How Competition Council Kills Competition in the Sugar Market
This is translation from Romanian. The original story is HERE.
A decision which the Competition Council issued recently shows in an eloquent way what is going on in the sugar market of Moldova and how the competition watchdog uses its powers to harm the industry even more.
Can a company name serve as a pretext to push competitors out of business?
On July 14, 2017, the Competition Council announced that the Edinet District branch of the Moldovan State Registration Chamber (CIS) had breached the Competition Law [adopted in July 2012] by registering a new company under the name Moldova Zahar SRL in January 2011. Moldova Zahar SRL is a subsidiary of the Polish investor Krajowa Spolka Cukrowa SA and operates a sugar plant in Cupcini, northern Moldova.
The competition authority deliberated the issue based on a complained from Sudzucker Moldova SA, the largest sugar producer in Moldova and part of the German group Sudzucker. Sudzucker Moldova SA claimed that Moldova Zahar SRL had benefited from a privilege to have that name, which helped the latter compete unfairly.
In support to its complaint Sudzucker-Moldova SA pointed out to Germany’s experience – the government refused registration to companies that asked to use “Deutch” (German) in their names. It provided a list of more than 1,600 names which the German authorities rejected as “incompatible with the generally-accepted principles.”
Sudzucker-Moldova SA also defended its stance with the following argument: CIS registered 385 companies that contain “Moldova” in their names but only seven of them use this word as a brand or product name - Moldova Telecom SRL, Moldova-Leasing SRL, Moldova-Port SRL, Moldova Combustibil SRL, Moldova-Tur SA, Internet-Moldova SRL, and Moldova Zahăr SRL.
Sudzucker-Moldova SA also submitted the findings of a study demonstrating that “respondents associated the name Moldova-Zahar with the domestically-produced sugar”: 83% of respondents believed that the sugar which Moldova-Zahar SRL sells was made in Moldova. “This is wrong – according to Sudzucker-Moldova SA – because Moldova-Zahar SRL imports a large volume of sugar.” It didn’t say how much though.
With these arguments, the Competition Council decided that it could make the Competition Law work retroactively and oblige CIS to withdraw the registration act – although CIS in turn warned that the decision was unenforceable because of its retroactive nature.
The biggest sugar importer? - Südzucker-Moldova
CIS also argued that it could not pressure any company registered as a limited liability into changing its name, unless the founder of that company decide to do so. The decision to register a company can be contested in a court of law only, it further said.
On the other hand, Moldova-Zahar SRL cautioned that cancellation of a business registration certificate means “the enforcement of discriminatory measures that could result in the withdrawal of foreign investment and missed revenues.
Moldova-Zahar SRL also said in self-defense that it has sold only domestically-made sugar under the brands “Moldova-Zahar” and “Mos Zaharia”, therefore Südzucker Moldova SA misled consumers and the Competition Council by claiming the contrary. According to Moldova-Zahar SRL, its rival used unverified information from a news website. Südzucker Moldova SA itself is the largest importer of sugar, it added.
Moldova-Zahar SRL asked the Competition Council to revise its decision.
Competition Council seeks shutdown for Moldova-Zahar SRL
Wojciech Kolignan, general director of Moldova-Zahar SRL, says that the conclusion issued by the Competition Council was biased and unfounded. He accused the authority of “acting in the interests of a competitor, Südzucker Moldova SA, and thus violated Article 12 of the Competition Law by offering monopoly to a company that itself uses the word ‘Moldova’ in its name.”
Mr. Kolignan, a Polish manager in Moldova, said: “We would like to capture your attention on the fact that the name of our competitor contains the word ‘Moldova’, too. From the Competition Council’s decision I gt the conclusion that Südzucker Moldova SA alone is entitled to use the country name while other companies are denied that.”
Moldova-Zahar SRL has asked a court of law to judge the decision of the Competition Council.
If the decision remains in effect, its enforcement will push Moldova-Zahar SRL to shut down: withdrawal of the registration certificates means that the company dissolves as a business entity.
A mega authority of the state has intervened in this situation. The Public Services Agency, which now incorporates the State Registration Chamber, has asked the Chisinau Court of Appeal to do away with the decision of the Competition Council. It cited “the imminence of an irreversible damage” [for the business community and economy as a whole].
The Chisinau Court of Appeal in turn suspended the decision of the Competition Council on October 5, 2017. It was unclear whether this decision will be ever withdrawn.
„Play by the rules, not with the rules”
The conflict between the two competitors in the sugar market requires that we reproduce a message from the former head of the European Union Delegation to Moldova, Pirkka Tapiola, for the Competition Council, in March 2017, when the authority marked its tenth anniversary.
„It is important that you continue developing your institutional buildup, and contribute to effective collaboration with other national institutions, especially in such areas as public investments, finance, energy, and anti-corruption. These are the sectors that need more transparency and you can step in as an independent regulator. It is important that you work together and identify solutions to play by the rules, not with the rules,” Mr. Tapiola was quoted as saying.
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This article has been published thanks to the support of the National Endowment for Democracy as part of the Promoting Government Accountability Project and may be shared, republished or quoted without limitations. Reference to the source is mandatory.