Antitrust Practices: Clearances, Unfair Competition, and Enforcement in Georgia

1) What types of unfair competition are prohibited in your jurisdiction?

Misleading advertising or communication – spreading false, dishonest, unreliable, or clearly deceptive information about goods/services that misleads consumers.

Concealing the true purpose of a transaction – misleading the other party to gain an unfair advantage.

Damaging a competitor’s reputation – spreading false information, unfounded criticism, or discrediting a competitor’s business, products, or trade activities.

Copying competitor’s product appearance – imitating the form, packaging, or external design of another’s goods.

Misappropriation of confidential information – acquiring, using, or disclosing trade/technical/commercial secrets without the owner’s consent.

Bribery in trade relations – bribing a supplier, buyer, employee, or decision-maker to act against their principal’s or consumer’s interests.

Calls for boycotts – encouraging others to boycott a competitor.

2) What types of bid rigging exist, and how are they classified?

1. Price Fixing

Competitors agree on prices instead of competing. A common example is Cover Bidding, where companies:

• Submit intentionally high bids;
• Include unacceptable terms;
• This makes a pre-selected company's bid look best, allowing them to win at an inflated price.

2. Market Allocation

Competitors agree to divide markets or customers among themselves. In bidding, this includes:

• Bid Suppression: Competitors agree to not bid or to withdraw a bid so a designated company can win.
• Bid Rotation: A group of companies agrees to take turns being the winning bidder on different contracts.

3) How do antitrust authorities detect and investigate cartels and anti-competitive agreements?

Detection:

1. Leniency (Tell-First) Program: A company that confesses its role in a cartel and provides evidence against its partners can have its fines completely waived or significantly reduced. This creates a strong incentive for members to betray the cartel.

2. Complaints from Victims: Businesses or customers who have been overcharged or harmed by a cartel can file a formal complaint with evidence.

3. Tips from Whistleblowers: Anyone (employees, industry insiders, the public) can report suspicious activity, which can trigger an investigation.

4. Proactive Monitoring: The Agency actively watches markets for red flags, like identical bids in tenders or sudden, parallel price hikes, and can launch an investigation on its own.

Investigation:

Once an investigation begins, the Agency uses its key powers to gather proof:

1. Demanding Documents: They can legally force companies to hand over any relevant information, emails, contracts, and internal records. Failure to comply results in fines.

2. Surprise Inspections ("Dawn Raids"): With a court order, investigators can show up unannounced to search offices, seize documents, and copy computer files to find evidence of collusion.

3. Questioning People: They can formally summon executives and employees to provide explanations and answer questions about the company's conduct.

4) What measures can companies take to mitigate antitrust risks?

Companies can mitigate risks by adhering to the following measures outlined in the Law on Competition:

• Comply with Merger Control Rules: A company must submit a prior notification to the Agency for any planned "concentration" (merger, acquisition, or joint venture) if the parties' turnover exceeds the legal thresholds. The transaction cannot be completed without the Agency's approval (Article 11¹).
• Avoid Prohibited Agreements: Refrain from entering into any agreement with competitors whose object or effect is the restriction of competition, particularly those involving the fixing of prices or the allocation of markets (Article 7).
• Prevent Abuse of Dominance: A company holding a dominant market position must not engage in abusive practices, such as applying unfair pricing, limiting production, or imposing discriminatory conditions on trading partners (Article 6).
• Utilize the Cooperation (Leniency) Program: A company involved in a prohibited agreement under Article 7 can admit its participation and provide evidence to the Agency. In exchange, it may receive full or partial immunity from fines (Article 33¹).
• Offer Conditional Obligations (Commitments): During an investigation, a company can propose specific commitments to the Agency to address competition concerns. If the Agency accepts these commitments, it can close the case without establishing an infringement or imposing a fine (Articles 23 and 25).
• Cooperate with Investigations: Respond to the Agency's formal requests for information within the specified deadlines to avoid procedural fines (Article 32). Do not obstruct on-site inspections authorized by a court (Article 25(8¹)).

5) What are the specific rules governing undertakings with a dominant market position?

Abusing that market power is prohibited. 

1. How Is a Dominant Position Defined?

• Market Share is Key: A company is generally not considered dominant if its market share is below 40%.
• Joint Dominance: The law also recognizes joint dominance, where a small group of companies (e.g., 2 or 3) together controls the market and doesn't compete with each other.
• Other Factors: The Agency also looks at other factors like barriers to entry for new rivals.

2. What Actions Are Prohibited?

A dominant company is forbidden from using its market power to harm competition or consumers. Key prohibited actions include:

• Unfair Pricing: Charging excessively high prices or predatory prices (selling below cost to eliminate rivals).
• Limiting Supply: Intentionally restricting production or innovation to the detriment of consumers.
• Discrimination: Applying different prices or terms to similar customers without a good business reason.
• Tying: Forcing a customer to buy an unwanted product in order to get the one they need.

3. What Are the Penalties for Abuse?

• Fines of up to 5% of the company's annual turnover for a first offense.
• Fines can increase to 10% for repeat offenses.

6) What powers do antitrust authorities have when conducting inspections?

The Law on Competition grants the Competition Agency significant powers when conducting on-site inspections, but these powers are subject to an important check: they must first be authorized by a court.

Here are the specific powers and procedures based on the text:

1. The Pre-requisite: A Court Order

The Agency cannot simply decide to inspect a company's premises. It must first obtain a court order. The Agency can petition the court for an inspection warrant if:

• It is impossible to obtain necessary information through other means.
• There is a risk that evidence will be hidden or destroyed.
• The parties are not complying with their obligation to provide information.
• A physical inspection of the company's assets is required.

2. Powers During the Inspection 

Once the Agency has a court order, investigators have the following explicit powers on the company's premises:

• Access to Premises: They have the right to enter the company's legal and factual business locations.
• Access to All Documents: They can familiarize themselves with any documents related to the company's business activities, including financial and economic records, regardless of confidentiality or storage method.
• Power to Copy Evidence: They are authorized to make copies of any documents they inspect.
• Request On-the-Spot Explanations: They can demand immediate explanations from employees on-site.

3. Powers of Enforcement and Support

To ensure the inspection is effective, the law provides additional powers:

• Penalties for Obstruction: Any attempt to obstruct the inspection or prevent authorized officials from entering the premises is a violation. This will result in a significant fine:
  • GEL 10,000 for a first offense.
  • GEL 20,000 for a repeat offense.
• Assistance from Other Authorities: If necessary, the Agency can involve representatives of law enforcement or other state agencies in the inspection process, for example, for technical support or to ensure security.

Author: Sofia Roinishvili, Partner.