State of Compliance
The Law on Competition adopted in 2012 prohibits agreements as well as concerted practices restricting competition, the abuse of a dominant position and State aid, which distorts or threatens to distort competition. The Law applies to both undertakings and public authorities. The Law effectively transposes the competition acquis.
The Competition Agency has the right to conduct inquiries on alleged breaches of the Law, carry out on-site inspections and impose fines on undertakings responsible for violations of the Law.
However, if a complaint regarding an alleged distortion of competition in a regulated sector is submitted to the Competition Agency, the latter forwards it to the relevant regulatory authority, which in turn informs the Competition Agency, once proceedings are initiated on the alleged infringement of competition. GNERC has never pursued a case regarding alleged infringements of competition law.
The main drawback of the special regime applicable to the regulated sectors of the economy is the fact that the regulatory authorities do not have the same effective tools against anti-competitive practices, which are available to the Competition Agency. In particular, GNERC cannot impose effective sanctions for violations of competition law. The undertakings in a regulated sector which are engaged in a concentration are exempt from the obligation to notify the Competition Agency before the closing of a merger. In addition, the Law explicitly states that third party access to networks in regulated sectors is governed by “the relevant legislation of Georgia”. As a result of such limitations, the Law on Competition is not in line with the requirements of Article 18 of the Treaty and the relevant case law of the Court of Justice of the European Union.
State Aid Law
State Aid Law
The Law on Competition includes the general prohibition of State aid; however, the definition of State aid is too narrow compared to the prohibition enshrined in Article 18 of the Treaty and is therefore non-compliant with the Energy Community acquis. Georgia’s legislation fails to acknowledge that State aid not only encompasses decisions with regard to an undertaking, but also with regard to certain energy resources as well as support schemes.
State aid is permissible with the consent of the Competition Agency, if it does not significantly distort or threaten to significantly distort competition and is granted to facilitate the economic development of certain areas, or to aid the conservation of culture and cultural heritage. Some of the grounds of justification do not correspond to the grounds for compatibility of State aid laid down in Article 87(2) and (3) of the Treaty establishing the European Community, as enshrined in Annex III to the Treaty. Furthermore, apart from de minimis aid, only an ex ante notification to the competent authority and a positive decision by it can guarantee effective enforcement of the State aid prohibition. Amendments to the Competition Law are currently being drafted, including changes to the State aid rules.
Furthermore, the State aid acquis is not effectively enforced in Georgia. Therefore, Georgia fails to comply with its obligations under Article 18 of the Energy Community Treaty.