The Commission for the Protection of Competition (CPC) aims to protect and make sure that consumers have alternative options to purchase high quality goods or services at affordable prices without price distortion.
But the Chairman of the CPC, George Christophides, is quick to send a message to business and companies that the Commission wants to ensure a level playing field where all companies may be able to function with the objective of fair profits and in a market free of restrictions.
In an interview with the Financial Mirror, Christophides said that if companies respect the law and the consumer, and refrain from price manipulation or setting up barriers to free trade and competition, then they should not be afraid of the CPC.
This may also explain why the recent fines imposed by the Commission have been relatively low, up to CYP 20,000 or EUR 35,000, at a time when the law gives the option for the imposition of fines of up to 10% of total annual turnover.
“Most companies have been cooperating with us when they are under investigation, which is why we have been lenient in the imposition of fines,†he said. Nevertheless, Christophides sends a warning to companies contemplating violating competition rules to know well that they are liable to be fined the maximum 10% on annual turnover if their actions are seen as deliberate.
Such a rationale may well have been the reason why the CPC decided to issue a temporary order forcing the Cyprus Milk Association and Lanitis Bros. and Pittas Dairy to supply fresh milk to Christis when the Association had cut off all supply to the latter.
“Despite the fact that Christis belongs to Vivartia SA of
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Long term benefit
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“Our job is to make sure that the right environment is in place leading to free and healthy competition in the market and by ensuring that any anti-competitive practices by companies do not distort competition.â€
This means that at times CPC decisions will be seen as adding to the cost on the consumer in the short-term, but this is seen as irrelevant, since the CPC’s objective is to make sure that consumers benefit in the longer term.
Previous decisions according to which the CPC intervened to increase the cost of mobile calls were seen directly related to making sure that the alternative player like Areeba would be able to prosper in the market and through healthy competition drive prices lower.
Such considerations may feature high when the CPC will issue its final decision on the proposed merger between Vassiliko Cement and Cyprus Cement, which even though if approved, the merger will create a monopoly, it will go a long way to help
“A monopoly is not banned if it does not hinder competition and lead to price distortion,†said Christophides, who added that the CPC Service, having completed its report is expected to hand its finding to the Commission to reach a final decision by the end of July.
There shall be no delays, Christophides promised, since the cement case is in its second and final phase. Even though the whole issue is very complicated and the CPC Service made a thorough investigation of the matter, which the private companies said resembled an interrogation, but since the affected companies cooperated fully and were well prepared to undergo intense scrutiny, the decision will be given according to the original timetable.
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Tight deadlines
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The CPC with its 11 officers and support staff has tight deadlines to meet but is coping with increased demand for its services through the hard work of its staff said Christophides. The CPC is also hiring specialized staff, especially those with PhDs in subjects related to competition rules.
“When it’s an urgent case, such as Vivartia/Christis on the supply of fresh milk, we allocate staff to the complaint. In the specific case, we issued a temporary order on June 19 after receiving the complaint on June 4.†But there are cases pending since 2001.
“It all depends on how the companies respond to our requests for additional information and the urgency of the matter.â€
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Intervention
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The CPC may take action independently or when it receives a complaint when there is price distortion in the market, though it prefers if the complaint is first made by another company directly affected by the action of the other.
For example in the case of Cyprus Airways, which received state-aid on its loan, Christophides said that the guaranteed loan is not an issue for the CPC to get involved, but said the recent offering of 60.000 tickets at below cost price is certainly an issue that his office could get involved. But as yet, no entity from the private sector has filed a complaint.
Similarly, the CPC, citing a clause in the Law, which states that if a company involved in the same sector takes a substantial stake in the capital of the other, then this action is considered as creating problems for the other, which explains why the CPC intervened when Marfin Popular Bank purchased a 8.19% stake in the capital of Bank of Cyprus from Piraeus Bank. And since no permission was requested, the CPC ruled that MPB had violated the law and had to appear before it to defend its case before a final decision had been made.
Similarly, MPB needs to explain why it started advertising that its three-way merger was in place, well before the final permission was granted by the CPC.
Christophides stressed that the CPC wants to remain impartial and not pre-judge a case, which is why he usually prefers not to make public statements on on-going investigations and also why he calls on interested parties to refrain from making public statements, which may affect the case under investigation.
Christophides is happy of the fact that the Cyprus Competition law is being aligned and harmonized with that of the EU, adding that being a full member of the EU since 2004, the CPC gets valuable support through the EU-wide Competition network.
With the pace of mergers and acquisitions showing no sign of letting up in
