With less than one month to go before Christmas, most of us are getting excited about the holiday season and tidying up our gift lists for Santa. The Christmas spirit even appears to have reached the Romanian Competition Council (the “RCC“), as it recently put forward proposals aimed at increasing competition on the market for snow-removal salt. Among other things, this is expected to result in cleaner, snow-free roads, allowing quicker drop-off of Christmas gifts.
In February 2017, the RCC initiated a sector inquiry into Romanian snow-removal salt relying on preliminary concerns flagged by the authority’s constant monitoring of key markets (including the overall salt market).
The objective of the RCC was to set out recommendations and measures aimed at fostering more competition on the market, in the context of existing regulatory barriers potentially restricting competition, possible price discrimination and state aid concerns.
The RCC defined the relevant product market as snow-removal salt.
It also ruled that the geographical market should be delineated at the national level, given the current status quo, although the RCC admitted that a narrower geographical market, consisting of a radius of 0 – 200 km surrounding the exploitation perimeters, could also be defined.
How things stand now
In Romania, there are only three valid exploration licences and nine exploitation licences, the latter all held by one company, which enjoys a de facto monopoly. There is one additional exploitation licence pending approval through a Government Decision for almost eight years.
Exploitation licences are issued for an initial 20-year period and may be successively (and indefinitely) renewed for additional five-year periods, at the request of the licence holder.
Foreign companies that are engaged in mining/exploitation activities in Romania are bound to set up a Romanian-based company that needs to remain operational throughout the entire validity period of the underlying licence.
The RCC’s recommendations
Against this background, the RCC came up with several proposals to amend the existing legislation and market practice:
– setting a maximum number of licence renewals that a single company can obtain (or extending the initial duration of the licence, so as to allow the recoupment of investments), followed by public tenders for granting exploitation rights over the relevant perimeter, where several other companies can participate;
– in order to disrupt the current market status quo (de facto monopoly), assessing whether exploitation licences granted to a single company could be limited to 50 % of the overall available capacities;
– removing administrative barriers consisting of the obligation to set up a Romanian-based company;
– amending the current obligation to provide cash collateral deposits, as financial guarantees for the underlying exploitation licences, by adding letters of bank guarantee and insurance policies;
– additionally, the RCC flagged a potential state aid measure resulting from the post-closing environmental obligations of licence holders: while private licence holders need to self-finance these costs, state-owned companies benefit from state support, as costs are paid by the relevant Ministry; the RCC recommended an amendment of this legal provision to bring it in full compliance with state aid requirements;
– the RCC also flagged an instance of price discrimination: the company enjoying a de facto monopoly has apparently had lower prices on exports vs. internal demand; in this context, the RCC recommended that the public authorities in charge of managing public roads organise tenders for snow-removal salt sufficiently in advance, and thus utilise their stocking capacities more efficiently. In the RCC’s view, this approach would allow foreign-based suppliers to bid, ultimately bringing down prices.
The preliminary sector inquiry report is available here and the RCC welcomes comments by 27 December 2018.
Georgiana Bădescu, partner