In a decision adopted on 24 March 2016, the Montenegrin Agency for Protection of Competition (“Agency“) found that the local water supply company from Budva “DOO Vodovod i kanalizacija” abused its dominant position on the market for water supply and waste water treatment and conduct on the relevant geographic market of the Municipality of Budva. The established abuse is twofold: it consists of imposition of unfair fee for an additional service which, by its nature or according to commercial usage, has no connection with the main service, as well as of illegal tying.
The Agency instigated official investigation against the water supplier on 6 April 2015, after learning from the public sources of a significant increase of prices for water supply services in Budva. Before commencing official investigation, the Agency had analysed the conditions for provision of water supply services by similar water supply companies in the coastal region of Montenegro. The Agency had also analysed the decisions on the pricing policy, adopted by the Board of Directors of the suspect water supplier. This preliminary analysis showed that the water supplier set its prices at the level significantly higher in comparison both to its own prices for the same services in the previous period and to the same type of services provided by other comparable water suppliers in the region. This led the authority to raise charges for abuse of dominant position, in accordance with Article 15(2) of the Montenegrin Competition Act.
The Agency first established that the water supplier has a dominant position on the market for water supply and waste water treatment and conduct on the territory of the Municipality of Budva. It then found that the water supplier directly imposed inadequate and unjustifiably high price for its services. The increase in the price was implemented through a direct imposition of a separate monthly fee for maintenance and reading of water meters, in the amount of approx. EUR 8 (including VAT). The Agency assessed this fee to be disproportionally high for this type of service. Setting of such a high price was found to represent an abuse of dominant position in the form of imposition of an unfair purchase price. Moreover, the charge for this service was automatically added on the consumers’ water bills, while the service was not connected to the main water supply service, thus constituting illegal tying.
In order to remedy the infringement of competition, the Agency prohibited all future activities of the water supplier which might prevent, distort or infringe competition through abuse of its dominant position. It also ordered the infringer to remedy the infringement by forming the price for the water meter reading and maintenance service and for the service of water supply and waste water treatment based on cost plus method. This Water supplier has 90 days to comply with this obligation.
The Agency does not have the power to impose fines on undertakings for breach of the Competition Act. It may only initiate misdemeanor proceedings before a misdemeanor court. The undertaking found to have abused its dominance may be fined by the court for abuse of dominant position in the amount ranging between 1% and 10% of the annual turnover in the financial year preceding the year in which the infringement occurred. An additional fine between EUR 1,000 and EUR 4,000 may be imposed on a responsible person in the undertaking.
This is the first decision on the abuse of dominant position of the Montenegrin Agency since 2012. The decision of the Agency is important considering that the established abuse has a direct harmful effect on consumers and involves an essential service provided by a dominant undertaking. Private enforcement of competition law is still a novel concept in Montenegro. In any event, the consumers who have suffered damage due to the abuse of the water supplier do have the grounds to file damage claims based on general procedural law governing litigation.