Levelling across the board prices means neutralising competition based on price, which generally is not allowed. That is why price-fixing is considered one of the hardcore restrictions of competition. Since 2005 Moldova has in place recommendations on lawyers’ fees. However, to my recollection, nobody has publicly scrutinised it from the competition law perspective.
Below I attempted to set the tone for further more comprehensive discussions. Therefore, this post shall be treated as an invitation to reflect on the issue. Although the ECJ case law has no jurisdiction in Moldova, I did refer to it, unfortunately not as an authority, but as best practices due to evident reasons.
In 2005 and afterwards in 2012, in an attempt to justify before the European Court for Human Rights the fees Moldovan Lawyers charged their clients for proceedings before the Strasbourg Court and pursuit domestic courts to upheld as ‘viable’ legal expenses the Council of the Moldovan BAR adopted the Recommendation on lawyers’ fees. It sets the tariff per hour between 50 and 150 Euro and other fees for activities which amount to legal services. This document has no legal force and is a ‘pure recommendation’. The Lawyers Act enshrines the liberalised approach towards fees.
Moldovan competition law
The Moldovan competition law, on its substantive side, has transposed articles 101 and 102 from the TFEU with minor accommodations plus uninspired local input. The issue concerned here is clearly caught by 101, i.e. art. 5 of the Law on competition, which states that:
(1) It is prohibited, without there being necessary a preliminary ruling in this respect, all agreements between undertakings or associations of undertakings, any decisions by associations of undertakings and concerted practices (hereinafter ‘agreements’) which have as their object or effect the prevention, restriction or distortion of competition within the Republic of Moldova market or only a part of it.
(3) Anticompetitive agreements are, in particular, those aimed at:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
Is the Moldovan BAR an association of undertakings?
In the famous Wouters case, the ECJ clarified this aspect.
The concept of an undertaking covers any entity engaged in economic activity, regardless of its legal status and the way in which it is financed. Any activity consisting of offering goods and services on a given market is an economic activity.
The ECJ explained that because the Members of the BAR offer for a fee legal services and bear the financial risks attached to it, lawyers shall be qualified as undertakings for the purpose of Art. 5 of the Competition Law (101 TFEU). Therefore, the Moldovan BAR represents an association of undertakings.
Does the Moldovan BAR exercise a public function when adopting such Regulation?
When the Moldovan BAR adopts such Recommendation on lawyers’ fees, it is neither fulfilling a social function based on the principle of solidarity nor is exercising powers which are typically those of a public authority. It acts as the regulatory body of a profession, the practise of which constitutes an economic activity, and therefore represents a decision of an association of undertakings within the meaning of Article 5 of the Law on competition.
Restriction of competition by object or effect?
It is evident from the text of Article 5 (1) of the Law on competition that the anticompetitive behaviour requirement by object or effect is alternative and not cumulative. Thus, the investigation in such cases binds the antitrust authority to undergo a two-step assessment (this was held in the 1966 Societe Technique Miniere case, see in particular p.249, 250, see also p.12 from the Competition Council Regulation on horizontal agreements). This distinction by object or effect remains to be one of the most controversial issues in EU competition law.
The first question which arises is, whether the Recommendation on lawyers’ fees is or not a restriction of competition by object. From the well-established case-law, we know that absolute territorial protection (see the over-cited and always in trend Consten and Grundig case, in particular, p.342), price-fixing (see T-Mobile Netherlands in particular paras 37-38), market sharing (see GlaxoSmithKline, in particular para 65) are considered to be restriction of competition by object. Basically, if such hardcore restrictions exist, there is a presumption of the anticompetitive effect (see art. 5(6) from the Law on competition). The ECJ has been rather laconic in defining the restriction by object. However, for the present case it is sufficient to say that because the Recommendation under scrutiny is not binding, it cannot be regarded as a restriction of competition by object.
Further, we have to analyse if it is a restriction of competition by effect.
In the IAZ case the ECJ ruled that a recommendation, even if it has no binding effect, cannot escape [art.5(1)] where compliance with the Recommendation by the undertakings to which it is addressed has ‘an appreciable influence on competition in the market in question’.
The logic of the Court seems to be that when we discuss issues around recommendations for the purposes of whether or not it is distorting competition it is irrelevant how we define it, which means that an effect-based approach shall be applied. Thus, the test is whether the Recommendation has an ‘appreciable influence on competition’.
Bearing in mind the wording of Article 5(1) of the Law on competition, I see no reason why it shall not be applicable with respect to the BAR Recommendation on lawyers’ fees.
Does the Recommendation influence the market?
Account must be taken to the actual and potential effect on competition in the market. To what extent it negatively affects prices, output and innovation with a reasonable degree of probability. In this regard, the ECJ points out that in assessing the agreement/decision under [art.5(1)] we should bear in mind the actual conditions in which it functions, in particular the economic context in which the undertakings operate, the products or services covered by the agreement and the actual structure of the market concerned (European Night Service, para 136).
These are minimum considerations which the competition authority needs to investigate before it draws a conclusion on the effects, which is beyond the purpose of this post. The assessment must answer if the Recommendation affects the behaviour of lawyers when setting the price for their legal services.
Indirect evidence can be noticed
For example, Recommendation 23 of the Moldovan Supreme Court of Justice (SCJ) on legal costs claims in simplified procedures (Procedura în ordonanță) implies that the criteria for determination of the lawyers’ fees shall be taken from the Recommendation on lawyers’ fees. However, the SCJ Explanatory Decision on legal expenses claims does not refer to the fee recommendation.
The BAR Ethics Committee invokes the Recommendation on lawyers’ fees quite often. For example, in the case of Cotruță it considered that 500 Euros for drafting a legal action was exaggerated in contrast with the Recommendation. In Proda,n the Committee ruled that 2000 Euros for one hearing in a criminal case before the Court of Appeal was contrary to the Recommendation which sets the tariff at 50 Euros. I shall underline here, that in bothinstancses lawyers breached other disciplinary rules, which, if taken separately, were sufficient to amount to a violation of the Lawyers Act. Nevertheless, the Ethisc Committee thought necessary to emphassze the ecessivtd amount of the charged fees. I am sure that this kind of statements may have an impact on the conduct of lawyers.
The SCJ when rules o then compensation of legal costs, it does not lose the occasion to cut them because they are contrary to the Recommendation. A simple manual search shows that there are dozens of them, and if dig deeper maybe hundreds. This off course has a dissuasive effect on clients which are unwilling to pay legal fees outside the Recommendations thresholds. On the supply side, many lawyers, especially those with big income fluctuations have no choice than to accept this. Out-of-court legal services, which are not recoverable from the culprit, are not exposed to the same extent to the confinements of the Recommendation.
Judging from the aforementioned, the Recommendation on lawyers’ fees certainly produces some effects on the legal services market. However, empirical analysis needs to be conducted in order to see if the Recommendation has an appreciable negative effect on competition, because, as it is apparent from art.8 of the Law on competition, Moldovan law has incorporated the de minimis threshold concept.
In Cipolla the ECJ implied that establishing minimum fees charged by lawyers may be compatible with (art.5(1)) provided that these minimum fees receive state blessing, which certainly is not the case here. EU countries have already aligned their practice in this respect, by abolishing lawyers’ fees recommendations (see here). Probably the Moldovan BAR should do the same. What do you think?