/ world today news/ Trade chains force Bulgarian producers to sell their goods below cost. Large giants have been working “at a loss” for the ninth year in order not to pay taxes in Bulgaria, but export billions of BGN from the country.
The main reason why the bill did not pass in the previous parliament, says Rosen Plevneliev. The president vetoed it, parliament dissolved, and so we couldn’t override the veto. And the reasons for the veto are insane – they are neither illegality nor inexpediency of the draft law. They are frankly lobbyists.” BSP deputy Kornelia Ninova commented on “Voices” the reasons for the long postponement of the law protecting Bulgarian producers, which is about to be voted on in the second reading.
– Mrs. Ninova, what made the changes in the Competition Protection Act necessary? According to some, a “law against commercial chains” is being prepared, and you say – in defense of Bulgarian companies?
– This necessitated the change – to protect Bulgarian companies. Of course, also at their request. We have had hundreds of meetings with Bulgarian manufacturers, the “Made in Bulgaria” union came out with a press conference and a statement supporting the bill. Moreover, they participated in its elaboration with texts. The practice of recent years of commercial chains abusing their significant market power has led to bankruptcies of small Bulgarian manufacturing companies, layoffs, less revenue in the budget, and at the same time profits from these chains are exported outside Bulgaria, i.e. the state gained nothing.
– This is a very big surprise, because everyone sees quite large turnovers. Can you list some of the problems that the Bulgarian producers have posed?
– First, pressure on them to sell their goods below cost, that is, at a loss. And many of them, in order to maintain a market presence, to have them as a brand in the chains, tend to do so. Second, the many discounts they ask for from Bulgarian producers and the payment of fees, behind which there is no service. And in the current Law on Bulgarian Fees it is written that every fee must be accompanied by a service, and the price of the fee must be equal to the price of this service. In the contracts of the retail chains that we have, although it was difficult to get hold of them, there are also such fees as: “store birthday” fee, “new store opening fee”. I often give this example – if you are a supplier of a store in Stara Zagora, why should you pay a fee to open a store in Varna, for example, where you have nothing to do with it. The advertising fee – if you need to be advertised in a store brochure, in a TV commercial clip or on a store bag – for each individual advertisement you pay a certain percentage in addition to the first fee that remains for the store. The other thing is the payment term – in the European law it says 30 days, in ours – 60 days, but we have cases of non-payment for 6 months.
– Doesn’t this lead to the bankruptcy of many Bulgarian companies with lower turnover?
– We have statistics that many companies have gone bankrupt. In addition, the product of those who continue to work in the market becomes more expensive. This is an argument against the argument of those who claim that prices will go up. On the contrary – if they pay on time, prices will drop. As well as vice versa. Because companies that do not receive their money are forced to take out loans. These loans are accordingly paid back with interest. Naturally, the price of both the loan and the interest is included in the price of the goods. If they had their own funds, this commodity would be cheaper, instead of making it more expensive with credit. We asked the National Revenue Agency for information on the chains – what taxes they pay. And it turns out that according to the taxes owed, some chains have been operating at a loss for the ninth year. This begs the logical question – why are they here? And the other logical question – where is the money? Years ago, we had a case in which it became clear that the funds acquired from the sale of Bulgarian goods on the Bulgarian market were exported abroad and used to buy another commercial chain in Albania. During this time, our manufacturers went bankrupt and people lost their jobs.
– I was recently in Germany, I entered Lidl and it struck me that some goods were cheaper than those in the same chain in Bulgaria, not to mention that they were of a completely different quality. Is there such a problem?
– There is. What do the Bulgarian producers say? If a loaf of bread costs BGN 1, the chains pressure us to take it for BGN 0.80. For us, the bread producers say, this is a loss, we work at a loss. At the same time, the chains do not reduce their profit and markup, but sell it for BGN 1.20. That is, we lose this BGN 0.20, while they do not lose it. They are pushing us to go down so their profit can be higher. That is, the prices that are now offered in the chains are loaded with a serious profit for the chains themselves, and are to the detriment of the manufacturer.
– These are obvious things that are against the Bulgarian interest. But why this bill could not pass when you were in power for one year, while now there are many obstacles. Can we talk about the general will of the deputies and how strong is the lobbying of these chains?
– The lobbying is very strong. They act both through talks with the European ambassadors and through pressure. They logically protect their companies. The arguments of our opponents are that such a bill is not European. However, for me, the main reason for this not happening is Rosen Plevneliev. In the last mandate, we adopted the law in two readings. The president vetoed it, parliament dissolved, and so we couldn’t override the veto. And the reasons for the veto are insane – they are not about illegality, nor about the inexpediency of the draft law. They are frankly lobbyists. For example, the President commented that the changes we have made will lead to an increase in prices. Purely legally, this is not his business, nor is it grounds for a veto. Naturally, he also touches on the topic that we are violating European legislation, which does not correspond to the facts at all. Because in Europe, no one will tolerate someone not paying for 6 months. Or I will give another example – the Bulgarian law states that all companies publish their annual reports publicly and they are accessible. Chain stores don’t – haven’t in all the years they’ve been here. They don’t publish their reports. For such a thing, the Bulgarian law says that a fine is imposed. And the chains pay their fines every year, yet they don’t publish their accounts so we can see what their financial situation is. This is what nobody in Europe will tolerate. They publish their reports and pay their taxes there. In Bulgaria, a company did not pay tax for nine years. Where is this?
– What happens from now on with the draft law?
– On first reading it was accepted in the hard version as proposed. However, there will be proposals from parliamentary groups between the first and second readings, and the deadline for these proposals expires on May 21. Officially they haven’t been imported yet, but I know unofficially what the opponents will want because we’ve argued with them. For example, they want us to reduce the fines that we foresee in the new bill – 10% of the turnover for the previous year, which is really a high fine. They will offer 10% of the turnover of the goods for which the chains committed an infringement. There is some logic, we will discuss it between the first and second reading. They want to change the concept of “significant market power” – our opponents do not like this concept, they want to soften it significantly. We have stipulated that 50 million turnover for the previous year is the criterion by which we will determine who is “significant market power”. Their third argument is that the powers we assign to the Commission for the Protection of Competition (CPC) should be abolished.
And for us this is important and I will explain why. The chains sign standard contracts and based on them a specific contract for each delivery. In these contracts, there is a clear violation of the rules of competition, the market and the free market price. For example, they distort the market environment and pricing, as there is a condition in the contract: if you sell a product with them at a certain price, they forbid you to sell the same product at a lower price anywhere else. And they keep prices high. Manufacturers came to us and told us: we produce in Vidin, we deliver to a chain in Stara Zagora. Naturally, because of the transport, it is more expensive for us to get the product to Stara Zagora. But they oblige us at the same higher price to sell the goods in Vidin in our company store, which is in front of the factory. However, we cannot sell cheaper, because when they saw this, they threw us out of the chain and fined us 30% of the value of the goods. There are also such fines in the contracts.
We say in the draft law – these standard contracts signed by manufacturers will go through the Commission for the Protection of Competition in advance. They will give them to the CPC and from there they will be told if there are any clauses that violate competition, and only then will they sign them. The chains and our opponents from GERB and the “Reformation Bloc” jump against the fact that we wanted to put a lot of burden on the CPC, that there was corruption there, etc. Well then, let’s fight corruption, and not not to accept the law, which is in the interest of Bulgarian producers.
– What is the possible purely tactical mechanism for the law that passed the first reading to fail completely?
– No, it won’t work. I suppose they will soften it in favor of the chains, but the tension is already very high among the manufacturers. This bill has been in the works for the fourth year, many Bulgarian manufacturers are behind it, 1,500 companies have signed, 130,000 Bulgarians work in these companies, and 600,000 people from the related industries. There is a lot of pressure and I think lobbying will not succeed this time. Of course, the sieve is again with President Plevneliev, and there I allow everything, because this person does not protect the national interest.
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