Functional Review of the Competition...
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The World Bank Europe and Central Asia Region Beneficiary: The General Secretariat of the Government Project title: Functional Review of the Central Public Administration in Romania - I Functional Review of the Competition Council SMIS Code: 19881 Co-financed by the European Social Fund, through the Operational Program Development Administrative Capacity, during the period July 5 th , 2010 - July 4 th , 2011
Transcript of Functional Review of the Competition...
The World Bank
Europe and Central Asia Region
Beneficiary: The General Secretariat of the Government Project title: Functional Review of the Central Public Administration in Romania - I Functional Review of the Competition Council SMIS Code: 19881 Co-financed by the European Social Fund, through the Operational Program Development Administrative Capacity, during the period July 5th, 2010 - July 4th, 2011
Acronyms
AOD Abuse of Dominance
EC European Commission
EU European Union
FR Functional Review
GOR Government of Romania
GSG General Secretariat of Government
ICN International Competition Network
OECD Organization for Economic Cooperation and
Development
PMR Product Market Regulation
RCC Romanian Competition Council
SOE State-Owned Enterprise
Acknowledgments
The functional review is commissioned by the Romanian Competition Council (RCC) as part
of a Functional Review Project financed by the EU and the Government of Romania. This
report was prepared by a core team comprised of Donato De Rosa (Task Team Leader),
Arabela Sena Aprahamian (Senior Private Sector Specialist), Paulo Correa (Lead Economist),
Martha Martinez Licetti (Competition Policy Expert), Ronald Myers (Public Sector Expert),
and John Pollner (Lead Financial Specialist). Mr. George Moldoveanu (Project Assistant)
provided valuable support to the team. Georgiana Neculau, Simona Anton and Bogdan
Corad (sociologists) provided support to the team for analyzing the RCC staff survey.
The team would like to express its gratitude to officials of the Romanian Competition
Council, including Board members, managers, and staff for their invaluable observations and
constructive collaboration. The team, in particular, would like to thank Messrs. Bogdan
Chiritoiu (President of RCC) and Vasile Secleman (General Secretary of the RCC) for their
time, patience, and insights. Ms. Luminita Popa and Mr. Marius Lungu (Public Managers in
the RCC) provided an extraordinary level of support in both substantive and logistic matters.
Finally the team is indebted to the numerous staff of the Ministry of Public Finance, Ministry
of Economy, Ministry of Agriculture, Ministry of Transport, Ministry of Communication and
Information Society, National Regulatory Agency for Energy, National Regulatory Agency
for Communication and National Agency for Public Procurement who took the time to meet
with the team. A partial list of persons met during the mission is attached in the annex.
The team worked in close consultation with Mr. Bernard Myers (Task Team Leader of the
Functional Review Project), Mr. François Rantrua (Country Manager, Romania) and Peter
Harrold (Country Director, ECCU5). The report was peer reviewed by Ewoud Sakkers and
Isabel Yglesias i Julià (European Commission, DG Competition), Monique Van Oers
(Director Legal Department, Netherlands Competition Authority) and Giuliana Cane'
(CICRA, World Bank).
TABLE OF CONTENTS
EXECUTIVE SUMMARY .............................................................................................................................. I
PRIORITY REFORM AREAS AND RECOMMENDATIONS ........................................................................ V
I. CONTEXT AND PURPOSE OF REVIEW ............................................................................................. 10
II. MANDATE OF THE RCC...................................................................................................................... 10
III. PERFORMANCE OF THE RCC .......................................................................................................... 13
ANTICOMPETITIVE BUSINESS PRACTICES AND MERGER REVIEWS .................................................................... 14
MARKET STUDIES, SECTOR INQUIRIES AND REVISIONS OF LAWS AND REGULATIONS ...................................... 24
STATE AID ........................................................................................................................................................ 27
COMPETITION ADVOCACY, SUPPORTING INSTITUTIONS AND EXTERNAL RELATIONS ....................................... 31
IV. ACHIEVING THE MANDATE THROUGH IMPROVED PERFORMANCE ................................... 32
EXISTING INITIATIVES TO REFORM ................................................................................................................... 33
CORE INSTITUTIONAL ELEMENTS ..................................................................................................................... 34
STRATEGY ......................................................................................................................................................... 34
PRIORITIZATION AND SERVICE DELIVERY ......................................................................................................... 36
ORGANIZATION AND STRUCTURE ..................................................................................................................... 37
HUMAN RESOURCES ......................................................................................................................................... 45
FINANCES .......................................................................................................................................................... 48
V. SPECIFIC RECOMMENDATIONS ...................................................................................................... 51
ANNEXES .................................................................................................................................................... 60
ANNEX 1. DIFFERENCES ACROSS DATA SUBMITTED BY THE RCC ..................................................................... 61
ANNEX 3: SCOPE OF FUNCTIONS AND MAIN CHARACTERISTICS OF COMPETITION AGENCIES .......................... 65 ANNEX 4: THE ORGANIZATIONAL CHART OF THE COMPETITION COUNCIL INCLUDING VACANCIES AND
OCCUPIED POSITIONS ......................................................................................................................................... 67
ANNEX 5: STAFF SURVEY RESULTS ................................................................................................................... 68
ANNEX 6: MISSION INTERVIEWS ....................................................................................................................... 74
ANNEX 7: DURATION OF CASES BY TYPE OF PRACTICE AND YEARS (IN NUMBER OF DAYS) ............................... 76
ANNEX 8: DISTRIBUTION OF WORKLOAD BY STAFF ......................................................................................... 78
LIST OF TABLES
TABLE 1: ANTICOMPETITIVE ENFORCEMENT – FORMAL CASES ........................................................................................... 14
TABLE 2: ANTICOMPETITIVE BUSINESS PRACTICE ENFORCEMENT- PRELIMINARY INVESTIGATIONS ............................................. 17
TABLE 3: PARTICIPATION OF TERRITORIAL OFFICES ON CURRENT INVESTIGATIONS- JULY 2010 .................................................. 19
TABLE 4: NUMBER OF TEAM MEMBERS IN TERRITORIAL OFFICES PER TYPE OF INVESTIGATION- JULY 2010 ................................... 20
TABLE 5: PRESENCE OF STATE OWNED ENTERPRISES ........................................................................................................ 24
TABLE 6: GOVERNMENT PARTICIPATION IN SELECTED SECTORS .......................................................................................... 25
TABLE 7: REVISIONS AND OPINIONS ISSUED .................................................................................................................... 27
LIST OF FIGURES
FIGURE 1: THE ROLE OF COMPETITION POLICY RULES ......................................................................................................... II
FIGURE 2: TYPOLOGY OF COMPETITION AND STATE AID RULES IN THE EC LAW ...................................................................... 12
FIGURE 3 : EFFECTIVENESS OF ANTI-MONOPOLY POLICY (1)
2009 ........................................................................................ 13
FIGURE 4: ANTICOMPETITIVE BUSINESS PRACTICES ENFORCEMENT: CASE STATISTICS IN THE EUROPE REGION, 2008 ................... 15
FIGURE 5: NUMBER OF FORMAL CASES BY PRACTICE AREA ................................................................................................. 15
FIGURE 6: AVERAGE LENGTH (DURATION) OF ANTICOMPETITIVE PRACTICES INVESTIGATIONS .................................................. 16
FIGURE 7: STAFF OF COMPETITION AGENCIES, 2008 ........................................................................................................ 18
FIGURE 8: PERCENTAGE OF STAFF WORKING FULL TIME ON COMPETITION ENFORCEMENT, 2008............................................... 18
FIGURE 9: ALLOCATION OF STAFF BY RCC DIVISION ......................................................................................................... 19
FIGURE 10: INSTITUTIONAL CHANGES IN ANTI-CARTEL ENFORCEMENT ................................................................................ 21
FIGURE 11: AGENCY’S PHD ECONOMISTS....................................................................................................................... 22
FIGURE 12: FOCUS THEMATIC AREA – STAFF SURVEY ........................................................................................................ 23
FIGURE 13: STATE AID BY INSTRUMENT AND BY HORIZONTAL OBJECTIVE ............................................................................... 28
FIGURE 14: METHODOLOGY FOR ASSESSMENT STATE AID – BALANCING TEST ...................................................................... 29
FIGURE 15: STATE AID BY MAIN ECONOMIC SECTOR .......................................................................................................... 30
FIGURE 16: NUMBER OF FULL TIME MEMBERS – COMPETITION AGENCY BOARDS ................................................................. 39
FIGURE 17: PERSONNEL STRUCTURE BY SPECIALTY ........................................................................................................... 41
FIGURE 18: DISTRIBUTION OF WORKLOAD BY STAFF: COMPETITION DIRECTORATES ............................................................... 43
FIGURE 19: EFFECTIVENESS OF NON-MONETARY REWARDS .............................................................................................. 48
FIGURE 20: ANNUAL BUDGETS OF COMPETITION AGENCIES 2008 ...................................................................................... 49
LIST OF BOXES
BOX 1: RCC’S ROLE IN MAKING MARKETS WORK FOR THE ROMANIAN ECONOMY .................................................................... IV
BOX 2: COMPETITION POLICIES AND THEIR APPLICATION IN THE EU LEGISLATION ................................................................... 12
BOX 3: COMPETITION CONSTRAINTS IN THE ENERGY SECTOR .............................................................................................. 26
BOX 4: RCC’S MISSION, VISION, VALUES, AND STRATEGIC OBJECTIVES .............................................................................. 35
BOX 5: INTERNAL TARGETS AND PERFORMANCE MEASURES .............................................................................................. 37
BOX 6: BOARDS ........................................................................................................................................................ 38
BOX 7: RCC STAFF SURVEY ......................................................................................................................................... 44
BOX 8: CHARACTERISTICS OF A GOOD COMPETITION AGENCY ............................................................................................. 51
EXECUTIVE SUMMARY
The European Union is founded on a competitive market economy unified by commonly agreed
rules and practices. While Romania has joined the Union, its ability to prosper fully within the
common market requires a strengthened commitment to, and ability to protect, EU competition
principles. Romania’s legal and organizational framework for enhancing competition is tenuous and
the current economic and fiscal crisis puts recent gains at risk.
In particular, Romania’s performance in competition policy still lags behind EU practice and is
characterized by:
(i) State-owned enterprises and government participation still play a dominant role in
many important markets and sectors in Romania, controlling at least one firm in 14 key
sectors of the economy and exhibiting a market share above 50% in at least one segment
of network industries.
(ii) Relatively low enforcement of competition policy against hard-core cartels and abusive
practices while merger review cases that do not significantly impose threats to
competition account for the bulk of the workload in the competition area. Compared to
other European Union members, few cases have been finalized and none of the abuse of
dominance cases has been concluded even though six of these cases were initiated before
2007.
(iii) Low staffing for competition enforcement and economic analysis placing the RCC at
the bottom of European Union rankings with no internal target deadlines to track
performance.
(iv) Active advocacy activities mainly focus on raising awareness of the importance of
competition law but efforts need to be made to refocus activity on tackling anti-
competitive regulation, expand advocacy to key groups within the government and
implement alternative advocacy tools.
A comprehensive reform program therefore is required at the national level, as well as within the
Romanian Competition Council (RCC) as the key agency in guaranteeing healthy competition.
Priority actions, further detailed in this report, include the following:
(i) improve the competitive environment by reducing the dominant role of the state in several
economic sectors, strengthening the ability of regulatory agencies to ensure competition in key
sectors such as transport, communication, and utilities, and requiring any agency proposing
legislation found by the RCC to be contrary to competitive principles to publicly justify its
position;
(ii) provide space for a redoubled RCC focus on competition enforcement by strengthening the
current legal framework on competition, reducing the RCC’s extensive network of expensive and
underutilized territorial offices, streamlining simpler merger procedures, in order to free
capacity for more demanding task, and – although this may not be immediately feasible -
transferring out of the RCC the responsibility for review of national programs for state aid to
firms;
ii
(iii) establish a new unit within RCC to target hard core anti-competitive behavior, such as
cartels, as the first step in a program to gradually restructure the RCC along business practice
lines designed to support greater specialization of competencies in line with EU standards; and
(iv) take immediate steps, within the principles of the government’s unified pay system, to
ensure a level of compensation to core RCC competition staff commensurate with their
responsibilities in front of the judiciary and private sector.
1. The economic growth and social development of Romania ultimately depend on the
efficiency and dynamism of its private sector operating within the broader European and global
market. To prosper Romanian firms, large and small, must be innovative and free to act within a
framework of fair (and applied) competition rules. These rules protect producers and consumers alike
from anticompetitive behaviors such as price fixing and other cartel like activities, bid rigging, abuse
of dominance and monopoly behavior, establishment of barriers to entry and all the other actions
which can distort the market and keep consumers and firms from benefitting from the lowest possible
prices and highest quality for goods and services.
2. All EU countries have competition agencies to apply competition policy rules. Though
small in size and cost relative to other public bodies, competition authorities have an outsized
impact on the functioning of markets. Competition agencies directly focus on rectifying
inappropriate firm behavior and, perhaps more importantly, encourage adherence to the law through a
deterrence effect and, more positively, through effective advocacy with government bodies. Studies
of first order benefits of competition enforcement show that an effective application of competition
policy leading to productivity improvements and price reductions in key infrastructure areas could
boost GDP by several percentage points in the short to medium term.
Figure 1: The Role of Competition Policy Rules
3. Competition policy is an essential input for achieving domestic market efficiency,
economic growth and European market integration. By improving the efficiency of national
markets, competition policy increases competitiveness internationally. Firms that are faced with
vigorous competition have strong incentives to reduce their costs, to innovate and to become more
efficient and productive than their rivals. Moreover, firms usually acquire many of their inputs (raw
CP sets “the rules of the game” CP verifies that market agents play by the rules
•Level playing field (non-discrimination,
neutrality, equal access).•Elimination of entry barriers.•Firms compete in their merits.
•Govts. do not impose anti-competitive
regulation or unnecessary barriers to entry and expansion. •Firms do not cartelize and not abuse.
If effective
•Markets are efficient and firm’s productivity increases.
Firms can focus on “how to play the best” (competitiveness)
Large impact on economic growth and productivity
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materials, energy, telecommunications services, and construction services) in local markets. If these
markets lack competition, goods and services necessary for production are not provided at
competitive prices. As a result, the economy as a whole may be less competitive and less likely to
compete globally.
4. The Romanian Competition Council (RCC) is the agency charged with actively
guaranteeing market competition, enforcing compliance to the laws, ensuring that state aid
provided to firms meets rigorous EU restrictions, and advocating and promoting broader
understanding of competition rules and benefits. Only established in its present form in 20041
through the combination of two legacy agencies, the RCC is a young organization that is making
progress toward its goal of meeting EU standards and comparing favorably with counterpart European
competition agencies. The RCC has taken many significant steps-- it has availed itself of extensive
EU and OECD peer review, twinning and investment support, initiated a far reaching internal reform
program aimed to increase its effectiveness, started a process to define a detailed strategy to enhance
performance, taken a series of steps to mitigate the constraints of an overly rigid public administration
system in Romania, and in general committed itself to become a center of excellence within the public
administration. As such it appears that the RCC already is the key agency within Romania for
advocating and promoting competition rules.
5. It is widely recognized that the effective application of competition policy is one of the
pillars for building a common EU market. In the case of Romania, the implementation of
competition policy by the RCC has had an impact on the Romanian market with several high
profile cases as described in Box 1 below. The RCC also needs to preserve its independency and
autonomy from political pressures and vested interests sometimes coming from other branches of the
government.
1 The Competition Council was established in 1996, and started effective work in February 1997, when the Competition Law
21/1996 came into force and the secondary legislation was drafted. In 2004, RCC took over half of the staff and
responsibilities previously covered by the Competition Office, a governmental institution, under the Ministry of Finance.
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Box 1: RCC’s role in making markets work for the Romanian economy
The RCC has conducted several investigations that have resulted in direct savings to consumers and improved competition in
Romanian markets. Below is a short summary of RCC‘s leading cases.
Busting cartels in national and local markets One of the most important cartel cases, based on its economic impact, analyzed by the RCC was the cement investigation.
The RCC observed that cement prices increased simultaneously in several local markets in Romania. The RCC investigation
proved that from 2000 to the first quarter of 2004, the 3 groups controlling the cement market maintained a price fixing
agreement to significantly raise their prices and illegally increase their profits. The RCC sanctioned the three companies with
fines approximately of EUR 30 million.
In 2007, the RCC opened investigations for cartel behavior in a few local bread markets finding evidence that producers
were harming consumers with anticompetitive agreements to increase their profits. For instance, in Vrancea County, the
evidence showed that 31 undertakings raised bread prices almost in the same day (13% to 70% increase compared to the
preceding month‘s price). Price increases followed meetings of bread producers, during which they discussed the levels of
selling prices applied in their County. The total of the fines applied to undertakings in this Country was around EUR 1.35
million. It was estimated that the harm for consumers during the cartel period was around EUR 2 million. The full impact of
RCC intervention is difficult to calculate; however, absent this invention consumers would have continued paying inflated
cartel prices.
Stopping bid-rigging in public procurement markets
The RCC initiated an ex officio investigation into the Romanian insulin market in July 2005. The investigation focused on
the conditions in which the national tender was conducted in 2003 for the human insulin necessary for the implementation of
the National Diabetes Programme, as well as the electronic tenders conducted by hospitals for the procurement of insulin
outside the National Diabetes Programme. The RCC found that the authorized distributors engaged in an anti-competitive
market sharing agreement in order to divide the diabetes product portfolio. For each product there was a single bidder and
authorized distributor, which made the Assessment Commission of the National Diabetes Programme proceed with the
completion of the tender by sole source negotiation. Distributors did not compete with each other within the tender. As a
result, the RCC fined four pharmaceutical companies for partitioning the publicly funded section of the insulin market in
2003 with approximately EUR 22.6 million. Upon the determination of the fine, the RCC noted a per se infringement
regardless of its effect on the market, which lasted for two years (from 2003 until 2005).
Advocacy role to promote competition, protect consumers and fulfill EU requirements
The EU Consumer Credit Directive of 2008 establishes common rules on consumer credit aimed at harmonizing certain
aspects of the laws, regulations and administrative provisions on consumer credit in the EU market. As part of its advocacy
role to promote competitive markets, the RCC recommended the extension of the principles of the Directive over the
mortgage loans or real-estate guaranteed loans, while eliminating or, as case might be, setting a low threshold for the early
repayment fee. This is a step towards full transposition of the EU Directive in Romania. As a result of RCC
recommendations, the Romanian Government adopted the Emergency Ordinance No. 50/2010 on 9 June 2010 that applies to
all credit contracts, including the mortgage credits or credits with other guarantees, as well as loan contracts having as
purpose to obtain or keep the property rights over a land or building which already exists or is comprised in project status,
regardless of the total value of the loan. This measure will increase mobility of consumers among banks and the degree of
transparency of information, which will result in a higher level of competition in the sector.
6. Despite this record, Romania still lags behind EU economies in the application of
competition policy. Compared to counterparts in the region, the RCC exhibits relatively low cartel
enforcement; few anticompetitive business practice cases are concluded in a timely manner; workload
on competition focuses primarily on merger review procedures, with fewer resources available for
conducting advanced economic analysis; and there are few internal targets to track performance of
RCC‘s enforcement activity and advocacy work.
7. To improve current performance the RCC needs to properly address significant
challenges, both internal and external. Discussions with the RCC and other competition
stakeholders have revealed challenges regarding strategic direction, prioritization of efforts, attention
to performance benchmarks and public accountability, as well as ability to overcome countervailing
pressures to successfully complete high impact cases. These threats stem from an environment which
is not conducive to the proper exercise of RCC‘s mandate, an agency mission which may be unduly
broad or diffuse, and capacity constraints which despite notable internal reforms may be overwhelmed
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by actions to cut salaries which in effect could decimate its human assets which account for 80% of its
budget and 100% of its impact.
PRIORITY REFORM AREAS AND RECOMMENDATIONS
8. This functional review proposes that a comprehensive three prong strategy is needed to
fortify Romania’s competitive framework to guide a path conducive to growth. The Government
as a whole must take practical steps to deepen its effort to advance rules and actions supportive of
competition, and strengthen the RCC‘s power to police this commitment. To better fulfill this mission
the RCC in turn should: (i) undertake a major internal restructuring to move personnel and resources
to the front line of competition enforcement especially in identifying and breaking cartels and abuse
of dominance practices (including, and especially by, state owned enterprises) and reduce or eliminate
territorial presence, lesser priority work in mergers and, as soon as feasible, state aids; (ii) undertake
and publish a coherent strategy backed by results indicators to achieve parity with EU comparators in
the core areas; and (iii) strengthen quality control and prioritization of its strategic efforts. Finally, the
RCC should continue its ground breaking efforts to strengthen its capacity through advances toward
program based budgeting, merit based human resource management, modern ITC infrastructure, and
public accountability. All these initiatives to address the RCC‘s enabling environment, mission, and
capacity presuppose that the RCC can attract and maintain its highly educated and motivated staff
through appropriate monetary and non-monetary compensation.
9. Assuming an appropriate level of commitment from the central government to the
RCC’s work through legal changes, budgets, and compensation, the current RCC management
and staff appears well able and committed to improve performance and accelerate its upward
trajectory. There is an impressive degree of commonality of vision within the RCC on the core need
to strengthen competition enforcement, and the fundamental requirement of a shift in focus and
resources. The management of this change program will present the normal challenges and
requirements in terms of funding, communication, external support, etc. However, such a program is
entirely feasible, and more importantly, absolutely necessary to arm the RCC to meet the
requirements of protecting a modern competition framework critical to the country‘s growth.
Reform Area 1: Improving the Governing Environment
10. The depth of knowledge and commitment to competitive market principles within
Romania and its public sector appears shallow and spotty. This is reflected by deficiencies in the
operations of regulatory bodies, the plethora of government actions which impact on competition
without due regard to competition concerns, and a legacy of a large public presence through state
owned enterprises in many economic sectors. This environment in turn reflects a history of state
economic management which has not been fully updated to meet the challenges and reflect the
principles of the market as in other EU partners. Certainly individual countries can and do make
decisions on the extent of public ownership and the role of the state. However, the presence of SOEs
in 14 of 20 sectors with significant and larger participation in the network industries (electricity, gas,
telecommunications and transport) exceeds the EU average. Complementing this, the relative
weakness of sector regulatory agencies such as the energy regulator may reflect the reality that energy
policy is the domain of the relevant SOEs whose performance and financial incentives in terms of
service, profits and employment are not necessarily identical with competitive behavior. While not
the formal target of the RCC review it became clear through interviews with regulators and/or other
interested stakeholders that the regulatory system for key industries is seriously flawed with weak
underfunded agencies frequently ignored by line sector ministries.
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11. Another manifestation of a still partial commitment to competition principles is the
limited role played in practice by the RCC in reviewing and changing inappropriate draft
legislation and government decrees and ordinances impacting competition. Too frequently the
view of the RCC is not sought (many times because other government agencies are unaware of
competition principles and/or more driven by short term sector priorities), or the RCC‘s opinions are
overridden without due consideration or explanation. Drafts for review are also presented to the RCC
with unpredictable and short deadlines (reflecting in fact the lack of broader government
prioritization, strategic planning, and vetting of proposals by senior officials), overwhelming the
capacity of the RCC to respond quickly.
Key Reform Options:
Reform Area Specific Actions Timeline
Mainstream competition
policy within the
government
Create of competition advocacy unit to deter anticompetitive regulation.
Refocus RCC activities in the domain of State Aid towards analyzing
their potential distortions on competition.
Strengthen competition advocacy in public and government bodies.
Short term
Short term
Medium
Term
Strengthen regulatory
agencies
Review the regulatory framework and governance of key economic
sectors (energy, telecommunications and transport) including the role of
respective regulatory agencies to identify means to strengthen their
capacity and ability to oversee their sectors to promote competitive
markets.
Short to
Medium
Term
Revise RCC’s legislative
mandate to promote
competition
An ordinance has been issued and parliamentary action is anticipated in
the near term. The ordinance should maintain important improvements
and be further strengthened along the following lines:
Include the concept of ―undertaking‖ as defined by EC case law.
Abolish the notification system of individual exemptions.
Amend to include the main concepts of economic concentration
and change from dominance test to the SIEC test (significant
impediment of effective competition test).
Include the presumption that undertakings with less than 40% in
the relevant market do not have dominant position.
Include a provision to guarantee that the RCC will need to
establish and verify the lack of competition in the market under
scrutiny before the Government decides to impose particular price
controls.
Review the effects of criminal sanctions on corporate leniency.
Improve provisions to guarantee accountability of Board
Members, such as the establishment of quarantine periods and a
more competitive appointment process.
Reduce merger thresholds and streamline and apply simplified
merger procedures.
Evaluate legality and inclusion of settlements procedures.
Secondary legislation to adjust to the new Competition Law will also
need to be promulgated.
Short
Term
Reform Area 2: Sharpening the RCC’s Mission
12. The RCC, despite continued improvements, needs to better mobilize its resources to
attack core anti-competitive behavior. Reflecting its legacy as a merger in 2004 of a price control
agency with offices throughout the country with a more focused competition agency, the RCC
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diffuses its staff and resources across several priorities. The packaging of Romania‘s State Aid
proposals (initiatives to help firms or regions restricted and reviewed by the EU) demands staff and
management attention. This also inevitably raises issues of conflicts of interest and possible policy
confusion as the RCC simultaneously seeks to eliminate anti-competitive behavior on the one hand
and in effect protect some firms from competition on the other. Offices are manned in all 42 counties
regardless of economic size and threat to competition or impact on consumers. Currently, staff in
territorial offices account for 30% of RCC‘s total staff. Mergers are reviewed extensively, but rarely
require RCC intervention. Considerable time is spent on ―advocacy‖, promoting awareness of
competition principles, but much seems of marginal value. Most importantly the RCC is organized on
sectoral grounds—developing impressive expertise on certain industries but without necessarily
cultivating and leveraging to the maximum core talents and focus on competition enforcement, cartel
busting, and investigation of abuse of dominance issues. The RCC needs to restructure itself, shift
resources to enhance specialization, and better prioritize its activities, if its wishes to meet its goal of
achieving parity with EU counterparts.
Reform Options:
Reform Area Specific Actions Timeline
Restructure the RCC
along business lines Gradually restructure the organization to aim at ensuring that at least
70% of resources are focused on competition enforcement. As a first
step, a separate unit for hard-core cartels should be established in order to
gradually move the organization towards business lines.
Expand Competition Divisions, Legal and Economics Research unit.
Review the business need for the current distribution of territorial offices,
and where appropriate close, consolidate, and reduce those offices to
reflect real threats to competition. Staff or their positions could be
shifted to higher priority business practices.
Short
Term
Strengthen strategic
planning and results
focus towards increasing
enforcement record
Complete RCC strategy document based on a broad participatory process
with specific targets based on EU parity, planned actions, deadlines,
monitoring indicators and outcome goals understandable to agency
stakeholders and the general public.
Establish internal deadlines and performance metrics for competition
cases.
Modify current Protocols with regulatory agencies to establish targets in
terms of successful promotion of competition (e.g. removal of barriers to
entry in the sector or elimination of anti-competitive regulation).
Communicate performance targets in Annual Report and webpage.
Short
Term
Reform Area 3: Improve Underlying Capacity
13. Complementing the reforms proposed above, the RCC should redouble its initiatives to
improve its human resource and financial management, information technology, and internal
management. The RCC can be seen as an example of a Romanian public organization which is
striving, within the constraints of an unduly rigid and outmoded general public administration, to
improve its performance, focus on results, pilot various administrative initiatives, increase the value
provided to taxpayers, and in general run its affairs in line with modern management principles. The
challenges confronting the RCC fortunately do not include serious deficiencies in administration,
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motivation, or leadership. The competence of the RCC seems to be widely respected by stakeholders
in both the Romanian public and private sectors. One former sector regulator has characterized the
RCC as the ―hope‖ for ensuring greater compliance with EU competition standards, and a
representative of an association of private businesses stated that the RCC was on its way to achieve
the level of professionalism and reputation enjoyed by the Romanian Central Bank. The proposed
adjustments would enhance the RCC‘s progress toward becoming a recognized center of excellence.
Key Reform Options:
Reform Area Specific Actions Timeline
Ensure the
competitiveness of RCC
compensation
The Government should take practical steps to ensure the market
competitiveness of RCC competition inspectors‘ salaries. Without
such a positive decision the RCC will be hollowed out of its
capacity with serious consequences for competition policy
effectiveness.
Short,
medium,
and long
term
Adjust staff skills in line
with business needs
Categorize competition inspectors, case handlers and support, e.g.
paralegal, staff based on job competencies requirements.
Define job competencies with education and skills required for each
position as basis for training programs and evaluations.
Ensure periodic rotation of personnel and flexibility in assigning
teams.
Strengthen the skills and experience of staff in key areas of
competition work.
Short
Term
Short
Term
Short to
Medium
Term
Short to
Medium
Term
Better integrate
information technology.
premises, etc.
Conduct a thorough assessment of ITC needs, for RCC
administrative and investigative functions.
Short to
Medium
Term
Managing Change
14. Implementing the proposals outlined above will require commitment and resources.
The RCC deliberately requested a functional review by the Bank—clearly reflecting this commitment
to strengthening its performance at the price of publicly manifesting its weaknesses and challenges. A
reform agenda has been discussed extensively within the RCC management, Board, and staff, and
there appears to be considerable pride in the RCC and desire to sharpen its focus on competition
enforcement. Leadership, commitment, and vision, however critical, would be insufficient without
support from the broader government for the required legal and policy changes or practical inputs of
technical and financial assistance. Senior government officials need to well understand the critical
linkage between a sound competitive environment and Romania‘s growth prospects and act to
strengthen that legal and regulatory environment. For its part, the RCC is developing a time bound
action plan identifying external resource requirements. A preliminary estimate totals Euro 3 million
to fund technical assistance and training to strengthen enforcement capacity and economic analysis,
establish a modern forensic lab, modernize RCC‘s information technology, increase security of RCC
premises, facilitate change management, and fund adjustments in the deployment of territorial offices
and staff.
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15. Finally, an immediate overarching concern is whether the RCC efforts to improve
performance can be advanced given the fiscal crisis as the ongoing pay cuts could significantly
undermine the RCC‘s capacity, institutional memory, and ability to attract or retain the talent needed
to deal effectively with increasingly sophisticated and better funded private businesses. Care must be
taken in the short term to preserve and protect the RCC‘s capacity to foster Romania‘s growth in the
long term.
10
I. CONTEXT AND PURPOSE OF REVIEW
1. The review of the Romanian Competition Council (RCC) is part of the broader
strategic and functional assessment of Romania’s central public administration being undertaken
by the World Bank on behalf of the Government of Romania (GoR) as laid out in the June 2009
Memorandum of Understanding.
The Review’s specific objective is to help identify legal, strategic, and organizational measures to
strengthen the RCC’s effectiveness in competition policy articulation and implementation with the
goal of enhancing competitive domestic markets. Fostering competitive markets is a core part of the
government’s strategy to increase productivity and improve consumer welfare and thus the
conditions for sustainable economic growth.
2. This report sets out the key observations and recommendations garnered during three
visits to Bucharest by the Review team in May, July and September 2010, as well from assessments of
relevant RCC documents, a questionnaire based survey of RCC headquarters and field based staff and
middle management, reports from ―horizontal‖ experts used by the World Bank to review cross
cutting functions such as human resource and financial management practices within the Romanian
public sector, and comparisons with EU and global practices of counterpart competition agencies.
Intensive series of discussions were conducted with RCC Board members, management, and staff, as
well as with public and private sector representatives who interact with the RCC, and with EU
officials in DG Competition. The findings and recommendations have been vetted with RCC and
other stakeholders. This report is organized to focus on the RCC‘s mandate and substantive
performance, on its organization and management practices to fulfill its role, and on the presentation
of proposals for improving the RCC‘s effectiveness.
II. MANDATE OF THE RCC
3. International experience provides evidence of the substantial benefits to consumers,
firms and overall economic growth of an effective competition policy. Several studies have been
conducted in other economies in order to assess the impact of effective competition rules. In
Australia, estimates suggest that the economy wide gains from the effects of competition policies on
productivity improvements and price changes in key infrastructure areas during the 1990s boosted
Australia‘s GDP by 2.5 per cent or $20 billion2. This is a conservative estimate that does not consider
the effects of dynamic efficiency gains from more competitive markets. Likewise, conservative
estimates for the UK suggest that direct consumer savings resulting from the enforcement of
competition law are worth $112 million a year. In the case of Netherlands, the outcome of the
competition agency‘s actions to Dutch society is estimated at EUR 328 million, which is a 3-year
rolling average3. Finally, recent studies also provide evidence that budgetary commitments to
competition agencies institutions yield economic benefits in terms of improved economic growth
2Productivity Commission, 2005, Review of National Competition Policy Reforms, Canberra. Crawford (2009). Recent
Developments in Competition Policy. Presented at the ACT Economic Society. 3 The NMa‘s outcome is determined using a method that was revised in 2008.
11
since they are associated with higher levels of per-capita GDP growth4. In the case of Romania, an
effective implementation of competition policy could have significant spillover effects given the
current level of government participation and involvement in key markets, where many SOEs still are
dominant players and full liberalization has not yet taken place.
4. The RCC was created in the mid 1990’s as an independent administrative body in
charge of the enforcement of competition policies and state aid authorizations in Romania5. The
RCC carries out its activity based on the attributions of Competition Law no.21/1996, subsequently
updated, aiming at protecting, maintaining and stimulating a normal competition environment so as to
promote consumers‘ interests. In accordance with EU and international standards, the Romanian
Competition Law was designed to prohibit anti-competitive practices, set rules for economic
concentrations and provide power to enforce legal rules. The competition authority also adopted a
full body of secondary legislation, which was subsequently amended and completed during the
process of harmonization with the acquis communautaire.6
5. In practical terms, the RCC is tasked with investigating complaints (or initiating its own
ex officio investigations) on a typology of competition law infringements (Box 1). Depending on
the results of the investigations (which use typical competition investigative tools such as ―dawn
raids‖ on businesses to collect evidence, sophisticated economic analysis, review of business sector
practices, and legal assessment of relevant national and EU legislation and case law), the staff
inspectors prepare a report that is presented to the RCC‘s Board of Counselors. Following a hearing
with relevant parties, the Board issues its final decision on the case. If there is sufficient evidence that
the competition law has been infringed, the RCC can issue a cease order and levy a fine on those
businesses found guilty of anti-competitive behavior. The decisions issued by RCC may be
challenged at the Bucharest Court of Appeals, while the decisions of the Court of Appeals may be
also appealed to the High Court of Cassation and Justice. The RCC is frequently called upon to
defend in court its findings and fines, should the affected businesses appeal RCC decisions. The
fines, accruing to the state, can be significant to the firm (up to 10% of firm turnover) and can exceed
the RCC‘s annual budget.
6. The RCC is also the national contact authority for State Aid schemes. This second area
of concentration involves reviewing proposals within the Romanian government to provide aid to
businesses (whether privately or publicly owned) in order to ensure that ―state aid‖ conforms to
restrictive EU guidelines for such practices. After Romania‘s accession to the EU, the State Aid
Community legislation became directly applicable in Romania, with the EC overseeing the State Aid
authorization process. The RCC represents Romania in front of the EC on state aid issues and serves
as the focal point in relations between the EC and the authorities, public institutions, State aid
grantors, and beneficiaries in Romania.
4 Clougherty (2009). Competition Policy Trends And Economic Growth: Crossnational Empirical Evidence. WZB Berlin
and CEPR Discussion Paper No. 7515. October, 2009 5 Since 2004, the RCC is the only institution entrusted with the application of competition rules after the government
eliminated the Competition Office (a specialized institution within the Romanian Government, with 42 local inspectorates). 6 Background section based on excerpts/analysis of the OECD report, Jan. 2009.
12
Box 2: Competition Policies and their application in the EU Legislation7
Competition policies are defined as the set of policies and laws which ensure that competition in the marketplace is not restricted in
such a way as to reduce economic welfare.8 In practical terms, competition policy usually involves the enforcement of antitrust
laws (typically rules against anticompetitive business conduct and mergers) and the promotion of measures to enable firm entry and
rivalry, typically called competition advocacy.9
The Treaty of the Functioning of the European Union covers competition rules in Articles 101 to 106.10 The main objectives of
competition policy as enforced by the EC are economic efficiency and European market integration. As Figure 1 shows, Articles
101 and 102 of the Treaty deal with anticompetitive business practices resulting from coordinating behavior between competitors
and from unilateral conducts of firms with significant market power. In addition, Merger Regulations provide rules to assess the
potential competitive harm of horizontal, vertical and conglomerate mergers and economic concentrations. Merger rules are
concerned with economic concentrations that will later significantly restrict effective competition in the market. In this sense,
articles 101 and 102 regulate conduct of firms while Merger Regulations focus on the structure and consolidation of markets.
While the DG Competition of the EC enforces competition rules at the Community level (in cases where the behavior has an inter-
state effect within the EU), these rules are part of the law of each Member State being directly enforced by national courts and
National Competition Authorities at the Member States‘ level.
Figure 2: Typology of Competition and State Aid Rules in the EC Law
The scope of the application of EC rules on State Aids extends to any State Aid which distorts or threatens to distort competition by
favoring certain markets or firms (either private or public). The criteria for application include the following: (i) there must be an
intervention by the State or through State resources; (ii) the intervention must be liable to affect trade between Member States; (iii)
the intervention must confer an advantage on the recipient; and (iv) it must distort or threaten to distort competition.
Finally, and similar to other competition authorities, the RCC engages in various advocacy efforts
including:
Identifying anticompetitive public regulatory interventions and rulemaking, and proposing
recommendations that government bodies undertake pro-competitive reforms.
7 Provisions are those of the Treaty of Rome consolidated by the Lisbon Treaty that in the substance did not change the
original provisions on competition. 8 Motta (2004). Competition Policy. Cambridge Books, Cambridge University Press. 9 For more detailed, see ICN Report on Assessment of ICN Members‘ Requirements and Recommendations on Further ICN
Work on Competition Advocacy, 2009. 10 Official Journal C 83 of 30.3.2010.
Horizontal and Vertical Agreements
Article 101 1/
• Price fixing and conditions of commercialization•Market sharing agreements•Bid rigging schemes•Discriminatory treatment and tie-in agreements•Resale price maintenance
Source: Treaty of the Functioning of the European Union. Rules on Competition1/ Prohibition does not apply to particular agreements (R&D, distribution) that do not distort competition.2/ It requires the existence of a dominant position 3/ Aid can be granted in specific circumstances (e.g. to promote the economic development of areas where the standard of living is abnormally low).
Abuse of dominant position Article 102 2/
•Refusals to deal or supply•Unjustified price discrimination and selective discounts•Vertical restraints (exclusive contracts, tie-ins)•Market sharing agreements•Predatory pricing and cross subsidies.•Discount and rebate schemes •Excessive pricing
Mergers and Economic Concentrations
Merger Regulation 139/2004
•Analysis of the competitive effects of situations where the operation allows a firm to take de facto control of the operations of another firm.
State aidsArticle 87 3/
•Prohibition of any State aid that distorts or threatens to distort competition by favoring certain undertakings or the production of certain goods .
13
Raising awareness of the benefits of competition policy to all constituencies, including other
public authorities in charge of regulation or rule making, judicial authorities, consumer associations,
and the academic and business communities
III. PERFORMANCE OF THE RCC
7. Even though significant progress has been made in the last few years, Romania still lags
behind EU economies in the application of competition policy. According to the Global
Competitiveness Report 2009, Romania ranks fourth from the bottom in the effectiveness of anti-
monopoly policy for EU economies.
Figure 3 : Effectiveness of anti-monopoly policy (1)
2009
Source: Global Competitiveness Report (1) Results to the question "To what extent does anti-monopoly policy promote competition in your country? (1 = does not promote
competition; 7 = effectively promotes competition").
8. Based on information provided by the agency11
, the RCC concentrates on the following
activities, which in turn can be assessed in terms of comparative EU performance:
Enforcement of anticompetitive business practices. Investigations into possible
anticompetitive behavior, such as cartels and abuse of dominance, potentially leading to fines if the
law has been infringed.
Merger reviews. Evaluation of notified economic concentrations to assess their impact on
competition. The review process concludes with an unconditional approval, a conditional approval
subject to the imposition of behavioral or structural remedies, or a prohibition of the proposed
transaction.
Sector inquiries. Investigations of the structure and performance of selected markets in order
to provide recommendations to improve the competitive performance of selected sectors.
Review and revision of regulations and laws. Revision of public regulatory interventions
and rule making in order to guarantee that public policies do not adversely affect market competition.
11 Annex 1 provides more detail on the information requests to the RCC. Information contained in this report has been
updated from the last RCC submission, which rectifies and adjusts the previous two submissions.
3 3.5 4 4.5 5 5.5 6
netherlands
sweden
germany
denmark
finland
france
austria
belgium
luxembourg
united kingdom
ireland
czech republic
slovak republic
spain
portugal
poland
greece
hungary
latvia
romania
italy
bulgaria
lithuania
14
State aids. Monitoring of State Aid Schemes at the national level and coordination of
schemes between grantors and receivers of State Aids.
Other advocacy activities. Activities related to raising awareness of the importance of
competition policy implementation and compliance.
Anticompetitive Business Practices and Merger Reviews
9. Significant progress has been made but the RCC still lags behind in the enforcement of
anticompetitive business practices compared to competition agencies in the EU12
. According to
the information available, during the period 2007-2010, the RCC opened 30 cartels and four abuse of
dominant position formal cases. However, it finalized only seven cartel cases. None of the formal
cases on abuse of dominance has been concluded even though six of these cases were initiated before
2007 (Table 1)13
.
Table 1: Anticompetitive Enforcement – Formal Cases
Year 2007 2008 2009 2010 2007-2010
Cartels A
O
D
Oth
ers
Cart
els
A
O
D
Oth
ers
Cart
els
A
O
D
Oth
ers
Cart
els
A
O
D
Oth
ers
Cart
els
A
O
D
Oth
ers
Cases opened (1) 4 0 6 6 0 4 10 3 13 10 1 0 30 4 23
Cases finalized
(2)
0 0 3 3 0 4 2 0 2 2 0 1 7 0 10
Cases under investigation (3)
9 6 13 15 6 14 22 9 23 30 10 21 35 10 31
Source: RCC Considering only cases that were opened
(1) Case opened by year of decision of end of pre-investigation. Includes cases where the result of the preliminary investigation was to move
forward with a full investigation (formal case). (2) Case finalized by year of final decision
(3) Cases analyzed in a given year
Others include vertical agreements, prohibited actions by the central or local public administrative body and mixed cases (alleged practices against articles 5, 6 and 9).
Although the number of cases completed does not necessarily measure the quality or the impact of the
investigations, Figure 4 a) shows that the RCC, in contrast to other agencies in the region, finalizes a
relatively low number of cases, even when comparing to agencies of relatively smaller economies.
Figure 4 b) presents the percentage of cases completed relative to cases under investigation for both
abuse of dominance and cartel cases - which can be used as a proxy indicator of timely service
delivery. For the RCC, the percentage of cases completed relative to the cases under investigation is
20% and 8% for the years 2008 and 2009 respectively, while other economies average 50%.
12 Annex 2 provides more detailed statistical information. 13 Investigations referred to preliminary investigations (analyzed by the RCC staff but that do not necessarily conclude in a
formal case) and full investigations conducted by the RCC (which do conclude in a formal case). A preliminary investigation
refers to limited scope inquiry undertaken to verify whether an allegation merits a full investigation.
15
Figure 4: Anticompetitive Business Practices Enforcement: Case statistics in the Europe Region, 2008
a) b)
Source: RCC and Annual Reports of Competition Authorities.
10. Merger review cases account for the bulk of the workload in the competition area,
although most of the cases analyzed posed no significant threat to competition. For the period
2007-2010, up to 56% of the competition related cases involved merger reviews (Figure 5).
Excluding sector inquiries and revisions to laws and regulations, this percentage increases to 70% -
which in turn means that only 30% of formal cases involved a potential anticompetitive business
practice. In addition, only 2% of the merger notifications were considered for Phase 2 revision (i.e.
for a deeper analysis of their impact on competition), while the rest were cleared without major
revisions.
Figure 5: Number of formal cases by practice area
Source: RCC
By date of opening a case
11. Consistent with international practice, the RCC has established deadlines for each of the
stages of a merger review process investigation. However, the RCC has not established internal
0 50 100
slovenia
romania -2009
romania -2008
denmark
finland
spain
hungary
netherlands
italy
lithuania
estonia
germany
portugal
belgium
letonia
bulgaria
sweden
france
poland
Completed
0% 50% 100%
romania 2009
spain
romania 2008
portugal
lithuania
france
italy
poland
netherlands
sweden
germany
slovenia
letonia
bulgaria
Percentage (completed/under investigation)
latvia
latvia
16
deadlines for anticompetitive practice cases. During the period 2007-2010, the average length of
time of formal cases has steadily increased over the years from around 100 days in 2007 to more than
1000 in 2010, due to the accumulation of a large backlog of open investigations. The average length
for preliminary investigations that lead to formal cases and for preliminary investigations that were
closed was 133 days and 38 days, respectively. In addition, the time formal cases have been open has
expanded over these years from a maximum of two to three years in 2007 to five years in 2010. In
general, if cases are not solved in a timely manner the benefit of the intervention is significantly
reduced.14
Figure 6: Average Length (Duration) of Anticompetitive Practices Investigations
Source: RCC
12. During 2009, 79% of the competition cases that received final judgments by courts
where favorable to the decision made by the RCC. As a result, out of the total fines applied
through the acts contested in the 14 cases, 80% were confirmed irrevocably by the courts, with
sanctions amounting to 11,697,544.1 Lei confirmed by courts. On average, court cases have
duration of less than 3 years.
13. As highlighted in its Annual Report 2009, the RCC is pursuing a plan to be more
proactive in the field of competition and has recently initiated several ex- officio investigations.
Unlike other agencies that often rely on complaints as a source of their competition enforcement, the
RCC starts a greater proportion of investigations on its own initiative - over 50% during the period
2007-2010. However, it is worth noting that the RCC receives a relatively low number of formal
complaints per year.
14. While the number of preliminary investigations initiated by the RCC has steadily
increased over time, only 24% of preliminary ex officio investigations became formal cases.
During 2007-2010, the RCC started 250 preliminary investigations and 57 formal cases, which
accounts for 23% of the total number of investigations. Preliminary investigations have been initiated
14 According to the RCC, the increased duration of completed cases in 2010 is due to the fact that a large number of dormant
cases were closed.
0
200
400
600
800
1000
1200
Preliminary open Preliminary closed Formal cases Preliminary pending Formal pending
2007 2008 2009 2010
17
through different means: by initiative of the RCC (ex officio), through formal complaints received
from undertakings (complaints) and through less formal complaints (others). In general, the
expectation that a preliminary investigation initiated by the competition agency becomes a formal
case is relatively high since competition authorities tend to open preliminary investigations in sectors
where there is strong evidence and high enforcement impact.
15. Information provided by the RCC reveals that, in relative terms, investigations and
complaints related to abuse of dominant position are less likely to conclude in a formal case
than investigations related to cartels and horizontal agreements. During the period 2007-2010,
the RCC did not open full investigation on 34% of alleged cartels and horizontal agreements. In the
case of abuse of dominant position, the RCC closed preliminary investigations and did not open
formal cases in 73% of the investigations.
Table 2: Anticompetitive Business Practice Enforcement- Preliminary Investigations
2007 2008 2009 2010 2007-2010
Cartel
s
AO
D
Other
s
Cartel
s
AO
D
Other
s
Cartel
s
AO
D
Other
s
Cartel
s
AO
D
Other
s
Cartel
s
AO
D
Other
s
Started (1) 6 13 9 21 22 3 13 32 8 49 17 4 89 84 24
Not
opened
(2)
4 10 9 11 12 3 12 14 8 3 15 4 30 61 24
Current
(3)
6 13 7 27 21 3 15 32 9 49 19 2 95 83 24
(1) Investigation started by year starting of pre investigation
(2) By year of preliminary stage decision (3) Investigations analyzed in a given year
16. The sharp expansion in investigations may perversely be contributing to relatively low
cartel enforcement given the need to disperse resources to cover the workload. From the point of
view of effective enforcement, it is better to concentrate on high impact cases rather than increasing
the number of open investigations –something the RCC highlights15
- that might not lead to significant
savings for consumers or improvements in the competition conditions of the markets. A better
approach would be to select fewer investigations that will lead to high profile cases in selected sectors
while setting deadlines to investigation currently in the pipeline. Competition agencies such as the
NMa (Netherlands) and OFT (UK) have established or are in the process of establishing target
timescales for internal monitoring, which enhances prioritization of case openings and also helps
identify cases that need to be closed if there is not strong enough evidence to continue.
15 According to RCC‘s Annual Report: ―The proactive activity of the competition authority for identifying and sanctioning
the anticompetitive practices had as a result the significant increase of the ex-officio investigations, which increased in 2009
by 130% compared to the previous year‖.
18
Figure 7: Staff of Competition Agencies, 2008
Source: GCR, RCC.
Figure 8: Percentage of staff working full time on competition enforcement, 2008
Source: GCR , RCC The estimates for RCC have been calculated using two scenarios: Romania upper bound assumes that 270 staff from legal, research and
territorial offices devote 50% of their time to competition enforcement, while Romania lower bound assumes only staff full time dedicated
to competition matters.
17. Even though in absolute terms the RCC seems to be adequately staffed, the allocation of
staff to practice areas reveals relatively low staffing levels for competition enforcement areas
relative to comparable EU competition agencies. The RCC ranks 4th compared to other agencies in
the region (Figure 7); and it is relatively well staffed even after considering different scopes of
functions and mandates,16
(Annex 3). However, a more detailed analysis of staff dedicated to
16 Generally, governments set up institutions for enforcing competition laws and/or performing other tasks in the competition
policy area. For instance, competition authorities can also be in charge of applying consumer protection, unfair competition
and advertisement rules as well as a coordinating and monitoring state aids schemes.
0
100
200
300
400
500
600
700uk o
ft
neth
erland
rom
ania
pola
nd
germ
any
italy
spain
france
uk c
c
denm
ark
czech r
epublic
hungary
sw
eden
port
ugal
gre
ece
slo
vakia
finla
nd
sw
itzerland
irela
nd
belg
ium
ca
austr
ia
belg
ium
cc
638
395
308 296 269 266
198158 153 143
126 120 11883 81 73 69 65 53 40 27 21
20
30
40
50
60
70
80
90
100
aust
ria
belg
ium
ca
belg
ium
cc
euro
pe
spai
n
switz
erla
nd
portu
gal
finla
nd
germ
any
franc
e
uk c
c
slov
akia
swed
en
hung
ary
gree
ce
irela
nd
neth
erla
nd
pola
nd
italy
denm
ark
rom
ania
-up
per …
czec
h re
publ
ic
uk o
ft
rom
ania
-lo
wer
…
% o
f sta
ff c
ompe
titio
n
19
competition enforcement reveals that it lags on the number of full-time staff dedicated to competition
enforcement (Figure 8).17
18. A more detailed analysis of the allocation of staff by RCC division reveals that the
Competition Inspectorates account for 25% of the total RCC staff, even though they are the
main units responsible for carrying out the competition enforcement. Moreover, 33% of staff is
scattered around in territorial offices throughout the country without specific performance measures
and target deadlines. This revealed preference seems inconsistent with the objective of detecting and
sanctioning severely the infringements of competition rules as indicated in the RCC 2009 Annual
Report.
Figure 9: Allocation of Staff by RCC Division
Source: RCC
Includes headquarters and territorial offices.
Territorial division includes staff working at Territorial - central office, as well as territorial office outside headquarters. July 2010. Internal Audit Unit – one staff – not included.
19. The RCC management has also encouraged territorial offices, accounting for 33% of
RCC staff, to allocate resources to competition work at the local level, which has resulted in a
significant increase in the participation of territorial offices in preliminary investigations.
Previously, territorial offices devoted more resources to monitoring state aid and conducting advocacy
activities. Currently, according to information provided by the RCC, 97% of current preliminary
investigations and 44% of ongoing formal cases have the participation of at least one territorial office.
Table 3: Participation of territorial offices on current investigations- July 2010
Total Total (ongoing) Number of investigations with
Participation of Territorial Office
% of participation
Preliminary
investigations
59 57 97%
Formal cases 41 18 44%
Data contains investigations initiated as complaint, ex officio, intimation, and individual exemptions. Source: RCC.
17 Under a more optimistic scenario, more than 50% of staff in the Legal Directorate can be considered as working in
competition enforcement because 90% of them are somehow involved in competition law enforcement: in administrative
proceedings phase; as legal adviser to the rapporteur and in some cases as investigation team members; in the phase of
judicial process, in supporting the legality of decisions of the RCC.
20
20. Even though territorial offices may assist in addressing anticompetitive behavior and
competition constraints at the local level, the RCC needs to carefully select investigations that
are related to strategic goals and could lead to significant impact for enforcement purposes.
Given the amount of human resources deployed in territorial offices, it is understandable that the RCC
management would like to shift their role to the detection of anticompetitive behavior at the local
level. However, there is a risk that this will result in an increase in preliminary investigations as local
offices may try to signal their productivity by opening more investigations that too frequently have
little merit. Territorial offices will need to understand clearly what is expected from them and how
they are contributing to the larger goals of the RCC. In addition, during the field visit conducted to
one of the largest territorial offices, it became apparent that almost all the inspectors participate in all
the cases while it was not clear who was leading the investigation. An analysis of the workload of the
territorial offices also reveals that team composition varies significantly with investigations with an
average of four inspectors for preliminary investigations and 10 competition inspectors for formal
cases. The RCC should carefully evaluate whether a more concentrated organization in headquarters
could lead to enhanced results in the long run.
Table 4: Number of team members in territorial offices per type of investigation- July 2010
Min Average Max Mode
Preliminary investigations 1 4 82 2
Formal cases 1 10 49 1
Total 1 6 82 2
21. Currently, the RCC’s competition enforcement is organized by sectors (services,
consumer goods and industry/energy). However, specialization by business line area could lead
to better results given that the final objective of a competition authority is to detect different
anticompetitive behaviors, an activity that requires a distinct set of agency tools and skills.
Cartel detection, especially for hard-core cartels, requires the development of effective alternative
policy instruments (leniency, settlements, commitments) as well as the strengthening of investigative
tools (effective planning of investigations, interviewing techniques, conducting dawn raids, gathering
evidence including digital evidence, etc.). A deep understanding of the industry is less important for
cartel investigations. Abuse of dominance and merger reviews require strong economic tools in
industrial organization and econometrics in order to assess anti-competitive harm and understand firm
behavior. For example, an in-depth understanding of economies of scale and scope, cost of entry,
differentiation of products in the market and theories of firms‘ behavior is essential for assessing these
types of cases. Sectoral specialization without the development of this distinct set of skills will not
lead to an effective enforcement record.
22. In addition, international experience shows that successful investigation of hard-core
cartels requires prioritization and specialization. According to the ICN, the prioritization of cartel
enforcement, increased staffing of cartel units and dedicated cartel specialists were the most important
changes for successful competition enforcement. For instance, the Brazilian competition authority
announced its focus on anti-cartel enforcement and undertook several initiatives in order to tackle
high impact cases, including the establishment of specialized units on cartel detection. In the case of
the Netherlands, the Competition Authority (NMa) prioritized its enforcement effort towards
detection of bid rigging and cartels in the construction industry. As part of this initiative, the NMa
21
developed special guidelines and procedures (the so-called fast track procedure) for which companies
could opt as an alternative to the regular sanction procedure.
Figure 10: Institutional Changes in Anti-Cartel Enforcement
Source: ICN
23. The International Competition Network also recognizes that an organization by sectors
may negatively affect agency effectiveness. A business line area-based approach is necessary when
the different instruments require very different skills (e.g. cartel investigations vs. merger reviews). A
division by economic sectors where some work is discretionary and other work is not (e.g. merger
cases are obligatory but other cases are discretionary) could result in the obligatory work crowding
out the discretionary work. For this reason, flexibility in re-allocation of resources internally (i.e. a
project-based allocation of resources) is essential.
24. Given the characteristics of the Romanian economy, sectoral specialization is more
critical for analysis of abuse of dominant positions and merger review than for cartel detection.
This stems from the fact that the Romanian economy is characterized by large and dominant SOEs,
potential cartels in local markets and public bodies issuing anti-competitive regulations.
25. An organization by business line will lead to more effective performance. Benefits of a
deeper specialization on anticompetitive practice will include: (i) increasing the number of detected
hard-core cartels and the use of alternative instruments, (ii) closing cases in a timely manner since
resources will not be crowded out to solve merger cases, (iii) more resources dedicated to tackle
complicated abuse of dominant cases and mergers, and (iv) more effective advocacy by focusing
sector expertise towards identifying anticompetitive regulation. In addition, common standards for
the analysis of anti-competitive practices will emerge within the RCC which should be supported with
the enactment of internal guidelines to analyze each different anti-competitive behavior in practical
terms.
26. A first step to increase RCC’s output and performance would be to restructure the RCC in
such a way that a special unit is set up with well trained staff which can fully concentrate on fighting
anticompetitive conducts (specifically hard-core cartels). In addition, the output could further improve
22
if more result oriented working methods were put into place. This would involve working with dedicated
teams, using protocols/manuals, defining milestones and clear deadlines.
27. The RCC’s enforcement record could benefit from the implementation of a wider and
mixed range of enforcement tools that are currently used by many European counterparts. In
cartel detection, the competition framework gives the RCC two important powers - the ability to
conduct dawn raids and to apply a leniency program. The RCC seems to have used some of these
powers, conducting an average of 12 dawn raids per year. Leniency applications have also been
received in the past years. However the current legislative framework does not allow for settlement
procedures.18
The new Competition Ordinance has included the acceptance of commitments and order
of cease of anticompetitive practices. In general, compliance programs, leniency, commitments and
direct settlements are being used by competition authorities as effective tools for combating cartels.
Top competition authorities are aware of the importance of all the tools available for effective cartel
enforcement and have been using them as alternatives to avoid lengthy investigations. For instance,
commitments can be used in non- hard core cartel cases and abuse of dominance cases where the
recognition of the anticompetitive effects of the practice can lead to their rapid elimination.
28. Investigative and empirical tools to conduct economic analysis could be further
mainstreamed. In the case of mergers and abuse of dominance cases, the RCC recognizes a need to
strengthen economic analysis tools applied to the evaluation of these cases, in particular in the case of
relevant market definition and competitive effects estimation, as well as estimation of fines and
damages. However the relatively limited number of staff in the Economics Research Department is a
constraint. Moreover, compared to EU counterparts, the RCC lags behind in the number of
competition and industrial organization trained economists.
Figure 11: Agency’s PhD economists
(X: no stand-alone economic office)
Source: GCR, RCC
29. In addition, the new changes to the legislation that change the analysis of mergers from a
dominance test to a substantial impediment of effective competition test (SIEC) will demand a larger
18
Procedures that involve settling cases by consent, with companies involved agreeing to pay a reduced fine.
0
2
4
6
8
10
12
14
16
18
20
italy
germ
any
france
sw
eden
uk o
ft
neth
erla
nd
port
ugal
sw
itzerla
nd
pola
nd
uk c
c
hungary
spain
fin
land
irela
nd
rom
ania
belg
ium
ca
belg
ium
cc
czech r
epublic
denm
ark
gre
ece
slo
vakia
X
X
X
X
X
X X
X X X
23
set of empirical and theoretical economic skills. For instance, it is likely that there will be a higher
demand for econometric tools used in estimating demand and competitive effects.
30. Even though the Research and Synthesis Directorate has started to use statistical
methods in competition cases, more resources and skills need to be devoted to economic analysis
in order to achieve EU parity. For instance, the Research and Synthesis Directorate has started
applying econometric techniques to quantify damages (horizontal agreements among bakeries in
several counties), provided input to sector inquiries and has an initiative to develop competition
indicators. However, there is still need to develop skills to include economic analysis in each
competition case, analyze competitive effects of mergers, estimate the impact of competition
interventions and assess theories of anticompetitive harm in vertical cases. Currently the Economics
Department of the RCC lags behind in being the ―think-tank‖ of the institution.
Figure 12: Focus thematic area – Staff survey19
Source: Staff Survey
31. In addition, competition authorities in the region reflect a different organizational
structure than the RCC.20
A majority of agencies either divide their work by main business areas
(cartels, abuse of dominance, mergers) rather than economic sectors or have units exclusively devoted
to cartel enforcement (unlike the RCC). Another pattern that emerges is that top competition agencies
around the world –e.g. US Federal Trade Commission and Department of Justice, UK Competition
Commission, NMa Netherlands - allocate a relatively higher amount of staff resources (averaging
19 An econometric analysis of the staff survey – which is summarized in Annex 5 – reveals that staff that worked in the
state aid field are more likely to consider state aid as a topic of focus for the RCC as a whole, while younger staff are more
likely to consider cartel and competition cases as a priority for RCC. 20 Sample of countries analyzed include: Albania, Armenia, Austria, Belgium, Bulgaria, Czech Republic, Croatia, Denmark,
Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Macedonia,
Netherlands, Norway, Poland, Portugal, Romania, Slovak Republic, Spain, Switzerland, Turkey, Ukraine, and the United
Kingdom.
35% 38% 36%
43% 44% 43%
9% 11% 9%
8% 5% 7%3 % 1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
central regional Total general
Other
Merger regulations
Help minimize distortion of completion derived from State Aid schemes
Cartel enforcement
Abuse of dominance in sensitive sectors
24
15%) to divisions specialized in economic analysis (i.e. a Chief Economist Office or similar) versus a
5% share of the RCC staff.
32. According to the staff survey and working groups with staff, anticompetitive business
practices, in particular the enforcement of hard core cartels, should be a priority for the RCC.
The enforcement of hard core cartels should be seen as a priority for increasing RCC effectiveness
and mainstreaming the importance of competition policy implementation. In addition, careful
consideration should be given to complex abuse of dominance or vertical cases that require proof of
market power and an analysis of effects in the market.
33. Given the fact that the RCC would like to strengthen the enforcement of hard core
cartels, the RCC should increase the notification thresholds for merger reviews. According to
the modification of the law, economic concentrations should be notified in case (i) turnover of the
undertakings exceeds 10 million EUR, (ii) turnover of at least two of the undertakings involved in the
operation exceeds 4 million EUR on the Romanian territory. RCC data reveals that previous merger
notifications have largely exceeded these thresholds.
Market Studies, Sector Inquiries and Revisions of Laws and Regulations
34. State-owned enterprises (SOEs) and government participation still play a dominant role
in many important markets and sectors in Romania. According to the information available,
national, state or provincial governments control at least one firm in 14 sectors. This figure is
relatively high compared to the typical OECD economy, which registers government participation in
only 9 of the same sectors.
Table 5: Presence of State Owned Enterprises
Source: RCC
35. State-owned enterprises (SOEs) exhibit significant market shares in the network
industries indicating significant scope for more active RCC engagement in these sectors.
Currently, SOEs have a market share above 50% in at least one segment or market of the gas,
electricity, rail and telecommunications sectors. In addition, recent cases of government involvement
in key economic sectors reveal that competition policy principles are still not mainstreamed within
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Total 14 6
Operation of air transport infrastructure
Other urban, suburban and interurban passenger transport
Water transport operation of water transport infrastructure
Financial institutions (not central banks)
Insurance
Motion picture distribution and projection
Freight transport by road
Operation of road infrastructure
Water transport
Air transport
Electricity generation/import, electricity transmission, electricity distribution, electricity supply.
Yes
Telecommunications fixed-line services, fixed-line services,
Gas production/import, gas transmission, gas distribution, gas supply.
Electricity generation/import, electricity transmission, electricity distribution, electricity supply.
Wholesale trade, incl. motor vehicles
Restaurants and hotels
Railways passenger transport, Transport via railways , freight transport, operation of transport
No
National, state or provincial government controls at least one firm in:
Manufacture of refined petroleum products
Manufacture of basic metals
Manufacture of fabricated metal products, machinery and equipment
25
government bodies (See Box 3). The RCC Staff survey also reveals that staff considers regulated
sectors or sectors where government has an important participation (e.g. energy, finance and
telecommunications) as priority areas for RCC enforcement and advocacy activities.
Table 6: Government Participation in Selected Sectors
Source: RCC
36. International experience also shows that sector inquiries could be used to target markets
with active government participation as a seller or a buyer. Based on the current status of SOEs in
the Romanian economy, the RCC needs to be vigilant that SOEs do not receive an unfair advantage
with the potential to distort the market and deter private participants. Actively studying these markets
including the role and impact of state aids could be something that the RCC should consider as part of
their activities to mainstream competition policy within government bodies.
37. Consistent with international practice, sector inquiries are being used as a proactive tool
but there is scope for improvement in investigation techniques and market selection criteria.
During the period 2007-2010, the RCC started 13 sector inquiries. Currently, six of them are still
under investigation. The average duration of a sector inquiry is approximately 20 months from
beginning to end. As a result of the investigations, the RCC formulated recommendations and
intervened with the competent public institutions in these fields. The results of the sector inquiries in
drug wholesale distribution and food products commercialization prompted investigations into
potential infringements of competition law.
No public ownership Less than 50% More than 50% but less than
100%
100%
Gas industry
Production/import sector X
Gas transmission sector X
Gas distribution sector X
Electricity industry
Generation of the electricity industry X
Transmission of the electricity industry X
Distribution of the electricity industry X
Supply segments of the electricity industry X
Rail transport
Operation of infrastructure sector X
Operation of passenger transport sector X
Air transport
Domestic and international traffic combined X
Telecommunication
Percentage of shares in the PTO owned by
governmentX - in the incumbent
Romtelecom SA
Sector
X - up to 100% in 5 operators. Those five operators have insignificant
market shares in the retail market.
Market share
26
38. Private sector representatives expressed some concerns regarding the RCC’s approach
to sector inquiries. When conducting market studies, the RCC elaborates a questionnaire that is sent
to market participants for their response. However, it seems there are no preliminary meetings with
private participants in order to acquire more informal feedback on the characteristics of the sector that
would help target and refine the questionnaires generated by the RCC, which is common practice
when conducting market studies. This would also help to define more clearly the scope of RCC‘s
information requests on competition cases related to these sectors. In addition, market studies might
also be improved by enhancing the authority of the RCC to obtain information from market
participants.
39. Currently the RCC does not have a system of competition indicators to track market
performance or criteria to identify which markets are more prone to anticompetitive behavior
or exhibit higher entry barriers. Traditional criteria used to select products for closer monitoring
include: (i) supply goods or services that are essential or that account for a significant part of
consumer spending, (ii) have linkages with other sectors/industries as a provider of inputs and
services, or (iii) prior public perception of high prices in that market. The RCC should also consider
designing a system for monitoring markets including accessing relevant sources of information. For
instance, closer interaction with consumer protection authorities would provide the RCC with relevant
Box 3: Competition constraints in the energy sector
In 2009, the RCC conducted a sector inquiry regarding the status of competition in the energy sector. According to the
information available to the RCC, the main potential competition constraints in this sector are:
(i) Concentration of generation segment in a State-owned firm. The possibility of a consolidation
of two companies with dominant position on the market pooling together the largest part of the
energy sector (electricity/gas/coal) particularly if this operation occurs while the vertical
unbundling has virtually stalled.
(ii) Bilateral electricity contracts between state-owned companies and private partners with
price conditions unfavorable to the State that also give preferential treatment to select
private firms in the market affecting the level of competition. A part of electricity produced in
Romania is subject to long term contracts. Some of these are completed competitively on the
OPCOM market. Another part is negotiated outside the exchange by extending previous contracts
from the past. Among these there are also the so-called ―contracts with the smart guys‖ signed
between state-owned generators and private partners. For instance, between 2002 and 2004,
Hidroelectrica signed contracts with 11 companies and traders, which were annually extended. In
2007, they accounted for 70% of the production of Hidroelectrica or 20% of the electricity traded
in Romania. The prices of such contracts negotiated outside the exchange are 50% lower than the
prices on OPCOM.
(iii) Prices for gas from domestic resources are lower than for imported gas and are used to
subsidize some companies or industries.
Regardless of these potential constraints, the government proposed the establishment of two national integrated
SOE companies, both of which would combine power generation (hydro, thermal and nuclear) with mines. Together,
the two companies would initially account for around 90 per cent of electricity generation in the country. Concerns of
potential abuses of these companies, as well as the implementation of cross-subsidies within the companies have been
raised by different actors in the sector. However, more worrisome to some agents is the poor regulatory governance
in the sector, especially the role of the electricity regulator – ANRE. ANRE was set up in 1999 and merged in 2007
with the gas regulator. According to information gathered in different interviews with stakeholders, it is perceived that
ANRE has significantly reduced its effectiveness and virtually has no role in promoting the development of
competition and adequate regulations in the market. As one participant noted, the RCC is ―the only hope‖ for
developing a competitive energy market in Romania. Currently, the RCC is analyzing the impact of these mergers in
the market and might be able to impose conditions that will deter anticompetitive behaviors and allow continuation of
the reform process in this important sector.
27
information on consumer complaints in selected sectors. Likewise, exchanges of information with the
National Statistics Office could facilitate the collection of data on retail and wholesale firm-level
prices.
40. The impact of RCC’s involvement in revising laws and regulations that could potentially
have a negative impact on competition is restricted by the current system. During the period
2007-2010, the RCC issued 56 opinions to revise regulatory interventions by public bodies that had
potential negative impacts on competition. Public bodies fully or partially implemented RCC‘s
recommendations in only 21 cases.
Table 7: Revisions and Opinions Issued
Source: RCC
41. According to discussions with the RCC, the agency sees a need to strengthen the current
legal framework in order to make its opinions binding for public bodies. The previous
Competition law established that any actions by the central or local public administrative bodies
which have as an effect the restriction, prevention or distortion of competition are prohibited. In
particular, rules and regulations that limit the freedom of trade or set discriminatory business
conditions to undertakings were considered particularly harmful. In case central or local public
administration authorities do not abide by the Competition Council‘s decision, the latter may
challenge the action before the Bucharest Court of Appeal. The amendments contained in the current
Ordinance increase the likelihood of compliance of local authorities with RCC recommendations.
However, although this modification could contribute to the development of more pro-competitive
legislation, the RCC will need to further develop internal guidelines in order to prioritize its activities
to markets where the questionable regulatory intervention or non intervention could have a larger
negative impact. An alternative solution may be to ensure that public bodies strengthen their capacity
to review the impact of their activities on competition.
State Aid
42. Under the State Aid regime, the RCC monitors State Aid schemes and coordinates with
several grantors and receivers of aid. In its role as the national contact authority in the field
between the EC and State Aid suppliers and beneficiaries, the RCC facilitates coordination and
provides specialized assistance to institutions involved in State Aid, including in the elaboration of the
initial scheme. The RCC also monitors State Aid schemes at the national level, which includes
drawing up and updating the State Aid inventory on the basis of reports, data, and other information
received from grantors.
28
43. On average, the instrument composition of Romania’s state aid schemes closely follows
EU patterns with a larger focus on research and development and regional development.
According to information available for 2008, grants are the main instrument to provide State Aids in
the EU (52% of total) and in Romania (68% of total). By horizontal objective, 49% and 28% of State
Aids in Romania are allocated to R& D and regional development respectively. In the EU generally a
larger proportion is assigned to environmental objectives.
Figure 13: State aid by instrument and by horizontal objective
44. Based on interviews conducted with several State Aid grantors, many believe the RCC
does a superb coordination job and provides timely technical advice. According to the interviews
conducted during the functional review, grantors consistently praised the quality of the technical
assistance provided by RCC staff. However, it was also indicated that tight deadlines, government
pressures, and quantity of proposals received could potentially undermine the ability of the RCC to
operate effectively.
45. There is scope for a larger engagement in analyzing the potential distortions of State Aid
schemes in the Romanian economy. From interviews with several state aid grantors, it became clear
that the actual impact on competition of state aid schemes is not being analyzed either by the RCC or
by individual grantors. Even though the current methodology of assessment of state aid schemes
includes a balancing test, this is only applied for schemes that require a deeper assessment. However,
state aids are recurrent in the same sectors or applied to the same undertakings so an evaluation of the
status of current state aid schemes would only be appropriate in areas where they are most
concentrated. The evaluation of state aid schemes should help reduce distortions in markets and
provide guidance to grantors and policy makers about future adjudication of aids.
52%43%
0%
3%1%1%
State aid by instruments - EU members -2008
Grants
Tax exemptions
Equity participations
Soft loans
Tax deferrals
Guarantees
68%
17%
3%2% 10%0%
State aid by instruments - Romania -2008
29
Figure 14: Methodology for Assessment State Aid – Balancing Test
46. The RCC should consider analyzing the effectiveness of state aid in sectors where there
is still significant government participation. Available information suggests that sectors such as
transport account for a significant proportion of state aid schemes. Given that these measures could
have significant effects in crowding out potential private investors, the RCC could play an important
role in assessing ex post the effectiveness of state aid measures in key sectors. In addition, the RCC
possesses a vast amount of information related to state aid measures based on its monitoring activities
that could be used to analyze the impact of state aid measures on competition.
47. Initiatives to improve coordination mechanisms among State Aid experts have been
implemented. In 2009, the RCC focused on developing the State Aid National Network in order to
cluster State Aid experts from the RCC and from the State Aid granting institutions. This is an
important initiative given the fact that there are many actors participating in the State Aid area at the
level of public institutions (e.g. in some cases, more than 10 people in charge of state aid in one
institution) .The evaluation of State Aids could also benefit from implementation of EU simplification
procedures such as the Simplification package and from encouraging State aid enforcement by
national courts.
30
Figure 15: State aid by main economic sector
Others include aid with sectoral objective provided to other sectors
Source: RCC
48. Enhanced coordination between the RCC and state aids grantors would have positive
spillovers for competition work. According to several state aid grantors, their interaction with the
State Aid Directorate was the start of coordination mechanisms with the RCC that evolve in specific
collaborations in terms of providing specific data and information for sector inquires and market
monitoring. Given that the appropriate objective of RCC‘s State Aid role is to prevent the
implementation of state aid schemes that will likely distort competition, closer coordination between
RCC‘s State Aid and Competition Directorates should also be promoted. As stated earlier, further
investigations and monitoring could be conducted in sectors more likely to receive State Aid and/or
with dominant State owned firms competing with private agents.
49. However, reallocation of state aid review and coordination activities to another branch
of the government may be considered since the presence of state aid functions in the RCC may
give rise to conflict of interest. Even though the activities related to state aid are carried out by a
different unit within the RCC, both competition and state aid functions are under the responsibility of
the board of the RCC. The same agency, thus, would have to simultaneously control anticompetitive
behavior while assisting state aid grantors on schemes that may reduce competition once
implemented. For instance, a growing number of firms may be able to claim implied protection from
competition enforcement investigation due to having received state aid authorized by the RCC. This
dilemma can only be resolved by shedding state aid functions to another agency in government,
although this may not be feasible in the short term. In addition, after many years of successful RCC‘s
technical assistance, each grantor – which usually has dedicated staff to design and analyze state aid
schemes- should be able to assess if their state aid proposals are consistent with EU regulations.
Furthermore, grantors could make use of the state aids simplification package proposed by the
European Commission in 2009, which includes a Best Practices Code and a simplified Procedure to
present cases.
50% 35%
72%
60%
30%48%
20%
33%
7%
5%
6%
3%
13%
11%
2%
4%
12%
12%
7%
12%
0.00
200,000.00
400,000.00
600,000.00
800,000.00
1,000,000.00
1,200,000.00
1,400,000.00
1,600,000.00
1,800,000.00
2005 2006 2007 2008
eu
ros
Agriculture Transport - Railways Transport- Air Manufacturing Others
31
Competition Advocacy, Supporting Institutions and External Relations
50. The RCC has been very active in implementing advocacy activities, but deeper
understanding and commitment to competition benefits and adherence to EU/GOR competition
policy still needs further consolidation within key stakeholders. For example, a recent proposal to
concentrate state owned electricity generation into two large companies have raised concerns in the
media and the public that basic competition principles are not fully endorsed by some areas of the
Romanian government.
51. The RCC’S advocacy activities have steadily increased in the last few years. In 2004, the
RCC conducted 39 advocacy actions. In 2007, the number of advocacy activities increased to 1,243.
According to its Annual Report, the RCC organized over 1,100 advocacy actions in 2009 including
seminars, roundtables, inter/intra-departmental debates, events with Twinning Projects and meetings
with regulatory bodies and other institutions. Attendants at RCC‘s seminars from other public
institutions indicated that these seminars are helpful for increasing awareness and understanding of
the competition and state aid legislations. However, there are some concerns that seminar attendance
is limited to a small target group and suggestions to extend or refocus the target audience were raised.
Given the large number of advocacy activities and potential resources devoted to these activities, it
may be worthwhile to evaluate their effectiveness and whether some of the resources may be shifted
to other areas (e.g. anticompetitive investigations or more targeted advocacy, for example directed to
courts). As one RCC staff suggested, the ―best advocacy for competition is the successful conclusion
of a highly visible and high impact anti-competitive case‖. This view is generally confirmed by
international best practice.
52. The RCC and outside stakeholders also agreed that supporting/enabling institutions still
need to be developed in Romania. Several concerns were raised in this area: (i) most universities do
not offer specialized courses in competition law or industrial organization which teach indispensable
skills to implement competition policy; (ii) consumers and business associations are still not
organized in such a manner to bring cases and complaints to the RCC; and (iii) even though the RCC
partners with domestic think tanks in order to produce sector inquiries, there are few think tanks with
the capacity to conduct independent research on competition matters.
53. The RCC has also promoted a closer collaboration with other public institutions and is
active in international fora but there is still scope for improving the effectiveness of these
collaborations and working in partnership with other organizations which have complementary
power or influence in relation to markets. The RCC has signed Institutional Protocols with several
public institutions (e.g. sector regulators, public procurement authorities) in order to foster
collaboration and coordination between institutions. Many of these collaborations seem very
promising but are of recent origin so there are no tangible results to report yet. For instance, in the
case of the public procurement authority, there are plans to develop databases to track procurement
conditions in selected markets, as well as to conduct training on competition law to procurement
officers. In the case of the telecommunications regulator, the two authorities have collaborated in the
definition of relevant markets for the regulation of communication services. Considering international
best practice, however, this covers only one aspect of potential effective cooperation between the
competition and the sector regulator. One aspect that the RCC could evaluate is to include in these
Protocols specific ways of cooperation that will lead to significant improvements in market
conditions. For instance, the RCC in coordination with the sector regulator or public authority could
32
commit to review the regulatory framework in order to introduce regulatory reforms that promote
competition or increase the quality of regulated services.
54. In the international arena, the RCC participates in the European Competition Network
(ECN), the International Competition Network (ICN), OECD Competition Committee, and
UNCTAD. Relevant materials are posted in the RCC‘s intranet for easy access by RCC staff. The
RCC could also use its participation in the international forums as a way of training and rewarding
competition inspectors.
55. Workshops and other dissemination activities should be seen as one of the several
competition advocacy tools not as an end in itself. RCC‘s competition advocacy efforts should
refocus towards tackling anticompetitive regulation, expand advocacy to key groups within
government and implement alternative advocacy tools. Seminars need to be de-emphasized. First,
RCC should focus on credible enforcement record. Second, the RCC should also consider being more
vocal in order to raise awareness of competition issues and advising policy makers where wider
government policies affect competition and markets. This could be achieved by conducting
investigations and proposing reforms to current anticompetitive regulations in key sectors of the
economy.
IV. ACHIEVING THE MANDATE THROUGH IMPROVED
PERFORMANCE
56. Given a level of performance relative to EU comparators, which is seen within the
agency as less than adequate, the RCC needs to review fundamental aspects of its operation and
redouble efforts to improve results. To do so the agency needs to better align its enabling legal
and political environment, mission, and institutional capacity guided by an overarching
commitment to excellence and impact. The challenges are substantial. The RCC operates in a
country that has a relatively recent experience with, and understanding of, competitive market
mechanisms and principles, a large number of powerful state owned enterprises influencing if not
dominating key sectors, and deep economic/fiscal challenges, all of which limit the agency‘s ability to
enforce stated competition policy. The RCC needs to also preserve its independency and autonomy
from political pressures and vested interests sometimes coming from other branches of the
government. While the RCC has made progress towards articulating a strategy, it still consists of short
mission and vision statements and a long list of aspirations and potential actions. The RCC is
currently responsible for packaging state aid proposals to be forwarded to the EU, maintaining an
expensive legacy structure in the territories, reviewing a variety of government regulations which
should be handled by those agencies if they understood competition issues, and dealing with a
growing list of mergers and acquisitions. It is hard to meet all these mandates simultaneously. In the
absence of an agreed, clear, and focused strategy the RCC has been essentially adapting aspects of
foreign models and incrementally adjusting the inherited practices and organizational structure of its
legacy institutions (one of which was focused on enforcing centralized government price controls).
Finally, the RCC‘s freedom of maneuver in terms of more flexibly managing its financial and human
resources is significantly constrained by Romania‘s unduly rigid, centralized, and outmoded public
sector rules and practices.
33
Existing Initiatives to Reform
57. Despite these challenges, and in apparent contrast to much of the Romanian public
sector, it is important to note that the RCC has demonstrated over the last several years a
willingness and ability to influence its legal environment, address strategic issues, and pilot
internal reforms. The effort seems to enjoy understanding and ownership from various stakeholders
within the RCC who are committed to the goal of enhancing results. There seems to be a widely held
(and essentially valid) perception that the RCC is a small but elite body of well trained economists
and lawyers with a high esprit de corps where individual staff members can exercise considerable
responsibilities. The management structure is flat and team focused, staff is relatively highly paid
versus the civil service in general, and the management culture in several parts of the RCC appears to
encourage individual initiative. The current management, including key individuals such as the
President, several Board members and Directors, and General Secretary are actively promoting
policies to create a modern professional merit based organization.
58. Notable initiatives include:
Project budgeting in parallel with the traditional and mandatory line item budget, an effort
which could evolve into more elaborate program budgeting better linking strategy through resources
to results, assuming changes in central government practices
Performance indicators agreed with staff at the beginning of each evaluation cycle which can
also enhance a results culture
Electronically based and managed annual performance evaluations discussed with the
assessed staff member
Initiatives in terms of knowledge management and digitization of files
Web site development with an extent, candor, and timeliness of information praised by
private sector representatives
Increased use of modern ITC throughout the organization and consideration of a move toward
Enterprise Resource Planning (integrated linkage of IT to all business processes)
Codification of over 90 core business processes and steps toward process reengineering
Initiation of a job classification effort aiming at codifying the professional requirements for
all core business positions
Scope for two Public Managers to advocate and support the implementation of modern
management methods (in contrast to most GoR agencies)
59. The RCC is also aware of the importance of strengthening the implementation of
competition policy. In the past few years, the RCC has conducted several initiatives at the
procedural level (e.g. guidelines on leniency towards ECN standards) and at the organizational
structure level (e.g. creation of a Tenders Directorate to fight bid rigging and increase competition in
procurement markets) to increase the effectiveness of their competition enforcement work. Moreover,
the Emergency Ordinance nr. 75 of June 2010 proposed a new competition law that aligns current
legal framework to EU practices. The following amendments contribute to the development of
procedural convergence in the EU:
Including the concept of undertaking as defined by EC case law.
Abolishing the notification system, individual exemptions and fostering convergence with
Articles 101 and 102 of the Treaty on the Functioning of the European Union and Regulation No
1/2003.
34
Amendments to the main concepts of economic concentration (notion of control, notification
obligation, standstill obligation, derogation) follow equivalent provision of the European Union
Merger Regulation.
Change from dominance test to the SIEC test (significant impediment of effective competition
test)
60. There are some aspects of the current amendments that could be further improved to
increase the effectiveness of the competition law framework:
Article 4 related to the possibility of price controls imposed by the government in case
markets lack competition is left unchanged. It is recommended to include a provision that establishes
that the RCC will need to establish and verify the lack of competition in the market under scrutiny
before the Government decides to impose particular price controls.
Article 60 provides for criminal sanctions on individuals for certain competition
infringements. However, it is not apparent from the draft amendments to the Competition Law that
lenient treatment would be available for individuals in this context. Absent an effective leniency
option for the individuals concerned, the enforcement of sanctions on individuals could become more
difficult and can also have an adverse effect on corporate leniency. In addition, the introduction of
new rules and procedures, involving different courts brings along new opportunities but will also
complicate the enforcement tasks.
Even though Article 8 is aligned with the EC‘s de minimis rules, it is not completely clear
from the proposed amendments to Art 8 whether hardcore restrictions in vertical agreements are also
excluded from the scope of de minimis rules. This is because section 4 of Art 8 explains that the
minimis rules do not apply to agreements without distinguishing between horizontal and vertical.
Improve provisions to guarantee accountability of Board Members and consider downsizing
the number of Board Members, such as the establishment of quarantine periods and a more
competitive appointment process.
After the approval of the proposed amendments to the Competition Law currently in force, the RCC
has increased its investigative powers (covering inspections, interviews and requests for information).
It should be ensured that the RCC has adequate means to put these powers in practice, in the
framework of its policy and sectoral priorities, and that it has the support of national courts for their
further development.
Core Institutional Elements
Strategy
61. The RCC’s annual reports convey to the public its mission and vision statements as well
as strategic objectives. These are useful building blocks to establish goals, increase accountability,
and convey a sense of direction, but do not constitute a fully developed business strategy. Fortunately
the RCC has embarked on an internal consultation process involving staff, as well as management and
the Board, to articulate a more detailed strategy document. This process, whose usefulness and
legitimacy is enhanced by a wide participatory approach, is expected to be completed within the next
year. The aim is to produce a practical roadmap to guide substantive and administrative policies. The
effort is welcome as heretofore the practical strategy of the RCC appears to have varied depending on
the priorities of appointed leadership. While there was a strong commitment in some levels of
management to strive toward EU comparator standards (―to achieve the level of the Italian
35
competition authority within ten years‖, a goal which according to RCC management has been
surpassed), this target was more implicit than explicit and its pursuit often dependent on individual
initiatives without clear benchmarking, timetables, or necessarily consistent Board support for
comprehensive and sequenced reforms.
Box 4: RCC’s Mission, Vision, Values, And Strategic
Objectives
1. Mission:
• Efficient measures for a normal competition environment.
2. Vision:
• An efficient and dynamic market economy, grounded on acknowledging
and complying with the competition values and principles, which is a
factor of progress, durable development and welfare.
3. Values:
• Independency, responsibility, professionalism, efficiency, integrity,
dialogue, results.
4. Strategic objectives:
• The improvement of the Romanian competition environment through
efficient decisions and solutions.
• A just allocation and a more efficient use of the available resources through
a clearly defined and systematically monitored system of priorities.
• Transparency and partnership at national and international level – a secure
way of consolidating the prestige of the Competition Council.
Source: RCC
62. Under the reformist impulse of the current RCC leadership, it is to be hoped that the
effort to articulate a strategy will focus on achieving specific performance targets measured by
annual indicators and supported by structural and operational changes, budget reallocations,
and adjustments in policy priorities. The formulation of strategy should aim to increase and
sustain a heightened focus on an organization‘s ends and means, as well as lay out clear, tangible, and
relevant actions coherently enhancing the organization‘s capacity to meet its mission within its
enabling environment. The effort should not be a paper exercise only aiming at a document framed
for display, but ideally an easily grasped roadmap fully inculcated by all staff and understandable to
outside stakeholders. At present, based on anecdotal evidence gathered from staff interviews, there is
scope for improved understanding of RCC goals, suggesting a need for a better articulated strategy.
Such a strategy process, if deemed valid by staff, would better mobilize their commitment to the
organization. For instance, top competition agencies have a motto that tends to summarize its main
objective such as ―Making markets work‖, ―Guarantee that markets work well for consumers‖ or
―Protecting consumers‖- this is absent in the RCC. Successful strategy implementation would be
enhanced by creation of a strategic planning unit within the RCC to monitor its execution, track
agency performance more broadly, provide senior management with a more robust planning capacity,
and in general strengthen the responsiveness of the agency to emerging external and internal
developments.
63. While the form of strategy definition, presentation, visible links to budget and
organizational decisions, etc. directly impact its usefulness as a tool for successful agency
functioning, the substance of a strategy is of course the fundamental consideration. In this the
strategy should target anti-competitive practices in Romania (with corresponding adjustments in other
activities) promoted through significant reallocation of staff and financial resources, organizational
change, supportive human resource and financial management systems, and in general greater
attention to time bound quantifiable results.
36
Prioritization and Service Delivery
64. The RCC has already recognized that competition enforcement is a priority for its
activities but resources should be better aligned to that decision. In terms of enforcement, priority
should be given to hard-core cartels as well as high impact cases that could lead to significant savings
for consumers. The RCC should also identify from its current or potential investigations those which
would more likely obtain proportionate and effective outcomes.
65. Following international best practice, it is recommended that the RCC establish a
results framework for competition enforcement. As a result of this implementation, RCC will be
able to monitor its performance, communicate its results to its main constituencies and increase its
accountability. In particular, the RCC should consider establishing internal deadlines for competition
activities, keeping records and monitoring the status of current investigations at the top management
level (currently, the RCC has no updated database that tracks progress of ongoing investigations),
reporting progress on internal deadlines and targets monthly to the Board, and communicate
performance targets in its Annual Report and webpage. This will involve devoting resources to
strategic planning activities. Using this information for competition enforcement, accountability of
the RCC towards the public and government could be improved. The OFT and the NMA design and
report performance indicators and targets (including value savings to citizens) specifically with the
government and consumers in mind.
37
Box 5: Internal Targets and Performance Measures
Top competition agencies around the world are setting specific prioritization and performance metrics. In the case of the
UK, the OFT Annual Plan 2010-2011 sets objectives for the competition agency including:
Objective 1: to deliver high impact outcomes
Make markets work well for consumers by delivering high impact work efficiently, focused on priority areas, and
spanning the OFT‘s enforcement and non enforcement functions.
Objective 2: to be a centre of intelligence and excellence.
Monitor markets proactively, systematically and transparently. Evaluate the impact of our work and use this evaluation to
inform strategy and future work.
Objective 3: to work in partnership
Work with our partners to better achieve objectives 1 and 2. This will include working with local authority Trading
Standards Services to pursue a risk-based approach to local regulation of businesses, cooperating with other UK
regulators, the European Commission, the Competition Commission and other National Competition Authorities to
ensure effective enforcement of the competition regime in the UK and working with Government to influence
competition, regulation and consumer policy, and reduce the potential for government actions to adversely affect markets
Objective 4: to develop the OFT as an organization
Develop the skills and talent of OFT staff to deliver high quality outcomes and add skills to the economy.
For the current year, the OFT indicates that they will focus on taking high-impact cases, influencing and changing the
behavior of consumers, industry and government, improving our overall efficiency and minimizing burdens for business.
Prioritization is given to areas of greatest consumer harm based on high-level outcomes rather than individual projects in order to allow flexibility.
In the case of Netherlands, lead times are part of the controlling information of Directors and the Board. In order to
increase transparency, the NMa has included in this annual report information on its internal targets and to what extent
these have been achieved. In particular, with regard to the lead times of cartel and abuse cases, the NMa targets to have
90 per cent of these cases completed within 20 months, counting from the official launch of the investigation by the
Competition Department until the (penalty) decision has been drawn up by the Board.
In 2009, the NMa completed 86 per cent of the cartel and abuse cases, in which a penalty was imposed, within the internal target of 20 months. The average lead time was more than 14 months.
Each year, the NMa conducts a telephone survey among small and medium-sized businesses on the competitive pressure
they perceive. Its findings reveal how these undertakings reckon with the NMa‘s activities, which is the so called
‗anticipatory effect‘. This effect is significant because increased compliance with the law means the NMa does not need
to step in as much. Almost 28 per cent of those surveyed in 2009 indicate that rulings by competition authorities have an
effect on their way of doing business in the market, which is a slight increase over 2008 (25 per cent).
Several other agencies are embarking on prioritizing areas of engagement and designing performance metrics as reported
by the International Competition Network.
Source: NMa Annual Reports,
Organization and Structure
66. The RCC is both a public authority and public institution overseen by a Board (or
Competition Commission). The former stems from the legal ability of the Board to initiate legal
proceedings and levy fines and the latter from the staff structure which supports the actions and
decisions of the Board. Seven members make up the Board, including one President (also responsible
for management of the RCC) and two Vice Presidents chairing Board commissions vetting decisions
to be forwarded to the full Board. Board members are appointed for staggered five year terms, with
three (or four) members appointed every 2.5 years. The current board represents a broad array of
experience in the private and public sectors, academia, and the law profession. The President of the
Board in addition must have held a management position with high responsibilities where he/she was
able to prove professional and managerial competence. Members are full time, receive a salary and
benefits, and depending on their responsibilities can play a role in RCC management beyond policy
decision making.
38
67. The Board is responsible for strategic direction, authorization of budget proposals and
adjustments during budget execution, HR policy guidance and organizational restructuring as
well as substantive decisions on investigations, fines, court actions, etc. Board members have a
salary equivalent to the rank of Deputy Minister. Board member offices are located within the RCC
headquarters and the members and Board as a whole are factors not only in the political legitimacy of
the RCC but actors in its routine functioning. Areas of concern, however, include how to sustain the
political neutrality, professional competence, and collegial working environment of the Board (i.e. can
new rules on selection processes, qualifications, explicit representation of various stakeholders—
academia, private sector, government, legal profession, etc.—work to add or in the end detract to the
maintenance of an effective Board.)
Box 6: Boards
The use of Boards and Commissions as, in effect, a fourth branch of government became increasingly common in
many OECD countries during the 20th century. Progressive good government reformers argued that groups of
citizens appointed for fixed terms of office could represent the public interest better than either elected officials
(too beholden to partisan political forces) or solitary administrators (who could be hired or fired at the pleasure of
politicians). Along with civil service systems and increased reliance on public administration experts, boards
were viewed as an intelligent way to make the public sector more democratic and competent.
Government boards are created as part of a statute establishing a public organization. A typical enabling statute
specifies the method for selecting board members, terms of office, board size, composition, levels of
compensation, and general functions. Because there is few model statutes for boards, their specific characteristics
vary greatly. Most board members are nominated by a chief executive (the President, prime minister, mayor, etc.)
and approved by a legislative body (parliament, local legislature, city council, etc.). Alternatively some boards
have members appointed by the leadership of legislative bodies, or board members automatically serve in an ex
officio capacity given their occupancy of another government position. Terms of office for board members can
range broadly. Boards may be composed of full-time members who receive an annual salary, or part-time
members who receive nothing for their service beyond expenses. Most boards are involved only with policy-
making, although some board members may actually manage day-to-day activities.
The appropriate operation of boards is important because they can have powerful impact on citizens and economic
actors. Boards often can act in a quasi judicial capacity, call hearings, undertake investigations, subpoena
witnesses, issue binding decrees, and determine fines. Given this power the final orders of boards are frequently
appealable to regular courts. Despite the widely accepted use of boards, there is relatively limited empirical
information about the characters of boards including especially who they represent. Certainly in many cases there
is continued public interest representation, although in other cases boards may serve particular political, social,
economic, and bureaucratic interests.
68. Board members are selected and appointed by the President of Romania at the proposal
of the Cabinet without formal vetting or approval by Parliament (as had occurred until 2004). To
assist in the RCC‘s efforts to deepen national understanding of the role of competition in general and
the RCC in particular, as well as forestall potential complaints about the democratic legitimacy and
accountability of the agency, it might be useful to institutionalize the relationship with Parliament. It
would be opportune to hold formal hearings to present the RCC Annual Report, where the RCC
would present the results of its activity for the past year and explain the areas of focus for the
following year. The RCC does report its activities to the Finance Committee of the Parliament as part
of the normal annual budget process and there is consideration being given within the RCC to seek
more formal hearings with Parliament to discuss RCC activities. For instance, the RCC could be
asked by individual members of Parliament or committees to report on activities (beside current
investigations), studies or proposed legislation. The instrument of the Annual Report could also be
enhanced and made a transparency/advocacy instrument to build the reputation of the RCC through
the reporting of its enforcement activity.
39
69. The size of the RCC Board could be reduced. EU practice varies in terms of the number of
members of the Board. On average EU countries have approximately five full time members. Top
agencies such as the one from Netherland and the UK only register three full time members. In some
cases, countries opt for a combination of full time with alternate or part-time members that evaluate
cases when full time members are not available (e.g. Belgium, France, Greece) although this could
raise concerns about potential conflicts of interest of part-time Board members that are engaged in
other activities outside the agency. The financial cost to the RCC for the salaries and accoutrements
(administrative staff, cars, offices, communications, etc.) of Board members is another factor to be
weighed given the likely long term pressure on the Romania budget.
Figure 16: Number of Full Time Members – Competition Agency Boards
Source: Competition Agencies websites and related documents.
70. In addition, even though there are specific requirements for appointment to Board
positions there is still scope for improving the appointment process. Currently the law stipulates
that the duration of the Competition Council members‘ term is of 5 years. Members may be
reappointed once at the most. Criteria to meet for being appointed in these positions includes: higher
education, minimum 10 years of experience in activities from the following domains: economic,
commercial, prices and competition or legal, high professional competence, a good reputation. In
addition, according to the law, the President must have held a management position with high
responsibilities, where he was able to prove his/her professional and managerial competence21
.
21
Other restrictions include the following: The status of the Competition Council's members is incompatible with any other professional or consultancy activities, with the participation in the management or administration of other public or private entities, with holding public position or dignities, except didactic activity in the high-level education institutions. The Council members cannot be appointed experts or arbitrators, either by parties or by courts or by other institutions. The Council members do not represent the authority that appointed them, and are independent in decision-making. The Council members and the competition inspectors cannot be members of political parties or other political organizations.
0
1
2
3
4
5
6
7
8
9
aust
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ium
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aria
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ania
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fran
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lithu
ania
ire
lan
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lan
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ia
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the
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nd
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unit
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ll ti
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mm
issi
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ers
avg = 5.33
40
Staggering the beginning and ending dates of each Council Member lessens the danger of there being
so many vacancies on the Board at the same time. However, a more open competitive process for the
positions based on specific requirements might contribute to ensure the quality of the Board and its
perceived neutrality.
71. There is scope for improving current mechanisms to guarantee independence,
accountability and transparency of the RCC. The quality of RCC decisions relies on both the
technical staff and on the members of the Board. Potentially, there is a risk for RCC‘s independence
from political and private interests since: (i) council members have been previously removed by the
government with an Emergency Ordinance raising questions about security of tenure and policy
independence, (ii) the RCC‘s Presidency has registered a significant rate of turnover, and (iii) there
are no freezing or quarantine periods (affecting employment with interested counter parties) after
leaving the RCC. An effort could be undertaken to address these issues in tandem with any proposals
to adjust the Board selection process in the sense that increased protection for tenure requires higher
and more explicit fiduciary standards for Board members.
72. Consideration should be given to realigning core business units around practice areas
(versus the current industry focus). Below the Board the RCC is grouped into so called core business
units (Annex 4) dealing with Services, Consumer Goods, Industry and Energy, Tenders and Petitions,
Territories, and State Aid. Corporate units cover legal, economic analysis, external relations, internal
audit, communications, as well as administrative functions. As suggested in Section III above, this
organization around economic sectors contrasts with majority practice in the EU and may inhibit an
enhanced focus on anti-competitive behavior and cartels. Assuming a strategic need to improve RCC
performance in these areas in line with EU practice and emerging threats to competition in Romania,
fundamental structural changes should be considered, with resulting reductions in resources for lower
priority programs. A restructuring toward business practices could foster specialization, synergies,
and better resource mobilization to address the challenges posed by increasingly more sophisticated
and large foreign and domestic private firms. Obviously sectoral characteristics and nuances exist and
need to be covered, but the fundamental first principle mission of the RCC is to eliminate various
types of anti-competitive behaviors, not to monitor sectors where other regulatory agencies, chambers
of commerce, NGOs, etc. can provide the bulk of background information. Of course sector
knowledge will be required by investigating teams, but on balance a focus on business practice
expertise over sector details seems more appropriate. Should such a restructuring not be undertaken
in the short term, the RCC should create a specialized anti-cartel unit to maximize the RCC‘s leverage
at least in this priority area. Such a unit could serve as a pilot for a movement toward a full business
practice structure. (In no case are units within RCC poorly motivated or led, without value added, or
lacking qualified human resources. However given the current and prospective fiscal circumstances
of the country those resources must be better leveraged and mobilized for the highest strategic
priorities. The presence of hard budget constraints requires hard choices.)
73. The number and staffing of territorial offices should be sharply reduced. EU and OECD
practice varies with regard to the level of decentralization, but most countries find a concentration of
skills and staff at headquarters and regional hubs to be more cost efficient and effective. In Romania
these offices are located in all the 42 counties, and, with an average of two staff in each branch,
account for around 90 staff (about 30 percent of the RCC total). Heretofore the branches seem to
have lacked the critical mass of skills, interaction with headquarters, or practical independence (being
embedded in local communities) to undertake hard hitting investigations of anti-competitive behavior.
These offices seem to concentrate on gathering information requested by headquarters or monitoring
41
state aid. From a field visit to one admittedly large office it seems that there is willingness to conduct
preliminary inquiries and lead investigations particularly for sectors or large enterprises
geographically located in that region. However, the value added from having a full time physical
presence in each county must be weighed against the need to significantly strengthen competition
enforcement in high impact cases. The RCC has recently initiated a pilot program seeking to group
county teams into eight regional units (virtually and electronically rather than through physical
transfers) to enhance critical mass, skills available to teams, and physical and moral presence to
undertake dawn raids and other actions related to the more problematic area of anti-competitive
behavior. This effort should be intensified along with the aim of having no more than eight regional
offices at most. Moreover, a rebalancing of job competencies within the branches and headquarters
should be undertaken, notably by moving toward lower cost staff in line with the more limited
requirements for monitoring state aid or anti-competitive behavior. Those staff remaining in
territorial offices should be better integrated into joint operations with headquarters with the
expectation that staff quality must be uniformly high and accountable regardless of location.
74. Work load in places is unbalanced and needs priority attention. Regardless of the
structure, there are imbalances within and between departments. Viewed against EU benchmarks, for
example (see graph below), the percentage of lawyers is significantly smaller within the RCC, leading
to excessive workloads plus threats to the RCC‘s ability to most effectively conduct investigations,
prepare decisions for Board review, or defend decisions in court. The increasing sophistication of
businesses in terms of knowing the law (and if so inclined to better hide anticompetitive behavior and
evidence), ability to hire high priced legal counsel, or import experiences known to multi-national
companies is testing the RCC‘s legal department. The Economics Research Department also appears
understaffed in light of EU comparator figures mentioned above and the growing sophistication of
market actors, which requires more refined economic assessments within the RCC.
Figure 17: Personnel Structure by Specialty
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% other specialists
% economists
% lawyers
Bu
lgaria
Cyp
rus
Esto
nia
Fin
land
Ge
rma
ny
Ita
ly
Leto
nia
Lu
xem
bo
urg
Ne
the
rlan
ds
Po
land
Po
rtu
ga
l
Ro
ma
nia
Slo
vak R
epu
blic
Slo
ven
ia
Spain
Luth
ua
nia
Sw
ed
en
Hu
ng
ary
42
75. Competition inspectors, organized into teams for specific cases and led by
“Rapporteurs”, can also appear to suffer from undue workload balances. According to RCC
figures as well as interviews, some inspectors can lead teams as Rapporteurs on more than one case
while also serving as team members on other cases. Managers naturally tend to select the best staff
for the most important work, but have limited ability to reward good performance (other than through
recognition or access to foreign training if time allows) given the prohibition on bonuses instituted in
2008, limited pay differences between grades, slow promotion rules, and prospects for continuation of
the current pay reduction for some unknown time. This undermines motivation for any staff with
clearly above average or excessive work. Given the lack of incentives and disincentives to encourage
more equal effort by all staff, the RCC is at risk in the current environment unless it takes actions to
better recognize and reward where possible hard work and results, and punish lagging effort. Every
organization faces this problem, but it may be more acute in the RCC since the high standards sought
by management exceed those of typical public sector agencies so poor performance stands out more
clearly with more negative repercussions for staff morale. As such senior RCC management should
seek to install and utilize a management information system to provide more accurate quantitative
data on staff and department activities, work load balances, team composition, progress of tasks, etc.
This information should be analyzed and used to make realignments, better identify training needs to
improve lagging performance, and isolate and address serious persistent cases of poor performance
not necessarily captured through the annual personnel evaluation process. Figure 18 illustrates that the
number of tasks (investigations in charge of or participating in) of the competition inspectors varies
significantly with a few inspectors carrying out the majority of tasks while a few others only conduct one
or two tasks on average.
43
Figure 18: Distribution of Workload by Staff: Competition Directorates22
Excludes: other papers – ICN work and guidelines
Source: RCC
76. Improved communication from senior management and staff, and in general enhanced
transparency within the RCC would be beneficial. The current degree of openness to reform
initiatives in the RCC, relatively flat management structure, apparent focus on team based operations,
consideration being given to a more formal peer review system, and other initiatives are impressive.
Nevertheless, staff survey results suggest a significant gap between staff and senior management (Box
7 and Annex 5). As the RCC is a knowledge based institution which needs to motivate highly
educated professionals (many with other career opportunities) sensitive and effective organization
management will be critical to the RCC‘s long term success, and must be seen as a priority
responsibility of senior management. Undue resort to traditional command and control processes,
hierarchy, and rote implementation of rules obviously is not, nor could be successfully, employed in
the RCC. A strategic shift to an even more results focused organization (with all the attendant
structural, physical, budget, and human resources changes) would require heightened internal
communication as well. The cost should be relatively small and the benefits tangible from internal
electronic newsletter and/or more frequent RCC wide open assemblies conveying key decisions,
promoting internal debate, outlining challenges external to the RCC, recognizing significant
achievements by units and individual, etc. These could enhance coherence in RCC operations and
morale.
22
Annex 8 provides more detail figures of current workload.
01
23
4
Fre
quency
0 2 4 6 8Services
01
23
Fre
quency
0 5 10 15Consumer Goods
01
23
4
Fre
quency
0 2 4 6 8Ind & Energy
01
23
Fre
quency
0 2 4 6 8 10Petitions
44
Box 7: RCC Staff Survey
With the full support of senior RCC management, a confidential survey of headquarters and field based staff and middle
management was conducted in early July. There were 202 respondents (out of 307) to the 50 item questionnaire, broadly
reflective of all functions and departments. The responses were analyzed by Romanian survey experts and subjected to a
factor assessment. The survey was a unique exercise and lacks earlier baseline findings or similar surveys in other
agencies to complete a fuller analysis. Nevertheless the findings provide first order indications of strengths of the RCC
as well as challenges going forward. More details are provided in Annex 5. Highlights include:
Strengths
- Directors and the staff believe they have ―very good‖ or ―good‖ knowledge about the direction in which the
institution is going and are proud to be working with the CC.
- A majority of respondents (X%) concur that the RCC focuses on performance management, although giving
higher marks to immediate supervisors than senior management.
- Delegation of responsibility and authority to directors and on to staff seems to work.
- The annual performance evaluation system is well regarded in general.
- Communications within departments seems good, as both the annual budgets and the new policies and
strategies are ―always‖ discussed by the directors and the staff.
- Directors seek information from staff and use it in their decision-making.
- RCC staff has access to many sources of data and information that can be used in making administrative,
technical and strategic decisions.
- Directors chair meetings effectively, and manage ―well‖ or ―very well‖ both their own time and the staff‘s time.
- Their current workplace is evaluated as ―good‖ or ―very good‖ compared with other employers that
respondents know of.
- Internal regulations and procedures help the staff ―effectively‖ fulfill their tasks, the work, teams and work
flow are ―well‖ organized and departments have clear objectives.
- Directors promote collaboration between departments, and collaboration is good with partner institutions.
- Staff training and development is ―much‖ (23%) and ―very much‖ (43%) supported by managers in practice
and through the budget.
Challenges
- ―Good performance‖ is not regularly acknowledged (44%)
- ―Poor performance‖ is not signaled immediately (47%) nor constructively (42%) or decisively (44%)
addressed.
- Transparency does not apply to new director appointments; the reasons for the selection are not made public in
the institution (75%).
- There is little explicit focus on staff career development (48%).
- Effective collaboration between territorial offices and headquarters is ―very poor‖ (19%) or ―poor‖ (21%).
- Although the communication between the direct superior and the staff is perceived as good or very good,
communication between staff and the CC management/ Council members is ―very poor‖ (22%) or ―poor‖ (23%).
- A majority support more active rotation of staff among departments.
77. A knowledge based organization needs a knowledge based management. More feedback
to management and better collection and use of operational information could be helpful in enhancing
the flexibility and efficiency of the RCC. Staff surveys should be undertaken on a regular basis to
inform staff and management of evolving issues in RCC performance. An annual exercise of this
nature could over time provide important baseline and trend data providing valuable insight, and early
warning, to senior management from the perspective of front line staff on RCC operations and
challenges. A robust operational reporting system providing senior managers easily grasped
dashboard (key) information on the status of investigations, outreach efforts, staff developments, etc.
(i.e. whatever is critical to timely strategic decision making) could also enhance the quality and
timeliness of decision making. The various initiatives in the area of organization and human
resources as described in sections below suggest the need for adequate staffing and funding of a
management support unit. Such a unit would provide the analytical, data generation, planning, and
implementation capacity which would be more strategic and dynamic than what is normally
considered ―administration‖.
45
78. A focus on results would also benefit from peer review efforts. Peer reviewing is an
important tool of quality control in a knowledge based organization. It is indeed vital to an
organization confronting well funded adversaries in the courts of law and public opinion. The aim of
peer reviewing is to ask the right questions, bring different perspectives, share lessons, and in general
stimulate a rethinking or reconfirmation of a position in front of an internal and supportive audience.
Staff selected as peer reviewers should be trained on the most effective means of communicating
messages, and should be recognized for their guru status and effort. The selection of peer reviewers
should be handled carefully to ensure neutrality and relevant expertise. Assessments, while written,
should also be discussed in an open forum which provides the task team full opportunity to explain
their decisions, and move toward a synthesis of points and relevant guidance as appropriate and
conveyed by the responsible Director. Minutes of the review meeting can focus on decisions taken
rather than being a record of conversation.
79. 360 degree reviews of managers should be considered as an important feedback channel
for both reviewed managers and more senior staff. Managers and their staff can benefit
significantly from well designed confidential staff surveys rating managers on an array of substantive
and management questions. Few managers could not benefit from candid feedback, and the best
managers recognize the value of this exercise. Senior officials who would use these reviews in
discussions with the reviewed manager realize, of course, that the manager also needs to meet output
targets, adhere to budgets, confront unanticipated challenges, maintain quality, etc. so ratings from
staff are hardly the only element in successful job performance. However, such reviews taken
together with broader staff surveys can provide senior RCC officials with important information about
overall developments and differences between units, besides helping individual line managers
improve their effectiveness.
80. Conflict of interest always is a potential problem in fiduciary institutions and should be
forthrightly addressed through quarantine provisions preventing staff and Board members
from exiting the RCC into organizations which were a focus of the individual’s work in the
RCC. The normal period of quarantine is two years, and of course does not prohibit employment in
an RCC related field, but rather firms where there would be a reasonable perception of a conflict of
interest and leakage of confidential RCC information. Similarly, the RCC should give high priority to
establishing, through legislation or internal regulation, prohibitions on the hiring of close relatives
(immediate family members, aunts, uncles, cousins, nieces, and nephews, etc.). In a small
organization it is extremely difficult to prevent an overlap of responsibilities and management lines
not conducive to suspicions of favoritism. The RCC should also issue guidelines on unacceptable
workplace harassment or interpersonal behavior potential contrary to the RCC‘s integrity and
professionalism.
Human Resources
81. Where salaries account for 80% of the budget, the RCC is, and must be, a knowledge
based organization. Staff is clearly the core asset of the institution and successful personnel
management must be seen as a top priority for the institution. The breakdown of staff by education,
age, and gender confirms the cursory view of an outside observer—the staff is young, educated, and
gender balanced. Sixty percent of staff are economists by training (a ratio which has held steady for 5
years) and 16 percent are lawyers (up from 13.5 percent in 2005). There are 74 Masters Degree
graduates of which 7 have completed PhDs. The question remains, however, whether the mix of staff,
46
despite continuing intake efforts, has attained yet the right balance of skills. As indicated above, there
seems to be a need to expand the Legal Department and the Economics Research unit as well as the
Competition Divisions. A job classification effort must be completed and carefully linked to the RCC
training program, career development counseling, promotion criteria, etc.
82. Intensified commitment to a robust training program is warranted to compensate for a
lack of in country courses on core competition issues as well as keep up with market developments.
The RCC appears to take this challenge seriously, as training in a wide variety of substantive courses
has been ramped up (in 2009 19 courses were offered and over half of staff -165- participated). The
RCC solicits staff requests for training and brings in outside experts as possible. Recognizing the
impact of exogenous government decisions on compensation the RCC has apparently sought to
recompense staff to the extent possible through foreign training or observational visits to other
European competition counterparts. That said, there is anecdotal evidence from staff that while some
training is useful (especially that concentrating on practical issues and operations) other courses can
be unduly theoretical and/or simplistic. Such comments can be made in many organizations, but do
not relieve the management from continued efforts to refine the training program. An important step
in this regard would be to complete the process of defining job competencies, which lays out the
education and skills requirements for positions. This in turn would permit assessments of individual
staff competencies through background reviews and testing. The overall picture of skills gaps for the
organization would also permit management to design a training program linked to agency needs,
both current and anticipated in line with priorities identified in the RCC‘s strategy. Such a training
program should be more demand driven from the standpoint of business needs and staff skill gaps
than supply driven and staff self assessments.
83. Recruitment and selection of staff appears to be merit based. Jobs are posted on the
internet and short listed candidates go through written exams and oral panel reviews. According to all
staff queried none suggested political affiliation counted in their selection. Vacancies are posted
internally and appear open to all qualified staff. Recent selections for Director level posts (just below
vice presidents) were filled from within. The staff survey indicated, however, that there is little
communication internally to explain the basis for selection of managers. Providing information on the
experience, academic background, and behavioral strengths of the chosen candidate could at low cost
add to transparency, convey messages regarding preferred characteristics, and enhance a merit culture.
According to the Secretary General it is possible to fire staff for cause if the complicated rules for
such action are followed (undoubtedly a long and tedious process). Hopefully a robust personnel
evaluation system will enhance the focus on performance and lead to more proactivity in addressing
poor performance. The staff survey indicated a high level of frustration among staff that poor
performance was not appropriately addressed.
84. RCC pay is higher than the average for the civil service and is justified by the RCC by
the complexity of the work and fiduciary and legal responsibilities of inspectors. Under the
current pay system (whatever the drawbacks nationally in terms of undue reliance on non salary
compensation and lack of standardization and equity in terms of equal pay for equal work within and
across organizations), core business staff (competition inspectors) are paid at the same rate as Justice
Ministry prosecutors. The RCC‘s ability to attract and retain talent is critical to its success, but may
be threatened if the pay guidelines being finalized under the recently enacted Unitary Pay Law are not
appropriately applied to the RCC. Whatever the obvious merits of bringing some equity and
rationality to government wide compensation, RCC staff compensation must be at some level
47
sufficient to attract talent in sufficient numbers. Moreover, a long extension of the emergency 25%
pay cut for all civil servants could have the effect of driving out many staff with better alternatives.
RCC staff, particularly younger ones with recent training and foreign language skills, could normally
be expected to leave to law firms, businesses, and private sector organizations anxious to have their
substantive knowledge on competition issues and perhaps RCC practices. But a significant increase
in turnover risks de-skilling the RCC, demoralizing remaining and even more overworked staff, and
blighting the prospects for RCC to attract the professionals it needs to pursue the theme of
competition in a society still grappling with the rules of market engagement. The Government and the
RCC should urgently consider options for setting compensation levels for competition inspectors at
the rank of magistrates, other core economic institutions like those overseeing pension funds,
insurance, or banking, or undertake other practical measures to maintain the RCC‘s ability to attract,
motivate, and retain high quality individuals. At the same time it might be useful to rectify the job
descriptions of those not acting as competition inspectors, considering hiring ―case managers‖ as in
other EU counterparts to handle more routine tasks in investigations, and in general provide more
differentiation in jobs and pay so as to better recognize job content and reward performance.
85. From the Board on down there also appears to be reliance on teams created to reflect
the needs of individual cases. The effort to promote a more democratic and merit based culture
appears to reflect recognition by managers that the nurturing of highly trained and self motivated staff
with other employment options requires a less hierarchical command and control approach in order to
maximize output. Individual staff members who propose initiatives can be placed in charge of their
implementation (admittedly additional work but also empowering and perhaps a form of professional
satisfaction and career development). Staff at various levels are also tapped to run these projects
involving substantive or organizational priorities, which can cut across unit boundaries. Again, this
can be a form of compensation in the sense of recognition, professional challenge, and skill
enhancement. These forward looking practices in line with those in the most advanced EU
governments would, of course, be even more effective were staff not concerned about deep reductions
in pay or the prospect of a limited advancement within government.
86. Introduce more flexible ways of working across units. Specifically, case teams are being
assembled to combine the right mix of experience and skills. For instance, the OFT is using more
flexible ways of working including bigger teams. It has introduced greater flexibility in how it
allocates staff to projects with greater scope for staff to work on projects across different areas of the
Office according to principles of availability, skills and experience, and career and personal
development needs.
87. Introduce non-monetary incentives to reward performance. Several incentives have been
used by competition agencies to reward the productive and innovative staff, including: (i) prizes and
performance rewards (e.g. ―Best Empirical Economic Analysis‖ conducted during the year), (ii)
developmental assignments in other competition agencies, (iii) teaching and lecturing antitrust and
industrial organization courses in selected universities, (iv) scholarships for graduate studies, and (v)
leading high impact cases. According to the results of the RCC Staff Survey, staff perceives non-
monetary rewards as an effective tool. Headquarters staff favors performance rewards and
developmental assignments in other competition agencies. Territorial staff also favors developmental
assignment but has a stronger preference for leading high impact cases (Figure 19).
48
Figure 19: Effectiveness of Non-Monetary Rewards
Source: Staff Survey
Finances
88. The RCC appears appropriately funded in terms of comparisons with EU counterparts.
This reflects several factors including the over the horizon support of the EU (which needs to be
maintained). It also stems from the high reputation of the RCC, its careful preparation and defense of
budget proposals with less than the normal level of fluff (in its view), bolstered by a record of meeting
spending targets in previous years. The RCC might seek to increase its reporting to the Parliament
whether at the time of annual report issuance or during budget discussions. In any case Board
members seem quite attuned to maintaining good relations with the legislature, and the RCC appears
to have close working relations with the Chamber of Accounts (taking action on its recommendations
and thus warranting a level of trust and internal government support from that organization). Of
course a primary issue is whether these resources could be better allocated and utilized to meet
priority strategic goals. With 80% of its budget accounted for by staff costs, there is relatively little
room for reallocations in investment spending or efficiency gains outside of personnel decisions.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
HQ regional Total general
Scholarships for conducting graduateAwards/Prizes based on performanceDevelopmental assignements to other competition agenciesLeading high impact case/investigations
49
Figure 20: Annual Budgets of Competition Agencies 2008
Source: GCR, RCC
89. The RCC appears to internally manage its finances appropriately. The Budget, Finance
and Administration Directorate (BFAD) within the RCC tightly manages cash releases and plays a
key role in budget execution and cash planning, in addition to its functions in expenditure
programming, budget preparation, and completion of required financial statements. Budgets are not
significantly under spent (and Finance Ministry controls prevent over spending). The Finance
Ministry has withdrawn its delegate from the RCC reflecting its confidence in the agency‘s ability to
manage its resources without the need for preventative ex ante review. The RCC has its own basic
level financial management software which has been adapted over the years. Annual reports from the
Chamber of Accounts contain only limited recommendations for improvements according to RCC
staff, and those recommendations are acted upon. The internal audit department in the RCC is facing
the same generic issues confronting the whole country. There are very limited staff resources (having
only one internal auditor, with two more positions not filled for the past couple of years) permitting
only 3-4 audit investigations per year and impairing the effectiveness of a risk based internal audit
strategy and annual work plan. Moreover the level of interest of RCC management to use internal
audit findings with a view to improve and streamline processes and procedures is unclear. As such
the RCC should strengthen its internal audit capacity. Because it focuses on systemic risks, process
gaps, and the range of policies impacting financial management going forward (rather than ex post
review or second guessing specific management decisions) internal audit can be a positive influence
supporting a results based culture.
90. Adapting financial management to enhance a results focus in the RCC will be
challenging given central government systems and policies. Romania lacks a modern integrated
financial management information system, which impacts the speed, accuracy, and efficiency of
government operations nationwide, including the RCC. As indicated in the horizontal review of
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50
Romania‘s budgeting system, the primary goal of Finance Ministry operations seems to be first level
fiscal control with more limited attention to allocation or efficiency goals. Romania‘s budget
classification is by administration, organization, and function and not designed to accommodate
program classifications. Revenue projections are often unrealistic (subject to political manipulation)
so spending frequently needs to be cut across the board during the year with little forewarning.
Quarterly spending authorizations are frequently complicated by weekly cash outlay limits.
Information is not up to date or available on line, requiring frequent telephone inquiries by agencies to
MoF offices to track down needed data. The effort within the RCC to expand the nascent program
budget (project budgets now accounts for about 23% of the RCC‘s budget) within the straight jacket
of an antiquated, unpredictable, and overly centralized line item national budget leads to high
transaction costs, and contortions in spending patterns/timing. Nevertheless the RCC has taken a
preliminary decision to track its 2011 budget with 80% in project budget envelopes. Clearly any
effort to link strategy to program to results would be facilitated by broader budget reform within the
central government. The RCC has been able to succeed thus far by utilizing its knowledge of budget
minutia to exploit acceptable avenues permitting flexibility, supported by investments in financial
management software to reconcile the differing charts of account and budget classifications. The high
morale and esprit de corps of the finance and human resources teams also encourages them to make
the extra efforts to make the new project budget approach work. Full expansion to project and
program budgeting as the basis for better funding and monitoring substantive programs should be
pursued if and when possible. In the meantime the RCC should continue efforts to update its
financial software. It is to be hoped that the relevant external agencies like the Ministry of Finance
and Court of Accounts can work with the RCC to support its efforts to promote performance culture
and improved results through its important initiatives in project based budgeting.
91. Strengthening supportive information technology. The RCC appears to make considerable
use of modern information technology both in its line operations (since data from firms subjected to
dawn raids needs to be discovered and recovered from computers) as well as administration (the
human resources team identified and purchased a modern computer based personnel evaluation
system). With an increased emphasis on results monitoring, tighter control over deadlines, increasing
digital use by Romania firms, there is a need to strengthen the utilization of information technology in
the RCC. A thorough assessment is required first, especially given the apparent intention to
implement an Enterprise Resource Planning system (full alignment of IT to the business). Problems
detected during the review which need attention include steps to better assure the security and
electronic backup of case files, a better system than having case information contained in personal
laptops used during dawn raids, an improved management information system for investigations and
administrative purposes, and better internal arrangements to ensure that both forensic and
administrative units are properly supported by ITC technicians (currently the team is located in
operations and high priority IT needs in administration can be underserviced).
92. In addition, IT is crucial in the course of investigating cartels but also for a proper
administration of the agency. In that respect, the amount of staff of the RCC currently working at its
registrar and the archives is rather limited (Annex 4). The successful fighting of cartel cases requires
hundred percent reliable resources and files. The importance of the related work can hardly be
overestimated.
51
V. SPECIFIC RECOMMENDATIONS
93. A proper enforcement of competition rules is crucial to ensure a sound competitive
environment which, in turn, is beneficial for the consumers and critical for growth. Investors both
from within and from outside Romania will consider the proper functioning of markets crucial for
their activities.
94. In the previous sections, a broad range of concerns were raised regarding the status of
competition policy implementation stemming from a limiting policy environment, a nascent but still
unarticulated and somewhat diffuse strategy to achieve EU comparator levels and the main
characteristics of a good competition agency (Box 8), and a still evolving internal reform effort which
needs to better conform the structure and functioning of the RCC to a competition enforcement
strategy.
Box 8: Characteristics of a good competition agency
According to the ICN although there is no one size which fits all, some universal characteristics of a "good" competition
agency can perhaps be discerned:
it has a clearly-articulated long-term strategy, and a plan for implementing that strategy;
it understands that it has a range of policy tools at its disposal, including notably case investigations and
different forms of advocacy and communication, and it has a problem-solving approach which tries to fit the right
solution to each problem;
it adapts its internal structure and processes to its environment and objectives, and keeps its internal organization
flexible;
it uses clear criteria to select which projects to undertake, among the many (discretionary) actions which it
could launch;
it keeps ongoing activities and projects under review and terminates projects which are not meeting their
objectives;
it understands that its main resource is its staff, and tries to provide them with a stimulating pleasant and
rewarding working environment, to compensate for the lower salaries than in the private sector;
it is constantly reviewing and evaluating its activity, and feeding the results back into the planning process;
it understands that communication is an essential part of its task, and devotes adequate resources to
communication, adapted to different stakeholders;
it understands that it cannot work alone and forms alliances with other public and non-public bodies
(regulators, NGOs, academia etc.).
95. The following areas should be analyzed, strengthened and changed in order to improve RCC‘s
effectiveness:
Reform Area 1: Improving the Governing Environment
Reform Area Specific Actions Timeline
1.1 Review of
changes in the
government’s
legal
framework for
competition
A comprehensive review of existing legislation for the government with a
particular focus on:
Guaranteeing the enforcement of provisions related to the impact of
regulations on competition. Currently, the legal framework
establishes that government bodies should evaluate the impact on
competition of all their respective regulations. However, the current
framework is not fully enforced with government bodies issuing
anti-competitive regulations. Government bodies should justify their
actions if the RCC considers that regulations imposed are harming
Short to
Medium
Term
52
Reform Area Specific Actions Timeline
the competitive environment.
Strengthening procurement rules to avoid competitive harm.
Currently, the RCC has the mandate to detect bid-rigging and
guarantee that tender conditions promote competitive procurement
markets. Other authorities also have a role in solving disputes after
tenders have been finalized. The legal framework could be
strengthened to take advantage of potential synergies between these
complementary functions.
Analyzing enforcement framework of unfair competition rules. The
Ministry of Finance is currently in charge of analyzing complaints
related to unfair competition (e.g. misleading advertisement, among
others). Currently, there is no formal coordination with the RCC
even though firms could recur to unfair competitive practices in
order to deter entry. Given that many competition authorities in the
region also have a mandate in this area, the convenience of keeping
unfair competition rules under the Ministry of Finance – or any
Ministry- should be reconsidered.
1.2
Mainstream
competition
policy within
the
government
Creation of competition advocacy unit to deter anticompetitive regulation.
The RCC should refocus its advocacy activities towards deterring
anticompetitive regulation established by public and government bodies
rather than raising awareness of competition principles only through
seminars. If RCC continues with the mandate on the State Aid area, it should
refocus its activities towards markets with significant government
participation and the evaluation of their impact on competition. Currently,
the RCC provides technical assistance and guidance to State Aid grantors in
order to fulfill EU requirements for permitted State Aid. RCC‘s role should
be to evaluate the impact of state aid schemes on competition in order to
prioritize state aid resources and minimize their distortions on competition.
Strengthening competition advocacy in public and government bodies. The
RCC cannot enforce competition policy alone, and requires the coordinated
support of key policy agencies (such as the ministries of Finance and Justice)
as well as core line agencies (such as Economy, Energy, and Transport).
These agencies should ideally, as part of their strategic planning policy
review, take into account the potential effects on competition of different
government policies and at best to promote broader competition goals within
their sectors. Public and government bodies should coordinate with the RCC
and request its opinion before laws and rules in their respective sectors are
enacted in order to avoid anti-competitive regulation.
Short to
Medium
term
1.3 Strengthen
regulatory
agencies
The government should undertake on a priority basis a review of the
regulatory framework and governance of key economic sectors (energy,
telecommunications and transport) including the role of respective regulatory
agencies to identify means to strengthen their capacity and ability to oversee
their sectors to promote competitive markets.
Short to
Medium
Term
53
Reform Area Specific Actions Timeline
1.4 Revise
RCC’s
legislative
mandate to
promote
competition
An ordinance has been issued and parliamentary action is anticipated in the
near term. The ordinance should maintain its important improvements and
be further strengthened along the following lines:
Include the concept of ―undertaking‖ as defined by EC case
law.
Abolish the notification system of individual exemptions.
Amend to include the main concepts of economic
concentration.
Change from dominance test to the SIEC test (significant
impediment of effective competition test)
Include the presumption that undertakings with less than
40% in the relevant market do not have dominant position.
Include a provision to guarantee that the RCC will need to
establish and verify the lack of competition in the market
under scrutiny before the Government decides to impose
particular price controls.
Review the effects of criminal sanctions on corporate
leniency.
Improve provisions to guarantee accountability of Board
Members, such as the establishment of quarantine periods
and a more competitive appointment process. Consider
downsizing the Board to EU average.
Reduce merger thresholds and streamline and apply
simplified merger procedures
Evaluate legality and inclusion of settlements procedures
The RCC will also need to issue secondary legislation to adjust to the new
Competition Law.
Short Term
1.5 Increase
accountability to
the Parliament
and public.
To assist in the RCC‘s efforts to deepen national understanding of the role of
competition in general and the RCC in particular, as well as forestall
potential complaints about the democratic legitimacy and accountability of
the agency, it might be useful to return to the practice of parliamentary
approval of Board members or at least Cabinet approval. Steps could be
taken in legislation to tighten the requirements of the Members of the Board
to ensure proper levels of competence and experience.
The RCC should also consider methods to increase reporting to the
Parliament, perhaps in conjunction with publication of its annual reports if
not during the process of budget approval. The number of Board members of
the RCC exceeds the EU average and that consideration might be given to a
reduction in its size (perhaps through attrition). This could lead to benefits in
Short to
Medium
Term
54
Reform Area Specific Actions Timeline
terms of reduced costs (for salaries, support staff, cars, offices, etc.) and
reduced confusion to RCC staff should these full time members become
involved in operational management decisions best left to the President of
the agency.
55
Reform Area 2: Sharpening the RCC’s Mission
Reform Area Specific Actions Timeline
2.1
Restructure
the RCC along
business lines
The core function of the RCC and other competition agencies is competition
enforcement through technically complex investigations of firm behavior,
requiring the input of lawyers and economists, and led by expert
investigators with the competence and behavioral attributes of investigating
magistrates.
The current organization of the RCC into industry sectors diffuses this
expertise, requiring its staff to spend time on a variety of tasks (sector
oversight, mergers and acquisition notifications, review of draft legislation,
cartels and abuse of dominance). Creating an elite core of front line
competition teams focused exclusively on enforcement would represent the
single most important reform to improve RCC performance.
A thorough restructuring to the organization to aim at ensuring at least 70%
of resources are focused on enforcement and that separate units for Cartels
(including bid rigging in public procurement), Abuse of Dominance and
Mergers, Advocacy (to mainly review anticompetitive government
regulations), and an expanded Economics Research unit (using skilled
econometricians and statisticians to monitor Romanian markets) should be
implemented. Within these divisions, current sector experts could focus on
tackling anticompetitive business practices and reviewing mergers in their
respective industries. Without necessarily adjusting the overall complement
of staff, the RCC should on a priority basis review the business need for the
current distribution of territorial offices, and where appropriate close,
consolidate, and reduce those offices to reflect real threats to competition.
Staff or their positions could be shifted to higher priority business practices.
Short Term
2.2 Strengthen
strategic
planning and
results focus
towards
increasing
enforcement
record
The RCC should complete the articulation of its strategy to increase its focus
on competition, establish clear monitorable results for internal performance
and external accountability linked to the goal of EU parity, and make the
necessary adjustments in internal organization, staffing, and funding to
achieve those results. The linkage between agency goals, prioritization of
operations, and supporting administrative functioning should be made as
explicit as possible, management information systems and a strategic
planning and oversight unit established, and in general the performance and
results culture of the RCC (which appears to compare favorably to the rest of
government) should be further intensified.
Additional actions in this area include:
• Complete RCC strategy document based on a broad participatory
process with specific targets based on EU parity, planned actions,
deadlines, monitoring indicators and outcome goals understandable
to agency stakeholders and the general public
• Establish internal deadlines and performance metrics for
competition cases
Short Term
56
Reform Area Specific Actions Timeline
• Prioritize prosecution of hard core cartels
• Analyze state aid measures in markets that lack competition or with
significant government participation (e.g. transport).
• Modify current Protocols with regulatory agencies to establish
targets in terms of successful promotion of competition (e.g.
removal of barriers to entry in the sector or elimination of anti-
competitive regulation)
• Refocus advocacy, reduce number of seminars and evaluate the
introduction of alternative advocacy instruments such as compliance
programs
• Establish criteria to estimate the impact of competition enforcement
Communicate performance targets in Annual Report and webpage.
2.3 Improve
Quality
Control:
The RCC should take steps to strengthen quality control since its findings are
often subjected to scrutiny in the courts by well funded and expert
adversaries. The restructuring of the RCC towards business practices would
be a major step in this direction, but should be complemented by explicit
programs of internal peer reviewing, drafting of operation manuals and
guidelines for staff to encapsulate evolving best practices within the RCC
and EU, strengthened training in advanced investigative and market
assessment techniques, establishment of deadlines for key decisions on case
development, careful case selection to promote impact and focus on highest
priority abuses, and better integration of economic research and state aid
units with competition enforcement.
Additional actions in this area include:
• Close investigations with a duration longer than 3 years in 2010.
• Keep updated records and monitor status of current investigations.
• Establish guidelines for opening and conducting preliminary
investigations including resources needed and timetables.
• Establish guidelines for the analysis of competitive effects (harm
and efficiencies) for merger and abuse of dominance cases.
• Report progress on internal deadlines and targets monthly to the
Board.
• Establish protocols for regular exchange of information with the
Statistical Office and consumer protection authorities.
• Establish a system for tracking competition indicators
Short to
Medium
Term
57
Reform Area 3: Improve Underlying Capacity
Reform Area Specific Actions Timeline
3.1 Ensure the
competitiveness
of RCC
compensation
Competition authorities are crucial to keep markets functioning efficiently
but also face strong vested interests from incumbents and public bodies.
Competition Inspectors represent the key professionals of the RCC and as
such the core assets of the agency and the government should adopt
arrangements to ensure their proper compensation. To successfully enforce
competition policy through investigations, legal proceeding, and even
defense of RCC findings and fines in court, the RCC must be able to attract
and retain highly educated and motivated staff. Over time the sophistication
and legal capacity of domestic and foreign firms engaging in inappropriate
behavior can be expected to increase. Whether through maintaining the
parity of RCC competition inspector remuneration to those of magistrates,
explicitly recognizing the RCC as a key economic organization requiring
compensation in line with others such as the national bank, insurance and
pension regulators, or taking other practical steps to ensure the market
competitiveness of RCC salaries, the decision is for the government.
Without such a positive decision the RCC will be hollowed out as the normal
pace of rotation accelerates and the best staff flee to opportunities in the
private sector and more senior staff are demoralized as they await retirement,
with consequent negative effect on competition policy effectiveness.
Short,
medium,
and long
term
3.2 Intensify
non-monetary
compensation
The RCC should in parallel undertake a series of measures to improve
psychic and professional rewards to staff through public recognition of
superior performance, opportunities through training, observational visits to
other competition agencies and inter government organizations to
acknowledge performance and enhance professionalization and career
development.
Short
Term
58
Reform Area Specific Actions Timeline
3.3 Adjust staff
skills in line
with business
needs
Currently, 220 of 350 staff are considered competition inspectors. However,
not all of them are dedicated to enforcement activities.
Following broader EU practice the RCC should increasingly rely on case
managers and paralegals which can relieve overburdened and highly skilled
competition inspectors from more routine tasks. Simultaneously the RCC
needs to increase the number of staff with PhD level training in economic
analysis, expand the legal department, and reflecting business needs,
complete its job competency review to formalize needed skills, better link
training to identified skills gaps, and continue efforts to improve training to
reflect business needs utilizing broader EU and academic sources for the
most sophisticated topics.
Additional actions in this area will include:
• Define job competencies with education and skills required for each
position as basis for training programs and evaluations
• Categorize competition inspectors and case handlers based on job
competencies requirements
• Assess periodic rotation of personnel and flexibility in assigning
teams
• Strengthen the skills and experience of staff in key areas of
competition work (e.g. specialized training courses in quantitative
techniques for competition analysis and partnerships with developed
competition authorities for assistance)
• Mainstream the use of paralegals to support the work of lawyers and
economists competition inspectors
Short to
Medium
Term
3.4 Improve
internal
communications
As a small knowledge based organization RCC management should enhance
its already flat management structure and informal communications networks
with more formal methods including newsletters, staff surveys, explicit
explanation of key policy and management decisions, full participation of
staff in strategy articulation, etc. These small steps together could enhance
RCC cohesion and understanding and alignment of staff efforts toward
common goals.
Short
Term
3.5 Continue
the movement
toward project
budgeting as a
pillar of results
management
The RCC plans to increase the internal classification of its budget around
RCC relevant projects from 23% in 2010 to 80% in 2011 (while adhering to
current national budgeting norms). This difficult effort, which should be
replicated government wide, will strengthen the focus on the performance of
the organization and staff. Other government agencies such as the Ministry
of Finance and Court of Accounts should work with the RCC to facilitate
wherever feasible this initiative.
Short
Term
3.6 Improve
internal
As a corollary to project budgeting, the RCC needs to expand its internal
audit staffing and management commitment to aggressively monitor systemic
Short
Term
59
Reform Area Specific Actions Timeline
auditing fiduciary risks to the RCC.
3.7 Tighten
Security
Given the highly confidential nature of RCC investigations and potential
financial implications, the maintenance of physical security to staff, files, and
information technology should be improved. Without having made a formal
investigation, it is a matter of concern that the RCC shares offices on several
floors of an antiquated building with the media where security afforded
offices is rudimentary, files are not duplicated electronically, access by staff
to information may not be as rigorously controlled as needed, etc.
Short
Term
3.8 Better
integrating
information
technology,
premises, etc.
The RCC appears rightly to place considerable emphasis on modern
information technology. However, a more thorough assessment of its use
and governance is recommended as several problems seem to exist including
lack of proper support for management information systems especially for
RCC administration requiring dedicated ITC support to this unit, reliance on
personal laptops for sensitive RCC information, limited forensic capability
for investigating data obtained from computers in raids on business.
3.9 Reduce
potential
conflicts of
interest
The World Bank strongly urges the RCC through legislation to establish
―quarantine‖ provisions to prevent staff, managers, or members of the Board
to leave the RCC for positions in the private sector directly connected with
operations with which they are involved. Similarly to protect the reputation
of the RCC for integrity, internal regulations or legislation is recommended
to severely limit the future hiring of relatives of current staff, managers, and
Board members.
60
ANNEXES
61
Annex 1. Differences across data submitted by the RCC
Detailed information was requested from the RCC regarding enforcement activities and performance
between 207-2010. Due to inconsistencies found in the data, the RCC submitted three sets of
information on its performance and enforcement
Tables below detail the differences between each submission. First three columns show the number of
investigations contained in each dataset submitted; and the last two columns, the difference among
them. For each type of practice, more investigations were reported by RCC. In addition, since second
submission, other category was included in the information labeled as ―Others‖. This basically
covered agreements, anticompetitive decisions of public bodies, and possible infringements of articles
5, 6 and 9 of competition law. The last three deals with agreements, abuse of dominant position and
actions by the central or local public administrative body prohibited, respectively.
Number of investigations 2007-2010
First submission Second submission Third submission Difference 1st-2nd Difference 2nd-3rd
Cartels 26 53 132 27 79
Mergers 179 200 200 21 0
AODP 6 23 94 17 71
Others* 0 35 123 35 88
*Includes agreements and practices against article 5, 6 and 9 (agreements, abuse of dominant position and actions by the central or local
public administrative body prohibited, respectively)
Third submission includes investigations reported in a separate dataset about enforcement activities by territorial offices
By examining more in detail the universe of investigations, we find that the ―additional‖ ones were
mainly preliminary investigations. Table below shows the number of formal cases reported in each
submission. In comparison with the table above, it is clear that the most part of ―additional‖
investigations were preliminary investigations.
Number of formal cases 2007-2010
First submission Second submission Third submission Difference 1st-2nd Difference 2nd-3rd
Cartels 26 30 35 4 5
AODP 6 10 10 4 0
Others* 0 28 31 28 3
*Includes agreements and practices against article 9 (actions by the central or local public administrative body prohibited).
Third submission includes formal cases reported in a separate dataset about enforcement activities by territorial offices
Type of investigations from differences between submissions
Between Second and First Between Third and Second
Become formal case
Ended as preliminary
investigation Become formal case
Ended as preliminary
investigation
Cartels 4 21 5** 74
AODP 4 13 0 71
Others* 28 7 3*** 85****
*Includes agreements and practices against article 5, 6 and 9 (agreements, abuse of dominant position and actions by the central or local
public administrative body prohibited, respectively)
** Reported in territorial offices ***Includes investigations and letters accepted
****Includes preliminary, letters not accepted and forwarded
62
Type of investigations from differences between submissions
Between Third and Second
Ex officio Complaint Intimation notification/letters Request point of view
Cartels 58 4 13 4 0
AODP 31 8 18 14 0
Others* 18 6 0 59 5
*Includes agreements and practices against article 5, 6 and 9 (agreements, abuse of dominant position and actions by the central or local
public administrative body prohibited, respectively)
Composition of Others by type of agreement 2007-2010
Practice Number of investigations %
Agreement 51 41.5%
due to public authorities intervention 39 31.7%
various (art. 5,6,9) 20 16.3%
Merger 5 4.1%
Discrimination 3 2.4%
Ban 1 0.8%
conclusion of contracts 1 0.8%
exclusive distribution 1 0.8%
possible infringement of art 6 of Competition Law 1 0.8%
no identified 1 0.8%
Total general 123
Composition of Others by type of agreement and decision of preliminary investigation 2007-2010
open formal
investigation
not
opened
letter
accepted
letter
forwarded
letter
rejected
point of
view
issued
request
notified
Total
general
agreement 19 8 1 19 4 51
ban 1 1
conclusion of
contracts 1 1
discrimination 1 2 3
due to public
authorities
intervention 4 12 1 17 5 39
exclusive distribution 1 1
merger 5 5
possible infringement
of art 6 of
Competition Law 1 1
various (art. 5,6,9) 2 1 4 11 2 20
no identified 1 1
Total general 31 24 3 4 50 7 4 123
63
Annex 2: Additional Competition Statistics
Number of investigations by sector 2007-2010
Cartel AODP Others
consumer goods 23 0 0
services 17 1 0
natural gas 5 14 0
public transport 14 0 3
food 3 1 8
construction 7 0 1
pharmaceutical 2 3 7
telecom 0 6 4
building materials 6 2 0
retail 2 5 0
cable tv 2 4 0
mineral resources 0 4 0
postal services 0 4 0
communication 4 1 1
industry 4 0 0
liberal profession 4 0 0
Repair motor vehicles 0 3 0
advertisement 0 0 3
banking 2 0 3
food and non-food 0 0 3
media 3 0 3
others 34 46 19 Others include agreements and practices against article 5, 6 and 9 (agreements, abuse of dominant position and actions by the central or local
public administrative body prohibited, respectively)
For Others, investigations do not include those initiated by letters nor requests of point of views. Source: RCC
64
Number of formal cases by sector 2007-2010
Cartel AODP Others
public transport 5 0 0
food retail sector 3 0 8
postal services 0 3 0
banking 1 0 3
media 1 0 3
telecom 0 0 2
bread market and related markets 2 0 0
confection 2 0 0
construction 2 0 1
consumer goods 2 0 0
liberal profession 2 0 0
natural gas 2 1 0
oil sector 2 0 1
pharmaceutical 2 0 7
building materials 0 1 0
connecting utility network 0 1 0
port operating 0 1 1
steel industry 0 1 0
therapeutic services 0 1 0
Other 9 1 5
Others include agreements and practices against article 5, 6 and 9 (agreements, abuse of dominant position and actions by the central or local public administrative body prohibited, respectively)
For Others, closed investigations include, besides closing formal investigations, letters forwarded and rejected. Total of closed investigations
are20. Source: RCC
Mergers and Economic Concentrations: 2007-2010*
2006 2007 2008 2009 2010
Mergers notified 5 52 74 45 24
Decision in Phase I 0 42 71 43 15
Decision in Phase II, without Phase I 1 2 2 0 0
Decision after phases I & II 0 0 0 0 0
No decision, being in Phase I 0 0 2 0 5
No decision, being in Phase II 0 0 0 0 3
Approved 1 41 63 40 12
Cleared with remedies 0 2 0 0 0
Structural Remedies 1
Behavioral Remedies 1
Denied 0 0 0 0 0
% of total requiring remedies 5% 0% 0% 0%
65
Annex 3: Scope of Functions and Main Characteristics of Competition Agencies
Table: Mandates and Scope of Functions of Competition Agencies: Europe and Central Asia
Number of
Functions
Anticompetitive
practices Mergers
State
aids
Unfair
competition Advertisement
Public
procure
ment
Consumer
protection
Italy 6
Bulgaria 5
Denmark 5
Lithuania 5
Norway 5
Poland 5
Czech Republic 4
Greece 4
Hungary 4
Latvia 4
Netherlands 1/ 4
Portugal 4
Slovak Republic 4
Sweden 4
Switzerland 4
United Kingdom oft 4
Albania 3
Austria 3
Croatia 3
Finland 3
France 3
Germany 3
Letonia 3
Romania 3
Belgium 2
Estonia 2
Luxembourg 2
Slovenia 2
Spain 2
Turkey 2
1/ Includes sectoral regulation on transportation and energu
Country
Scope of functions
66
Table: Characteristics of Staff in Selected Competition Agencies in the European Region
Country Year
Staff Number
of
Functions
Potential
allocation of staff
by function Staff total % specialized staff
United Kingdom OFT 2008 747 n/a 4 187
Netherlands 2008 399 78% 4 100
Turkey 2009 325 33% 2 163
Romania 2007 296 81% 3 99
Poland 2007 281 72% 5 56
Italy 2008 278 64% 6 46
Germany 2009 277 46% 3 92
Spain 2008 198 59% 2 99
Denmark 2008 143 85% 5 29
France 2008 130 68% 3 43
Bulgaria 2008 130 70% 5 26
Czech Republic 2008 126 75% 4 32
Hungary 2007 114 71% 4 29
Sweden 2008 108 79% 4 27
Norway 2008 102 n/a 5 20
Portugal 2008 83 71% 4 21
Slovak Republic 2008 73 65% 4 18
Finland 2008 70 72% 3 23
Switzerland 2008 64 84% 4 16
Belgium 2008 64 61% 2 32
Greece 2007 62 69% 4 16
Estonia 2008 56 85% 2 28
Latvia 2008 55 80% 3 18
Lithuania 2008 53 74% 5 11
Latvia 2009 45 n/a 4 11
Croatia 2007 45 69% 3 15
Albania 2009 34 59% 3 11
Austria 2008 29 76% 3 10
Slovenia 2008 18 95% 2 9
Luxembourg 2009 11 83% 2 6
67
Annex 4: The organizational chart of the Competition Council including
vacancies and occupied positions
68
Annex 5: Staff survey results
Sample Characteristics:
Total number of respondents: 202, of which:
Management position: 13
Non-management position:178
Did not disclose: 11
Areas of activity: Competition: 61
State aid: 19
Corporate: 25
Administrative: 33
Competition & state aid: 31
All fields: 26
Not stated: 7
Number of respondents per age group:
<29 years: 5
30-40 years: 130
>40 years: 58
Non-respondants: 9
Territorial distribution: Central office: 142
Regional offices: 60
Data collected: July 2010
Main results
The predominant opinion in RCC is positive: Performing management is predominant in RCC , i.e. ―much‖ or ―very much‖ managers organize the
activity in a logical, balanced manner, establish clear objectives and quality standards, plan, follow,
monitor the progress, perform timely rectification actions, define the outcomes and assess their
concreteness;
There are documents establishing RCC‘s objectives;
There is a performance evaluation system based on the pre-established objectives where the staff can
challenge, provide constructive feedback and contribute to the decision-making:
The coordination between the directors and the directorates and the one between the CC and the other
agencies is ―good‖ or ―very good‖:
Top managers delegate responsibility to the directors, who delegate responsibility to the staff and when
delegating responsibility this is accompanied by authority;
Therefore, making the staff responsible is a concern for RCC, both the directors ,the staff and the
members of the plenum being ―always‖ responsible
Transparency is also a concern for the CC, both the annual budgets and the new policies and strategies
being ―always‖ discussed about by the directors and the staff;
RCC has many data and information that can be used in making administrative, technical and strategic
decisions. The directors ―always‖ ask the staff for information and ―always‖ use it in the decision-
making.
The directors chair the meetings effectively, manage ―well‖ or ―very well‖ both their own time and the
staff‘s time
The directors and the staff have ―very good‖ or ―good‖ knowledge about the direction where the
institution goes and are proud to be working with the CC, the current workplace being evaluated as
―good‖ or ―very good‖ compared with other employers that they have information about
The internal regulations and procedures help the staff ―effectively‖ fulfill their tasks, the work, teams
and work flow are ―well‖ organized and the departments have clear objectives
The directors promote the collaborations between departments
The CC expects that the new law improves the professional performances.
But the opinions diversify when it comes to: ―Good performance‖ is not regularly acknowledged (44%)
69
―Poor performance‖ is not signaled immediately (47%) nor constructively (42%) and nor decisively
(44%)
Transparency does not apply when appointing a new director; the reasons for the selection are not made
public in the institution (75%)
There is no talk about staff career development (48%), but staff training and development is ―much‖
(23%) and ―very much‖ (43%) supported by managers in practice and through the budget
The effective collaboration between the territorial office and the central office is considered as ―very
poor‖ (19%) or ―poor‖ (21%)
Although the communication between the direct superior and the staff is perceived as good or very
good, the communication between the staff and the CC management/ Council members is ―very poor‖
(22%) or ―poor‖ (23%)
According to the predominant opinion, the performing management is characteristic to the Romanian
Competition Council. There are, however, opinions that differ significantly with regard to the type of
management in the institution:
The factorial analysis of the management type based on 10 dimensions (variables Q2, Q3, Q5, Q7, Q8,
Q9, Q10, Q12, Q13, Q14); only one factor that explains 64% of the variation
The factorial score was divided into three groups rather equal in size, but with significantly distinct
opinions:
About 1/3 of the respondents consider that at CC there is a performing management
About 1/3 of the respondents believe that there is only a partial performing
management (i.e. objectives are defined, but without quality standards, results are
defined, but not evaluated, etc.)
About 1/3 of the respondents consider that the management is rather dysfunctional.
Irrespective of the position (management/non-management) and age, the respondents from the central
office and those working in the state aid field are much more critical towards the type of main
management in the institution (have a significantly higher likelihood to consider the management in the
institution as dysfunctional).
Static profile of the 3 groups:
Dysfunctional
Management
Partially
Performing
Management
Performing
Management
By Location Regional Offices 6.7 26.7 66.7
Main Office 45.1 36.8 18
By Position Non-managerial 34.1 32.4 33.5
Managerial 16.7 50 33.3
Over 40 30.6 30.6 38.7
By Age 30-40 35.1 40.4 24.6
Under 29 37.5 50 12.5
Frequencies:
Objective-based management:
Very much Much Little Very little
Do Directors /managers set clear, detailed
objectives?
27 37 27 9
Do directors/Managers define the outcome
of the activities, and clarify not only the
objective but also the quality standard?
42 31 20 6
Are there documents about these
objectives?
95 27 27 36
Activity Planning and Monitoring
Very much Much Little Very little
Do Directors/Managers plan the routine
daily and general activities?
43 30 19 7
70
New operations, projects or programs are
planned?
48 33 16 3
Directors/Managers regularly monitor “the
things to be done”?
57 27 11 5
Directors/managers regularly monitor the
progress of ongoing activities?
51 33 11 4
Evaluation:
Very much Much Little Very little
Do Directors/Managers regularly evaluate
the outcome of their directorates?
49 31 14 5
Do Directors/Managers regularly evaluate
the concrete results of their directorates?
48 31 16 3
Performance Evaluation System (PES):
No Yes
Does it contribute to making decisions for the professional development of
staff?
27 71
Does it provide constructive feedback to the staff? 31 68
Where the staff has the possibility to challenge the evaluation? 8 91
Is it based on pre-established objectives 4 95
Staff Performance
No Yes
Good performance is acknowledged regularly? 44 56
Poor performance is signaled in a decisively? 44 52
Poor performance is signaled in a constructive way? 42 54
Poor performance is signaled immediately? 47 50
Non-monetary incentives for staff Frequencies (%)
Performance prizes/awards 65.5
Training/development assignment in other competition agencies/institutions 64
Coordination role in major/significant impact cases 48.7
Scholarships to continue university education 17.3
Coordination
Very good Good Poor Very poor
The coordination between the RCC and
other agencies is
25.8 37.1 32.6 4.5
The coordination between the directors
and the Directorates within the RCC is
20.1 38.1 30.9 10.8
Delegation of Responsibilities
Very much Much Little Very little
Do Directors /managers regularly delegate
the decision making responsibility to their
subordinated managers?
29.2 40.6 14.4 12.4
Do directors/Managers regularly delegate
the decision/making responsibilities to their
subordinated staff?
25.2 36.6 21.3 15.8
When delegating the responsibility for
actions they delegate authority as well?
35.6 25.2 25.2 13.4
Making People Responsible
No/Never Yes/Always
There is a lot of talk in the RCC about “making people responsible”? 20 90
Both Directors and staff are responsible for their actions? 7 92
Plenary members are responsible for their actions? 17 80
Transparency
Never Always
There is a lot of talk in RCC about “transparency”? 21 79
Annual budgets are discussed by directors /managers with their staff? 38.6 61.4
71
When a new director is appointed, the reasons of his/her selection are made
public in the institutions?
74.8 23.8
New policies and strategies are discussed with the directors, managers and
staff?
32.2 66.3
Information
Never Always
The institution has more data and information that can support the
administrative, technical and strategic decisions.
8 91
Directors/managers ask the staff for relevant information when needed in the
decision making process.
10 90
Data and information are regularly used by directors/managers 18 81
Efficiency
Very much Much Little Very little
Directors/managers manage their own
time efficiently
43.1 33.7 12.9 9.4
Managers manage the time of their staff
efficiently
32.2 31.7 21.3 14.4
Staff professional development
Yes No
There is a lot of talk about staff career
development in RCC?
52 48
Very much Much Little Very little
Staff training and development is
supported in practice by manager and by
the budget allocated
43.1 23.33 20.3 13.4
Workplace Environment
Very much/
Very Good
Much/Good Little/Poor Very Little/
Very Poor
I have a good knowledge/understanding of
the direction where the RCC management
take the institution
43 27 19 11
I am proud to be working in the RCC 66 25 8 1
How would you evaluate the RCC as a
workplace compared with other employers
that you know
51 35 11 2
Organization
Very much Much Little Very little
The work flow/process in my group/team is
well organized
50 33 12 4
The objectives of my department /team are
clearly defines
54 36 8 1
The internal rules and procedures help me
carry out my duties effectively and with
good quality
51 23 19 7
The work cooperation between my
department/team and other directorates is
efficient
42 42 13 4
The objectives of my department/team are
clearly defines
54 36 8 1
The staff in the regional offices and the
headquarters work together effectively
33.7 25.2 21.3 19.3
My director/manager promotes/encourages
the collaboration with other
departments/teams with tasks related to
ours
58 25 14 3
The RCC management should actively
encourage inter-department rotation of staff
34 21 23 20
RCC Priority focus:
72
Practices Frequencies (%)
Cartels/monopolies 87
Abuse of dominant position 72.5
Minimization the state aid market distortions 19
Mergers and acquisitions 14.5
Other 2
Sectors/Areas Frequencies (%)
Energy: gas, electricity, household fuels 62.8
Financial sectors 41.1
Telecommunications 21.1
Pharmaceutical sector 16.1
Public procurement 14.4
Agro-food sector 13.9
Anti-competitive practices 13.3
Freight and passenger transports 11.7
Institutional reorganization 11.1
Constructions 11.1
Infrastructure-transport 10.6
Retail 7.8
State aid 7.2
Others 28.3
Partnerships Frequencies (%)
Regulatory bodies 49.7
Central Public Authorities 48.7
Local Authorities 27.7
Business Associations/Chambers of Commerce 24.6
Consumers Associations 24.6
Ministries 22.6
73
Estimation of Likelihood of Priority Areas
Probit regression, reporting marginal effects Number of obs = 202
LR chi2(6) =
55.53
Prob > chi2 =
0.0000
Log likelihood = -69.901155 Pseudo R2 = 0.2843
State Aid dF/dx Std. Err. z P>z x-bar [ 95% C.I. ]
Regional 0.1087164 0.162299 0.74
0.46
1 0.29703 -0.20938
0.42681
7
Age less than 40 -0.1761262 0.043908 -3.31
0.00
1
0.33168
3 -0.26219 -0.09007
State Aid Staff 0.8222072 0.079956 5.73 0
0.09405
9
0.66549
5
0.97891
9
Corporate Staff 0.3783692 0.159574 2.74
0.00
6
0.12376
2 0.06561
0.69112
8
Administrative Staff 0.2238087 0.137155 1.91
0.05
7
0.16336
6 -0.04501
0.49262
7
Mixed Staff 0.1408579 0.180774 0.86
0.38
8
0.31683
2 -0.21345
0.49516
9
obs. P 0.1881188
pred. P .1213616 (at x-bar)
Cartel dF/dx Std. Err. z P>z x-bar [ 95% C.I. ]
Regional 0.0521743 0.088555 0.54
0.58
7 0.29703 -0.12139
0.22573
9
Age less than 40 0.0717252 0.041731 1.57
0.11
5
0.33168
3 -0.01007
0.15351
6
State Aid Staff -0.3567517 0.156294 -2.76
0.00
6
0.09405
9 -0.66308 -0.05042
Corporate Staff -0.1092707 0.13002 -0.99
0.32
4
0.12376
2 -0.36411
0.14556
3
Administrative Staff -0.415315 0.127095 -3.73 0
0.16336
6 -0.66442 -0.16621
Mixed Staff -0.2120725 0.157253 -1.54
0.12
3
0.31683
2 -0.52028
0.09613
7
obs. P .8613861
pred. P .8934139 (at x-bar)
74
Annex 6: Mission interviews
Competition Council: Mr. Bogdan Chiritoiu , President
Mr. Otilian Neagoe , Vice President
Mr. Stefan Neagoe, Competition Counsellor
Mr. Dan Ionescu, Competition Counsellor
Mr. Valentin Mircea, Competition Counsellor
Mr. Jozsef Nandor Nemenyi, Competition Counsellor
Mr. Vasile Seclaman, Secretary General
Ms. Anca Tulus, Director, Budget and Human Resource
Directorate
Ms. Isabela Barasciuc, Director, Administrative Directorate
Ms. Luminita Popa, Public Manager
Mr. Marius Lungu, Public Manager
Ms. Maria Alexandru, Director Research – Synthesis Directorate
Mr. Florin Andrei, Deputy Director, Research – Synthesis
Directorate, IT Unit
Ms. Daniela Badila, Director, Consumer Goods Directorate
Ms. Georgeta Fotino, Director, Services Directorate
Mr. Daniel Chilea, Deputy Director, Industry and Energy
Directorate
Ms. Cristina Cobianu, Director, State Aid Authorising Directorate
Mr. Daniel Diaconescu, Director, State Aid Reporting,
Monitoring and Control
Mr. Gheorghe Radulescu, Director, Territorial Monitoring
Directorate
Ms. Cristina Butacu, Director, Legal Directorate
Ms. Doina Tudoran, Director, External Relations Directorate
Ms. Geta Gavriloiu, Competition Inspector, External Relations
Directorate
Ms. Alis Barbulescu, Competition Inspector, State Aid
Directorate
Mr. George Anglitoiu. Counselor
Mr. Adrian Dodita, Adviser
Mr. Ioan Badica, Competition Inspector, Constanta Territorial
Office
Mr. Constantin Culicea, Competition Inspector, Constanta
Territorial Office
Ms. Elena Siscu, Competition Inspector, Constanta Territorial
Office
Mr. Sandel Trache, Competition Inspector, Constanta Territorial
Office
Ms. Laura Tatiuc, Competition Inspector, Constanta Territorial
Office
Presidency Mr. Bujor Bogdan Teodoriu, Presidential Counsellor
Prime Minister Office Ms. Andreea Paul Vaas, Counselor Prime Minister Office
General Secretariat of the Government Mr. Serban Cerkez, Expert, Public Policies Directorate
Court of Accounts Mr. Nicolae Vacaroiu, President
Mr. Dragos Budulac, Head of Unit International Relations
Ministry of Public Finances Ms. Irina Avram, General Director , General directorate for State
Aid, Unfair Competition and Regulated Prices
Staff in charge of regulated prices, State Aid and unfair
competition.
75
Ministry of Economy, Trade and
Business Environment
Mr. Doru Voicu, Counselor to the Minister
Ministry of Agriculture Mr. Adrian Radulescu, Secretary of State
Ministry of Transport and
Infrastructure
Mr. Eusebiu Pistru, Secretary of State
National Regulatory Authority in
Communications
Mr. Eduard Lovin, Executive Director, Regulations Directorate
Mr. Gheorghe Rusen, Director, Regulation Directorate
Ms. Luminita Nicolae, Head of Unit, Legal Directorate
National Regulatory Authority in
Energy
Mr. Florin Radoi, General Director
National Authority for Public
Procurement
Ms. Cristina Traila, President
Ms. Ana Ungureanu, Counselor, European Affairs
Association for Consumer Protection in
Romania
Mr. Razvan Resmerita, Director
Petrom Mr. Mihai Berinde, Director (former President of RCC)
Academia and Research Centers Gheorghe Oprescu (former President of RCC)
Jean Constantinescu, President of IRE (Romanian energy
institute) and Former President of ANRE
76
Annex 7: Duration of cases by type of practice and years (in number of days)
Average length of investigations (number of days)
Figure: Average length from start of preliminary investigation to final decision: Formal cases
Source: RCC
By date of final decision. Length of time from date of starting preliminary investigation to date of final decision by the board. Pending refers
to formal cases not finalized. Pending refers to investigations that have not been finalized yet.
Figure: Average length from starting date of full investigation to final decision: Formal cases
Source: RCC
By date of final decision. Length of time from date of starting full investigation to date of final decision by the board. Pending refers to
formal cases not finalized.
Figure: Average length from starting date to final date of preliminary investigations: Formal cases
0
200
400
600
800
1000
1200
1400
1600
Cartels Finalized AOD Finalized Others Finalized Cartels Pending AOD Pending Others Pending
2007 2008 2009 2010
0
200
400
600
800
1000
1200
1400
1600
Cartels Finalized AOD Finalized Others Finalized Cartels Pending AOD Pending Others Pending
2007 2008 2009 2010
77
Source: RCC Includes all preliminary investigations.
By date of final preliminary decision. Length of time from date of starting preliminary investigation to date of final decision in preliminary
investigation. Pending refers to preliminary investigations not finalized.
Figure: Average length from starting date to final date of preliminary investigation: Investigations that
do not lead to formal cases
Source: RCC
By date of final preliminary decision. Length of time from date of starting preliminary investigation to date of final decision in preliminary
investigation.
0
20
40
60
80
100
120
140
Cartels Finalized AOD Finalized Others Finalized
2007 2008 2009 2010
0
20
40
60
80
100
120
Cartels AOP VA
2007 2008 2009 2010
78
Annex 8: Distribution of Workload by Staff Figure: Competition Directorates
01
23
45
Fre
qu
en
cy
0 1 2 3 4 5 6 7 8 9 101112131415Consumer Goods
01
23
45
Fre
qu
en
cy
0 1 2 3 4 5 6 7 8 9 101112131415Ind & Energy
01
23
45
Fre
qu
en
cy
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Petitions
01
23
45
Fre
qu
en
cy
0 1 2 3 4 5 6 7 8 9 101112131415Services
79
Figure: State Aid Directorates
01
23
Fre
qu
en
cy
0 20 40 60State Aid Monitoring
01
23
45
Fre
qu
en
cy
0 5 10 15State Aid Aut.
05
10
15
Fre
qu
en
cy
0 5 10 15Territorial
Project title: Functional Review of the Central Public Administration in Romania - I Project co-financed by European Social Fund Date of publication: October 15, 2010 This report does not necessarily represent the position of the European Union and the Romanian Government.
