We start the autumn with a visit to Romania where our colleagues tell us about the heated debates around 5G and the restriction of authorized operators.

Why Romania’s newly enacted it and telecommunication infrastructure law might distort competition among suppliers of 5G network equipment

National security issues, which also include cyber security, are an important paradigm for governments around the world. Over the last years, discussions on political and economic security have been particularly intense within various EU forums in the context of threats to the security of telecommunications equipment, particularly the 5G network.

For the time being, the important point of the main challenges in this discussion is the issue of using network equipment from certain non-EU non-NATO manufacturers. As such, Individual Member States have taken up this subject in different ways.

As regards Romania, the Parliament recently adopted a law (“the Law”), which entered into force on 14 June 2021 and which has the potential to raise certain competition concerns. The Law essentially sets out new measures for authorizing 5G equipment and software suppliers in order to prevent, combat and eliminate risks, threats and vulnerabilities in relation to Romania’s national security and defence.

According to the Law, suppliers will be allowed to provide 5G equipment/software based on a prior authorization from the Romanian state. The criteria provided by the Law has generated numerous discussions and controversy in Romania, as they seem to be established and influenced not by technical concerns, but rather by purely political considerations. The supplier must declare that it meets all criteria below:

• It is not under the control of a foreign government, absent of an independent legal system;
• Its ownership structure is transparent;
• It does not have a history of unethical behavior;
• It is subject to a legal system that imposes transparent corporate practices.

The assessment is carried out by the Supreme National Defence Council (“SNDC”), which issues a positive or negative opinion, considering the criteria and information above in view of the potential risks, threats and vulnerabilities.

However, implementation of the Law could inadvertently facilitate the distortion of competition by excluding certain 5G technology suppliers from the market and may thus result in a breach of the EU Treaties’ provisions.

The elimination of suppliers exerting a significant competitive pressure on the market may thus result in an increased risk of collusion and give rise to the exacerbation of the current practices of incumbent radio access network and other mobile infrastructure equipment vendors to the detriment of new players.

In the process of enacting the Law, various institutions issued several opinions on the draft Law, including the Romanian Competition Council, which indicated that the measures or the imposed conditions must not limit the autonomy of economic operators, i.e. these should be objective, necessary to achieve their purpose, but also proportionate and non-discriminatory.

The Law, in its current form, may lead to a reduction of choice for industrial vendors and will likely cause significant price increase due to a limitation of competition between suppliers. This effect is likely to be ultimately transferred upon the consumers in the long run and could also impact business development and innovation in Romania.

In conclusion, implementation of the Law in its current form may distort competition both in Romania and in the EU market by excluding certain non-EU non-NATO 5G technology suppliers from competing for the entire range of 5G network equipment in Romania. This risk would have require a proper in-depth competitive assessment rather than regulatory intervention.

The French Competition Authority publishes new notice on determining sanctions

On July 30, 2021, the French Competition Authority published its new procedural notice on sanctions, which repeals and replaces its notice of May 16, 2011. This new notice, which pursues an objective of harmonizing sanctions handed down by national competition authorities within the European Union, takes into account the modifications resulting from order No. 2021-649 of May 26, 2021, transposing the ECN+ directive, as well as the Authority’s decision-making practice in this area over the past decade.

This new notice eliminates the concept of “damage to the economy”— which was a national peculiarity—and places duration and seriousness of the offense at the heart of determining the basic amount of the sanction.

Concerning the duration of the offense, the value of the sales will now be multiplied by the number of years the offender has participated in the practice (whereas the former notice applied a coefficient of 1 the first year of the offense, then 0.5 for subsequent years). For offenses lasting less than one year, the Authority will carry out a calculation on a pro rata basis, depending on how long the undertaking participated in the offense.

Regarding the seriousness of the facts, the assessment will be “objective and concrete”. The Authority will take into account notably the nature of the sector, market, activities, persons likely to be impacted as well as the objective characteristics of the offense. As with the European approach, and in order to hand down increasingly dissuasive sanctions, the Authority can increase a sanction by between 15 percent and 25 percent of the value of the sales in cases of abuse of a dominant position or for the most serious cases of horizontal agreements (price fixing, market sharing and production limitation).

We also note the addition of new mitigating circumstances to reduce the basic amount of the sanction. This includes the offender discontinuing anticompetitive behavior as soon as the Authority intervenes, cooperating effectively with the Authority beyond its legal obligations to do so and outside the scope of the leniency procedure, or taking remedial measures during the course of the procedure towards those parties affected by the practice.

Moreover, the Authority will have the possibility to increase the sanction when the illicitly acquired gains from the practice are greater than the total amount of the fine. For repeat offences the Authority can further take into account infringement decisions already handed down by other competition authorities to increase the amount of the sanction.

Finally, the notice expressly provides for the new maximum fine applicable to business associations, i.e. 10 percent of the global turnover excluding taxes; previously the cap was €3 million.

Unfair trading practices in the agri-food chain

Order No. 2021-856 of June 30, 2021 completes the national legal framework of illicit trading practices between economic operators of an agribusiness chain. It transposes into domestic law Directive 2019/633 of April 17, 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain. This directive aims to remedy the imbalances in bargaining power between suppliers and buyers of agri-food products.

The order thus introduces into the French Commercial Code three new restrictive competitive practices, i.e. prohibitions (i) on buyers cancelling an order with insufficient notice, i.e. less than 30 days (Article L.443-5), (ii) on buyers of agricultural or food products unlawfully obtaining, using or disclosing trade secrets (Article L.443-6), and (iii) on any person that carries out production, processing, distribution or service activities refusing to confirm in writing the terms of an agreement on agricultural and food products when requested to do so (Article L.443-7). 

Breaches of these provisions will be punished by an administrative fine of up to €75,000 for an individual and €375,000 for a legal entity.

The order enters into force on November 1, 2021 and will apply to agreements that have been concluded after its publication. Existing agreements will have 12 months to comply with it.