On Protection of Economic Competition in the Republic of Armenia
Competition among the subjects of the market was always the basis of market relations. It provides the market with the stable development and equality before the law. Due to this, the Republic of Armenia adopted the Law “On protection of economic competition”. The law regulates activities of entrepreneurial subjects and state bodies directed to limitation, prevention, and prohibition of competition, as well as unfair competition. Above listed actions may be carried out through signing anti-competitive agreements in the Republic of Armenia. These agreements are to be considered as transactions, which directly or indirectly cause limitation, prevention, and prohibition of competition.
We can distinguish the following types of anti-competitive agreements in the Republic of Armenia:
- Horizontal – transactions made between the subjects acting on the same market;
- Vertical -transactions made between the subjects having a particular connection with each other (conducting realization of substitute goods) and acting on different markets;
- Mixed – transactions between the subjects acting in the different markets.
Those agreements divide and allocate markets, or sources of distribution by the volume of sale, or purchase of goods, a variety of goods, groups of buyers and territorial principle. The aim of such agreements is restricting access to the market, or ousting out other entities from the market, artificial increase, decrease, or maintenance of prices, restriction, or control over the technologies directed to the development of production and similar limitations. The conclusion of these agreements is prohibited in the Republic of Armenia.
For ensuring the competition the law establishes such concepts as monopoly position and dominant position. The economic entity shall be deemed as having a monopoly position on the commodity market if it has no competitors as suppliers or consumers. The entities are deemed as having a dominant position on the commodity market if they have commodity power and can have an impact on conditions of turnover of goods on the commodity market, or oust out other entities from commodity market, or prevent from market access.
Entities have a dominant position:
- when the volume of sale and purchase of the goods of an entity is not less than 1/3 of the whole share of the market;
- when the volume of sale and purchase of the goods of two entities is not less than 1/2 of the whole market;
- when the volume of sale and purchase of the goods of three entities is not less than 2/3 of the whole share of the market.
Business entities can be recognized as having a dominant, or monopolistic position by the decision of Commission.
Abuse of monopoly and dominant position is prohibited.
Abuse shall mean:
- direct or indirect imposition of unjustified purchase, or selling prices, or other unfair trading conditions contradicting the legislation of the Republic of Armenia, or existing commercial usage which lead to the restriction of the competition;
- restriction of the trade and production development,
- creation of an artificial shortage by means of unjustified reduction of the production, or by means of keeping, spoiling, or destructing the goods to the prejudice of the consumers;
- application of discriminatory terms to individual partners, thereby creating unfair competition conditions for them;
- imposition of additional obligations on a party to a contract, which, by their nature, or from the implementation aspect are not associated with the subject matter of the contract;
- pressure to restructure the economic entities, or break the economic relations;
- an artificial increase, decrease, or maintenance of prices;
- proposal and application of conditions which lead, or may lead to unequal conditions of competition, unless similar conditions were proposed to other entities acting on this commodity market.
Some RA business entities may take a decision on the concentration of their capitals for reaching higher economic indicators. Such a procedure is known as market concentration.
As a market concentration is deemed:
- affiliation of economic entities;
- the merger of economic entities;
- acquisition by an economic entity of at least 20 % of the assets of another economic entity;
- acquisition by an economic entity of at least 20 % of the share capital, or charter capital of another legal entity;
- the merger of business entities, with the result that one entity may directly, or indirectly impact on taking decisions by other entities or their competitiveness.
Concentration must be declared and the RA legislation establishes the order of declaration of concentration. Concentration shall be declared if total value of assets or income of at least one of the parties to the concentration is more than the value of assets or income established by the Commission in the year preceding to creation of the concentration, or at least one of the parties to the concentration has a dominant position in the commodity market.
Unfair competition is an action, or conduct in business activity which contravenes the Law “On protection of competition”, commercial usage, violates the principle of good faith, such as honesty, justice, truthfulness, impartiality, in relations between competitors, or between competitors and consumers. Unfair competition is prohibited under the law of the Republic of Armenia and each interested party, including consumers, suffered losses from unfair competition has a right to go to the court with a demand to stop unfair competition.
Types of unfair competition in the Republic of Armenia
Actions, or conduct when carrying out an entrepreneurial activity which leads, or may lead to creating confusion with Respect to the Economic Entity or the Activity of the Economic Entity may be considered as unfair competition.
Any false, or groundless statement in respect of business activities that damages, or might damage the reputation of the economic entity, its business and goods offered by it shall be considered as an act of unfair competition.
Any business activity or conduct that misleads, or may mislead the public with respect to any economic entity, or its activities, or the goods offered by it shall be considered as an act of unfair competition.
Any business activity, or conduct which, irrespective of creating confusion, cause, or may cause damage to any economic entity’s reputation, or non-tangible assets, shall be considered as an act of unfair competition.
And finally, any actions, or conduct causing acquisition, use, or disclosure of undisclosed information without an agreement of its right holder, or in forms which contravene common business practice shall also be considered as an act of unfair competition.
State body on protection of economic competition
With the aim of carrying out state politics in the sphere of economic competition, it’s created a body on the protection of economic competition – The Commission.
The Commission is empowered to take decisions on:
- violation of the legislation on competition;
- researches of trademarks;
- bringing entities, or their managers, officials of the government and local government to responsibility for violation of the RA legislation on protection of competition;
- examinations, inspections, analysis and monitoring of information provided by business entities;
- turning to the court due to the violation of the RA legislation on protection of competition;
- turning to the Government of the RA with the demand to stop violating the RA legislation on competition;
- imposing penalties and applying other sanctions;
- to comment on the issues related to the legislation on the protection of economic competition;
- and other authorities established by the law.
The Commission consists of seven members: the Chairman, the deputy chairman and five members of the commission. The Commission performs its activities through sessions. The sessions are competent if at least five members of the Commission take part in it. The considerations must be heard at open-door sessions, except for some cases. The decisions must be passed at the sessions of the Commission by the majority of votes of the members participating in the session. The copy of the decision must be handed over or sent as a registered letter to the person to whom the given decision concerns within five days after it was made. The decision of the Commission is valid from the date of its promulgation and may be appealed in administrative order within a ten-day period. The decision may be appealed to the court within a month.