No escape from the fair deal
From catching scheming hoteliers, probing petrol stations to opening up the notary market, President of the Competition Council Bogdan Chiritoiu talks cartel-busting to Ana Maria Nitoi
Last June sleepy spa resort for sick pensioners Baile Olanesti in Valcea county was rocked by the arrival of Competition Council’s inspectors, as they swooped down in a raid on seven hoteliers.
The businesses were suspected of having made some understandings between one another to bid separately for public tenders subsidising hotel rooms for pensioners.
One company, Olanesti Riviera, received a 23,000 Euro penalty for refusing to allow inspectors to check its documents and emails. Meanwhile another, Sind Romania, was penalised with 13,000 Euro for attempting to destroy documents during the inspection.
“Usually multinationals to do not resist our searches, while smaller companies, who do not understand what the Competition Council does, make attempts [at a cover-up] like in Baile Olanesti,” says Bogdan Chiritoiu, the president of the Competition Council.
From large corporates to two-star hoteliers, the Competition Council inspectors have great liberty when investigating a case of a possible cartel. They can ask for any information regarding the investigation from the companies involved and, if they are refused, the penalties are high. The Council can also use a surprise inspection at the same time at different companies or at several locations of the same firm – a dawn raid. “Generally, we do a maximum of one inspection per case and it is then when we put our hands on the most significant information,” says Chiritoiu.
Now the Council is working on 45 major investigations into a possible breach of competition law. From these, 14 have been opened in the last five months since Chiritoiu became president.
Speeding up the process of probes is his priority. “When I came here I found that some investigations had been open since 2004, which is unacceptable and I have to reorganise measures to get things moving faster,” says Chiritoiu.
The average in the EU for finalising an investigation is between 16 and 18 months, while in Romania this is almost two and a half years. For cases older than two years, Chiritoiu has changed or replaced the investigation heads to bring a new perspective.
One large-scale investigation, started more than four years ago, is examining whether there were understandings between companies regarding the prices of petrol products. Last September the Council decided to search the offices of the six largest petrol retailers in Romania - Petrom, Rompetrol, Lukoil, Mol, OMV and Agip. This investigation is still ongoing.
Recently one decision ruled in favour of Greek mobile operator Cosmote’s purchase of Saudi Arabian rival Zapp in Romania. “In principle we agree with the idea of the consolidation of a third actor [Cosmote] in a sector where there are already two very strong players [Orange and Vodafone],” says Chiritoiu.
But an obstacle to the council is that most penalties are contested in court, with a trial lasting up to three years. The council is trying to promote a modification of the competition law by the beginning of 2010. “We want to introduce a highly used practice in the EU - clemency - meaning that if a company recognises its fault during an investigation, it is forgiven, while the second firm that comes to us and admits its guilt benefits from a reduction in the penalty,” says the president. This should encourage evidence gathering. If a penalty is up to ten per cent of the turnover of a company, the Council could cut by 50 per cent the penalty. This change depends on whether MPs will pass the new legislation.
The role and number of notaries in the real estate sector are also under analysis, where the Council has recommended changing legislation to encourage competition. Now there is a limited number of notaries allowed to operate on the market. In addition, they are not allowed to promote their services. The Council wants to enlarge their number and facilitate competition by allowing them to advertise. The hope is that this will bring down their fees. “We estimate that about 300 million Euro every year could be saved to the benefit of consumers if our recommendations are put in place,” says Chiritoiu.
The president’s approach is more about prevention than punishment. “My goal is to encourage competition in Romania by finding faults in the legislation and make recommendations to modify this,” he says, “rather than enforcing the competition law by imposing sanctions, without solving the core problems.”