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When freedom of contract slips into an abuse of a stronger bargaining position. The Bulgarian Competition Authority fines A1, the Bulgarian subsidiary of Telekom Austria.

December 2018 – Last week, the Bulgarian competition authority fined A1, the Bulgarian subsidiary of Telekom Austria, a total of BGN 804,340 (approximately EUR 411,252) for abusing its bargaining power by imposing high sales targets on a local distribution partner and by unilaterally terminating the distribution partnership with it.

The case was tried and the fine imposed under the Bulgarian rules on abuse of stronger bargaining position, which were introduced in 2015 and apply to all economic sectors (unlike similar regulations in other EU Member States, which are limited to the retail/retail food sectors only).

A1 is the largest mobile telecom operator in Bulgaria. Based on regulatory submissions, it appears to have held in 2017 a share of approximately 40 percent of the mobile telephony market. This strong market position let the Bulgarian competition authority to regard A1 as an undertaking also having a significant bargaining power in its relations with distribution partners. Another attenuating circumstance in this case was that the distribution partner – an established handset retailer – has built its distribution business around A1’s products, has generated a substantive portion of its turnover over the last few years from offering A1’s services and could not market other mobile telecoms’ services via its network of outlets.

A1 has been held liable for abusing its stronger bargaining position on counts that:

  • A1 has unilaterally imposed higher sales targets while suspending marketing and promotional support for the distribution partner. The higher sales targets had allegedly not been based on economically sound and objective criteria. Moreover, in the course of the commercial negotiations, A1 had allegedly declined to even consider possible decreases of the targets.
  • A1 has unilaterally and abruptly terminated the distribution partnership with the handset retailer on grounds of the latter’s failure to meet sales targets and suspected commercial malpractices. Such termination had allegedly come without prior attempts to mitigate/resolve the fallout and without providing sufficient reasoning.

The Bulgarian competition authority’s decision in this case is yet another in a string of decisions dealing with forms of reprehensible conduct in the course of commercial negotiations. This line of case-law has already settled certain standards of dealing and communicating with business partners in the course of commercial negotiations. And as much as we (lawyers) wish not to admit that, freedom of contract already faces its regulatory limitations. Which requires that we train, prepare and help business people to navigate those limitations sensibly.

For further questions and assistance with this and competition law matters, please contact Dessislava Fessenko, Of Counsel, at

e-mail

.