In a very recent ruling, the Commission for Protection of Competition (CPC) shed light on prohibited agreements that threaten free market competition and the terms “undertaking” and “economic activity”, which inevitably tie into this issue.
In particular, the CPC clarified one of the necessary conditions for the so-called prohibited agreements under the Protection of Competition Act (PCA). In order to properly understand this condition though, we must first know what we mean by “undertaking”.
Here, the CPC refers to the legal definition in the PCA in accordance with the European Commission (EC) and Court of Justice of the EU (CJEU) case law. Emphasis is put on the functional aspect of an undertaking, defining it as an entity, engaged in an economic activity. It’s inconsequential whether we’re talking about a natural person, a legal entity, or an unincorporated entity. Its legal and organisational forms are also not defining characteristics.
The relatively short definition of the term “undertaking” offers a broad scope of application regarding prohibited agreements, but it also raises another question: what is “economic activity”?
The meaning here is twofold. On one side, this is an activity, with which goods and services are being offered on the market. Or in other words, it’s such an activity, the result of which is intended to be offered for exchange on the free market. Furthermore, this activity must be capable of realising profits for a private interest. A key point here is the fact that the actual realisation of the profits is not a necessary condition. Simply the potential of the economic activity to realise profits is sufficient.
Necessary conditions for the application of the rules regarding prohibited agreements
Having outlined the meaning of the term “undertaking”, we can now also look at one of the necessary conditions for the application of the rules regarding prohibited agreements.
For there to be a prohibited agreement, both sides of this agreement must be independent undertakings – independent from each other, but also from a third-party undertaking, that is common for both of them. This is the necessary condition set by CPC, EC, and CJEU case law concerning national and European legislation in regard to market competition. The presence of a common will or policy, set by the parent company, excludes the application of the prohibition. In such cases, the parent company will be held liable for the actions of the subsidiary company.
The news above is for information purposes only. It is not a (binding) legal advice. For a thorough understanding of the subjects covered and prior acting on any issue discussed we kindly recommend Readers consult Ilieva, Voutcheva & Co. Law Firm attorneys at law.