By three consecutive decisions of 16 March 2023 the Commission on Protection of Competition (the Commission or CPC) initiated proceedings to investigate potential cartel agreements of undertakings in the food sector. All levels of trade in basic food products are subject to investigation. The reason for initiating the proceedings is the unusually rapid and substantial increase in the prices of basic and fast-moving food products such as eggs, milk and dairy products.

Two of the proceedings are initiated against associations of producers and distributors of poultry, eggs, milk and their derivatives, and the third proceedings is initiated against some of the hypermarket chains, such as Lidl Bulgaria EOOD, Billa Bulgaria EOOD, Metro Cash and Carry Bulgaria EOOD, etc. A party to the proceeding is also the Modern Trade Association.

The investigation of the Commission will focus on the wholesale and retail price formation of eggs, milk and their derivatives, applied margins and other commercial practices in the context of possible prohibited exchange of commercially sensitive information between the members of the relevant industry associations, which could cause parallel pricing or unjustified increase of wholesale and retail prices for those products.

In relation to the proceedings above, Administrative Court Sofia – District has issued a total of 5 permits for on-the-spot inspections pursuant to Art. 50 of the Protection of Competition Act (PCA) (the so-called dawn raids) – regarding Lidl Bulgaria EOOD, Bulgarian Association of Dairy Processors, National Association of Dairy Processors, Union of Poultry Breeders in Bulgaria, and Association of Industrial Poultry. On-the-spot inspections are means for the CPC to collect evidence and although they are carried out by an administrative body, the powers of its officials are extremely broad, and include entering and search of business and personal premises, vehicles and any other site connected with the investigated undertaking and the matter of the proceedings.

The CPC investigation may affect all undertakings in the wholesale and retail food market to various degrees depending on their role on the market. Such investigations are usually lengthy due to the lack of a statutory time limit to complete the proceedings and carry out a market analysis with the entire structure of the relevant market.

As part of the proceedings the undertakings under investigation may be subject to:

• Requests for information on commercial prices and conditions of products and goods manufactured and distributed by them;
• Requests for contracts, correspondence, minutes of meetings and other relevant documents;
• Performing on-the-spot inspection pursuant to Art. 50 of the PCA (dawn raid). So far, in relation to all proceedings such dawn raid has been conducted with respect to Lidl Bulgaria EOOD;
• Written explanations may be requested from company employees;
• Failure to provide information or providing inaccurate, incomplete or misleading information may be sanctioned by up to 1% of the total turnover for the previous financial year, as well as a periodic penalty of 5% of the average daily total turnover for the previous financial year for each day until the requested information is provided.

In the event that the CPC finds an infringement, the undertakings under investigation will face statement of objections. This is an interim stage in the proceedings to hear the defense of the undertakings concerned.

• Within the framework of the defense, they may propose commitments  to remedy the infringements and fully refute the Commission's allegations;
• Under certain conditions, after receiving the statement of objections, the undertakings may also benefit from the program for relief or reduction of sanctions (the so-called leniency procedure), which involves full cooperation of the Commission in establishing the infringement. The leniency program applies only to the first undertakings to admit and cooperate, and not to all.
• If the Commission finds that an infringement has been committed, the maximum penalty threshold may be up to 10% of the turnover of the previous financial year. The sanction may also be imposed on any of the members of the associations under investigation.

Any other undertakings in the relevant market (competitors of the investigated undertakings or their suppliers or customers) may be subject to enquiries by the Commission seeking clarification of the circumstances under investigation from persons not subject to the proceedings, such as:

• The CPC may request information on commercial terms, prices, relevant contracts, and documents regarding the undertaking's activities as a market participant;
• The same information and documents may be requested specifically on the undertaking's relationship with the investigated market participants or possibly its membership in one of the associations under investigation;
• Written explanations may be requested from representatives and employees;
• Despite the fact that these undertakings are not investigated, there is an obligation for them to provide complete and accurate information to the CPC;
• Failure to provide information or providing inaccurate, incomplete or misleading information may be sanctioned by up to 1% of the total turnover for the previous financial year, and in certain cases, a periodic penalty of 5% of the average daily total turnover for the preceding financial year for each day until the requested information is provided.

DPC Law Firm has extensive expertise in competition and commercial law and our attorneys can provide further assistance and advice on the subject.

‍