After the Record Fine: Retail Chains Claim There Is a Targeted Attack Against Them

Tensions between retail chains and the state are escalating. Kaufland has announced that it will appeal a hefty fine of almost €76 million imposed by the Commission for the Protection of Competition (CPC) over alleged unfair trading practices towards Bulgarian producers and suppliers. The company has warned that it is considering withdrawing its investments from the country.

Economy Minister Aleksandar Pulev responded by saying that “even if there is an outflow, the vacuum will quickly be filled”.

The supermarket chain has issued its first official response since the CPC imposed a penalty of nearly €76 million. According to the regulator, the company engaged in unfair practices towards its suppliers. Kaufland rejects the allegations, claiming that the total added value it generates for the country amounts to almost €14 billion. It is preparing to challenge the decision in court.

Mihail Petrov, Chief Executive Officer of Kaufland Bulgaria:

“If Kaufland starts sliding downhill like a bobsleigh, the collapse of Corporate Commercial Bank (KTB) will seem like a spring breeze by comparison. Kaufland has a lot of loans, a lot of suppliers and 8,800 employees, so stop using it as a punching bag. I cannot wait to go to court and tear the CPC's decision to shreds.”

Zhelyu Boychev, member of the Commission for the Protection of Competition:

“Every year, Kaufland sends all its suppliers a proposal for improvement – or, put another way, a proposal to reduce prices. Once this kind of agreement is reached, I would like to point out that it is applied retroactively, from the beginning of the year.”

Warnings from the retail chain's chief executive about a possible withdrawal of investment prompted a sharp response from the economy minister. Aleksandar Pulev described his tone as arrogant and said the government would not back down in the face of such warnings.

Alexander Pulev, Minister of Economy: “We are not at war with retail chains; we are at war with unfair trading practices. The fast-moving consumer goods market is highly profitable and very liquid. Even if one chain loses market share, that gap will be filled within just a few weeks by its competitors. Before threatening the Bulgarian state, this gentleman should look at the statistics and see that the latest figures for this year show a 100% increase in foreign direct investment in the country. So I am calm and have no reason to be concerned by this kind of arrogance.”

Businesses do not dispute the need for oversight, but they have raised concerns about the predictability of the rules and the scale of the penalties.

Nikolay Vulkanov, Executive Director of the Association for Modern Trade:

“Nobody is saying that there should be no rules or no oversight. The question is whether we are following the principles of the rule of law or making up special rules of our own, backed by enormous, unrealistic and excessive penalties – penalties that are not imposed anywhere else in the EU for similar violations.”

Following the retail chain chief executive's statement, the CPC issued a response pointing out that this was not the first penalty imposed on the company. Meanwhile, the regulator announced that it had opened proceedings against another retail chain, although it has not yet disclosed which one.

The political party 'Progressive Bulgaria' also published a statement on the issue on Facebook.

“No matter how big you are, you are not above the law. By drawing a comparison with Corporate Bank, Kaufland's manager is confusing the rule of law with lawlessness. Nobody is stronger than the state when it enforces the law to protect the rights of its citizens. Statements of this kind only confirm that the regulatory authorities are right. Instead of arguments, we are hearing threats,” the party said.

An expression of serious concern over the public statements made by Kaufland Bulgaria's management was also issued by the Confederation of Independent Trade Unions in Bulgaria (CITUB).

“Every company has the right to defend its interests through legal proceedings. At the same time, CITUB considers it unacceptable for jobs and the livelihoods of employees to be used as leverage to put pressure on state institutions in connection with the exercise of their statutory powers,” the trade union said.