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Moldova: Competition Authority

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Moldova is a small country that started its way to a market economy about 25 years ago. The country’s competition environment is determined by its being drawn from a past with a planned economy, and the fact that it is a small economy. It has all the characteristics specific to low-income countries. The economies of new and small countries have emerging markets with small dimensions, monopolies, dominance of markets influence, high entry barriers , etc. The small internal market generates the amplification of several shortcomings in the competition area, especially if the small country comes from the break-up of a totalitarian state, such as the Soviet Union.
Achieving a dominant position in a small market is easier, especially if the dominant position in the sector is inherited from the previous economic system. The exercise of the dominant position, and the authorities’ justification of the dominant position (including dominant structures) may hinder the development of a competitive culture. The monopolistic market structure – such as that for electricity, gas and water distribution, and fixed telephony – is maintained because of the relatively high expenses, which do not allow the establishment of new units on the market. For new supplier to enter the market, it would have to create its own service delivery infrastructure. Hence it is complicated – impossible, even – for the service to be delivered by several entities due to high barriers to entry on the market, as well as natural barriers already formed on the market by services or goods. It is difficult to enter an existing market when the relationships are already formed between players.
In addition, in a small market, bulk-buying from a small number of suppliers limits the number of players on this market. Also, barriers to entry on the market may be artificially created by the government. In many cases, entry is limited to an area in which competition would be possible but would reduce the added value which is attributed to the companies. In this case, the nature or procedure of service licensing may limit the number of players on the market, as happens in the operation of pharmaceutical services.

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State Aid Register of the Republic of Moldova

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As the world economy is constantly changing, the integration of banking and financial markets has reached the point where one country’s economy may  affect the economies of other countries as well. Particularly in times of financial crisis it is essential to use state resources in a rational and efficient way to ensure that a state economy will be less influenced by external factors. In order to monitor the correct implementation of all the state aid in Republic of Moldova, the Competition Council, with the support of the World Bank, has implemented the Electronic Informational Register of Recording and Monitoring State Aid – SIRASM. SIRASM contributes to a more efficient way of use of state resources by:

  • Improving efficient of allocation of public funds
  • Ensuring transparency in the use of public money;
  • Improving the implementation of competition law;
  • Promotion of competition culture;
  • Improving the competitive environment.

SIRASM will help to establish a system of state aid monitoring and – the main task  – to implement a monitoring mechanism to assess the impact of state aid on the competition environment.  It provides information resources on state aidfor public authorities – state aid providers and beneficiaries – and online notification and reporting of state aid. EFFICIENT USE OF PUBLIC MONEY This objective will be achieved on three levels: 1. country level; 2. district level; 3. level of state aid providers, because it enables all involved to:

  1. Save time and financial resources when including information in the state aid inventory.
  2. Save financial resources for postal dispatches and telephone conversations.

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"Promoting pro-competitive reforms that foster growth and reduce inequality”,OECD-GVH RCC Newsletter Issue No. 5, July 2015

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Between May and December 2012, the Moldova Competition Council has examined a case of infringement of competition law on the market „services for rail freight” by the S.E. „Railways of Moldova” (Î.S. „Calea Ferată din Moldova”). This has led to non-discriminatory treatment of all consumers with the purpose of increasing economic efficiency.
The S.E. „Railways of Moldova” applied discriminatory measures against some of its customers that placed them in an unfavourable situation compared to other undertakings from October 2011 to June 2012, by imposing the international tariff on some of them. While undertakings using rail freight services within the territorial boundaries of the Republic of Moldova had to pay the lower local rate, undertakings that had as one of the points of departure or arrival the Giurgiulesti International Free Port (hereinafter GIFP) – which also makes part of the Republic of Moldova and the other – and any other point of the territory of the Republic of Moldova had to pay the higher international rate.
Success story
This case was initiated following a notification by the Ministry of Economy, that identified a competition issue in the non-transparent application of SE „Railways of Moldova”’s pricing policy for the supplied services – a company with a dominant market position
Thus, given that the activity type of S.E. „Railways of Moldova” is the provision of rail passenger services, cargo, baggage and messengers, the relevant product market was defined as the provision of rail freight services. According to Art. 5 paragraph. (3) of the Railway Code No 30-XV from 17.07.2003, the S.E. „Railways of Moldova” operates throughout the country, including the territory of the GIFP. For this reason, the relevant geographic market was identified as national, determined by the geographical coverage of the S.E. „Railways of Moldova” infrastructure.
The S.E. „Railways of Moldova”, being the only undertaking to provide rail freight services in Moldova, was established as an undertaking with a dominant position in that market, holding a market share of 100%.
The relevance of the examined case stems from the fact that the different tariffs for rail freight services have a strong impact on the markets in which S.E. “Railways of Moldova’s” customers compete, because transport costs determine the final cost of goods and their price and have an influence on the competitive environment and the competitive capacity of the customers of S.E. „Railways of Moldova”.

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