competition Law Provisions

Cross-border mergers of limited liability companies are regulated by the Companies Law, Cap. 113 which was amended in 2008 in order to implement the provisions of Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies. These 2008 provisions apply to cross-border mergers of limited liability companies where at least one of the merging limited liability companies is a Cypriot company or where the limited liability company resulting from the cross-border merger is a Cypriot company. They further apply to cross-border mergers allowing for the cash payment referred to in the interpretation of the term “merger” below exceeding 10 % of the nominal value, or, in the absence of a nominal value, of the accounting par value of the securities or shares representing the capital of the company resulting from the cross-border merger; provided that this possibility is permitted by the legislation of the member state regulating at least one of the merging limited liability companies.

Section 201I of Cap. 113 defines a “cross-border merger of limited liability companies” as the merger of limited liability companies incorporated in accordance with the legislation of a member state and having their registered office, central administration or main place of establishment within the Community, on condition that at least two of these companies are regulated by the laws of different member states. It further defines a “merger” as an operation whereby:

(a) one or more limited liability companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to another existing company - the acquiring company - in exchange for the issue to their members of securities or shares representing the capital of that acquiring company and, if applicable, a cash payment not exceeding 10% of the nominal value, or, in the absence of a nominal value, of the accounting par value of those securities or shares; or

(b) two or more limited liability companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to another limited liability company that they form - the new company - in exchange for the issue to their members of securities or shares representing the capital of that new company and, if applicable, a cash payment not exceeding 10 % of the nominal value, or in the absence of a nominal value, of the accounting par value of those securities or shares; or

(c) a limited liability company, on being dissolved without going into liquidation, transfers all its assets and liabilities to the limited liability company holding all the securities or shares representing its capital.

Competition law provisions can also be found in the State Aid Control Laws of 2001 to 2007. The State Aid Control Laws establish the Office of the Commissioner for State Aid Control, which was set up in June 2001 as part of the process of harmonizing Cypriot legislation with the acquis communautaire in the field of state aid. The primary objective of the Commissioner in the pre-accession period was to fulfill all the prerequisites set by the European Commission in order to make possible the provisional closure of the Chapter on Competition, something achieved in June 2002.

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

The Competition Law and the Concentrations Law contain provisions that are similar and, in many cases, identical to the competition rules contained in Articles 81 and 82, as well as to other EU legislation such as the Merger Regulation and the relevant block exemption regulations. Where the Law of 2008 is concerned, it specifically mentions in its Preamble that it was adopted for the purpose of regulating and protecting free competition in the republic of Cyprus and for applying Regulation 1/2003/EC as amended by Regulation 1419/2006.

In practice, during the hearing procedure before the Competition Commission, legal counsel often refers explicitly to decisions made by the European Commission and the European Court of Justice. The Competition Commission is ready to look to principles developed in the case law of the European Court of Justice and by the European Commission and to apply these to issues arising under Cypriot cases. It draws valuable assistance from such principles, especially after Cyprus's accession to the European Union on May 1, 2004. It should, however, be noted that despite Cyprus's accession to the European Union and despite the fact that such rules should have become automatically legally binding, the Competition Commission, has, in its controversial decision issued on June 2, 2006, concerning the agreement between LTV and Multichoice (Cyprus) Ltd, refused to apply Regulation 1/2003 and Article 81 EC, claiming that it had not been formally designated by the Republic of Cyprus as a competition authority under Article 35 of Regulation 1/2003.

This decision was judicially reviewed by the Supreme Court of the Republic of Cyprus following an application filed by Netmed N.V and Multichoice (Cyprus) Public Company Ltd against the Competition Commission. The application for judicial review raised matters of European Law and the applicants invoked a pre-trial request for the European Court of Justice (ECJ) to issue a ruling on the basis of Article 234 of the EC Treaty.

The applicants argued that the contested decision infringed the general legal principles and legal order of the European Union and more specifically Article 81 of the Treaty and Regulation 1/2003 which was directly applicable. The applicants further argued that the Competition Commission refused to apply the above with the excuse that it was not officially appointed by the Republic of Cyprus as Competition Committee pursuant to Article 35 of Regulation 1/2003. On 18 January 2008, the Supreme Court issued a decision annulling the decision of the Competition Commission. The applicants’ request for preliminary ruling by the ECJ under Article 234 was rejected by the Supreme Court’s decision dated 7 September 2007.

In August 2006 the Council of Ministers formally designated the Competition Commission as the competent competition authority under Article 35 of Council Regulation 1/2003.

• Future Developments

Our Practice 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.

The Competition Law work undertaken by our Practice includes: