What is the Competition Law and why is it necessary?
introduction by Mr. Alin ZABAVA, Consultant
SCA Nestor Nestor Diculescu Kingston Petersen
Competition is one component of the complex relationships existing
among suppliers operating on a certain free market segment (defined in
terms of product and geographical area). Due to competition, suppliers
adjust the prices of the products they offer on the market in order to
derive a decent profit, based on production costs and demand and on
the pressure exercised by the other players operating on the market,
via the prices they ask for their products.
Competition intensity can vary to a large extent, from perfect
competition, when the number of independent undertakings operating on
the market segment is very high (theoretically, infinite) and
competition is most intense, to monopoly, when there is only one
supplier for a certain market segment and no competition. Basically,
one can consider that any undertaking operating on a market segment
desires to become a monopoly, in order to derive the monopolistic
profit and to provide the highest return for the investors in such an
undertaking, on behalf of the consumers of the product it supply,
which pay the monopolistic price for such product.
monopolistic market may be considered as opposite to a free market and
in such market there are but very few (if any) incentives for
innovation, product enhancement and, generally, for economical and
technical progress, because the respective monopoly derives the
highest possible profit irrespective of the market trends and the
consumers’ needs, such status should not be allowed in any market
segment, to the most reasonably possible extent. For this purpose,
various States enacted dedicated legal statutes for the protection of
the competition on their markets, which specify how undertakings
should behave in order to maintain reasonable competition environment
on the market segments in which they operate.
Romania, as in many other States, competition is considered as
fundamental for the appropriate functioning of the free market.
Accordingly, the Competition Law was enacted in 1996 (Law No.21/1996),
as an organic law. This law was latter on modified and supplemented,
in December, 2003, under Government Emergency Ordinance No.121/2003,
further sanctioned by the Parliament, in May, 2004, under Law
No.184/2004 (an organic law too) and, more recently, in November,
2004, some minor changes in Art.5‑7 thereof were enacted, under
another organic law – Law No.538/2004.
Competition Law No.21/1996, as further modified and supplemented,
specifies how should Romanian and foreign undertakings conduct their
business in Romania in order to maintain a reasonable competition
environment on the Romanian market. The Romanian Competition Law is of
great interest for the business community operating in Romania, as
competition rules specified under this law and under the secondary and
tertiary legislation promulgated thereunder are rather strict and the
sanctions which are applicable in case of breach of such rules.