Price Fixing and Restrictive Agreements
Price fixing is a prohibited practice under the Law of Georgia on Competition. Under Article 7, it is prohibited for economic agents, or within the framework of an association of economic agents, to conclude an agreement, adopt a decision or carry out a concerted action the purpose or effect of which is the restriction, prevention or prohibition of competition on the relevant market. The first sub-item of this article names precisely the price-related prohibited form: the direct or indirect fixing of purchase or sale prices or of other trading terms.
The law also names other forms of prohibited agreements: the limitation of production, markets, technological development or investments; the allocation of markets or sources of supply by customer, territorial or other criteria; the application of different conditions to identical transactions with certain trading partners, thereby placing them at a competitive disadvantage; and the imposition of a supplementary condition for concluding a transaction which has no substantive or commercial connection with its subject matter. Under the second point of the article, a prohibited agreement is void unless the exceptions established by this law apply to it — an agreement on prices therefore has no legal force at all.
The Timetable and Course of the Investigation
The investigation begins after the agency adopts a decision to open the case, and the agency adopts its decision within no more than 6 months. Taking into account the importance and complexity of the case, the agency may, by its own decision, extend the investigation up to 18 months; the parties are notified of the extension no later than 10 working days before the expiry of the term. If, after the opening of the investigation and before the draft decision is sent to the parties, the complainant withdraws the complaint, the investigation is terminated — unless justified evidence exists that competition is significantly restricted.
Before the final decision is adopted, a concluding session is held so that the applicant and the party may present their positions. Before the session, the agency sends them the draft final decision and the case materials in writing, and explains that they have the right to present their positions and additional information; the period fixed for this may not be less than 25 working days, and information submitted after its expiry may be disregarded by the agency. Before the adoption of the draft final decision, the respondent economic agent may propose to the agency the acceptance of a conditional undertaking to carry out specific actions aimed at eliminating the alleged violation; if the agency accepts the undertaking and the risk of the alleged violation no longer exists, it adopts its decision without assessing the facts. Failure to perform the conditional undertaking entails a fine and the resumption of the investigation.
Demands for Documents and On-site Inspections
In the course of the investigation the agency has the right to demand from an economic agent, party or interested party the submission of the information and documentation necessary for the case, and it also summons them to provide explanations. An on-site inspection is permissible only on the basis of a court decision — the agency applies to the court where the information cannot be obtained otherwise, where there is a threat of its concealment or destruction, where the parties do not fulfil the obligation of submission, or where a review of material assets is necessary.
An on-site inspection covers the review of documents connected with the activity — including financial and economic documents, regardless of their confidentiality and storage rules — the copying of those documents, the taking of explanations on site, and admission to the places of legal and factual activity. If authorized persons are not admitted on site or obstruct the inspection, the economic agent is fined under the law — and this is precisely where most mistakes occur: a party believes that resistance is self-defence, while in fact it triggers a sanction.
Fines and the Cooperation Programme
Under Article 33, in a case of a restrictive agreement the party is fined an amount not exceeding 5 percent of its aggregate turnover of the previous financial year; where the legal basis of the violation is not eliminated or the violation is repeated, the fine may reach 10 percent of the aggregate turnover. Obstruction of an on-site inspection is punished by a fine of 10 000 GEL, and 20 000 GEL upon repetition of that violation; failure to perform a conditional undertaking entails a daily fine of up to 5 percent of average daily turnover for each day of delay. In determining the amount of the fine, the damage caused by the violation, its duration and severity must be taken into account, and the fine imposed must be paid into the state budget within 1 month.
The strategy of an investigation is changed by the cooperation programme provided for in Article 33-1: a person is fully or partially exempted from a fine if it admits in writing its participation in the prohibited agreement, provides the agency with information and evidence significant for the case before they become known from another source, cooperates continuously and without limitation during the investigation, ceases participation in the agreement, does not destroy significant documents and does not disclose its participation in the programme. The exemption does not extend to the initiator of the agreement or to the person who coerced another person to participate in it.
Frequently Asked Questions
Within what term does the agency decide a price-fixing case?
After the decision to open the case, the agency adopts its decision within no more than 6 months; taking into account the importance and complexity of the case, the investigation may be extended up to 18 months.
What is the scale of the fine for price fixing?
The fine may not exceed 5 percent of the aggregate turnover of the previous financial year, and where the legal basis of the violation is not eliminated or the violation is repeated — 10 percent.
What follows from obstructing an inspection?
A fine of 10 000 GEL, and upon repetition of that violation — 20 000 GEL.
What is the cooperation programme?
An exemption provided by Article 33-1: a person who admits participation in the prohibited agreement in writing and provides the agency with significant information and evidence is fully or partially exempted from the fine.
How We Help on Legal.ge
A price-fixing investigation is at once a legal and a strategic challenge: it requires assessing whether communication with competitors bears the marks of a prohibited agreement, how the party should exercise the obligation to submit documents, when it is worth offering a conditional undertaking, and when to join the cooperation programme. Each of these decisions bears directly on the amount of the fine.
The lawyers working on Legal.ge will help you assess the requirements of the Law on Competition, respond to the agency's demands, prepare your position for the concluding session, and devise a strategy to minimize sanctions. Contact us for a consultation at any stage of the investigation — a timely response here determines the outcome.