Internship Report at Small and Medium Entrepreneurship Development National Center of Armenia (SME DNC of Armenia); Protection of Consumer's Rights Under Anti-competitive Agreements

SRH UNIVERSITY OF APPLIED SCIENCES BERLIN

Internship report - SME Development National

Center of Armenia

Name: Hamlet Hayrapetyan

Matriculation Number: 26204510

Supervisor: Prof. Dr. Jörg E. Wilhelm

Date of submission: 14.01.2013

Hamlet Hayrapetyan Internship report: January 2013

Abstract

This paper is about my sixteen week internship at Small and

Medium Entrepreneurship Development National Center of Armenia

(SME DNC of Armenia (hereinafter Foundation)) which is a part of

my Bachelor studies of the 5th semester at the SRH University of

Applied Sciences Berlin. The first section of my paper includes a

detailed description about the work I have done during the

internship, the responsibilities that I had and changes that I

could bring to the Foundation. The second part is a study about

consumer rights and anti-competitive agreements in the framework

of SMEs. It reflects the knowledge and experience that I got

during the internship.

The study consists from analysis, case studies and

comparison of Armenian legislation system with the EU legislation

system, how they protect consumer rights and prohibit anti-

competitive agreements among entrepreneurs. I decided to show the

main parts of the legislation systems, open the cases about anti-

competitive agreements and market enforcement, than compare them

to see that all in all the legislation systems work, but there is

need to develop new enforcement mechanism, especially for

Armenia. From my knowledge and experience I add some

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recommendations for the improvement of the field and development

of the institutions that deal with those kind of problems.

Table of Contents

Abstract.............................................................1Table of Tables and figures..........................................4

I. General information and individual report.........................51. Report Data.....................................................5

1.1 Name and complete data of the foundation....................51.2 Name of the department.......................................5

1.3 Reference person.............................................51.4 Duration of the internship...................................6

2. Job description.................................................62.1. Aim towards the internship.....................................6

2


2.2. .................Structure of the foundation and the departments7

2.2.1. ........................................Foundation Structure7

2.2.2.1. "Information Support programs" department................82.2.2.2. "International Cooperation Programs" department..........9

2.2.2.3. "Local Economic Development Programs" department........102.2.2.4. "Industrial Systems Building Programs" department.......10

2.2.2.5. "Training Support Programs" department..................112.2.2.6. "Financial Support Programs" department.................12

2.3. ...............................Description of my internship role13

2.3.1. ..................."Information Support programs" department13

2.3.2. "International Cooperation Programs" department..........142.3.3. ............"Local Economic Development Programs" department

152.3.4. "Industrial Systems Building Programs" department........16

2.3.5. "Training Support Programs" department...................172.3.6. "Financial Support Programs" department..................17

2.4. ..........................................................Result18

2.5. ...........................Experience gained from the internship19

II. Scientific paper / Analyses.....................................201. Introduction.....................................................21

2. Hypothesis.......................................................223. Analysis.........................................................23

3.1 Legal framework: Armenia.......................................233.3.1 Case Study.................................................25

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3.2 Legal Framework: European Union................................283.2.1 Case Study.................................................31

3.3 Comparison of Legislation......................................324. Recommendations..................................................33

5. Conclusion.......................................................34III. Resume.........................................................35

IV. Sources.........................................................36V. Appendix.........................................................38

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Table of Tables and figures

Table 1. Organization chart of the SME DNC of Armenia 08

Figure 1. E-Newsletter cover page 09

Figure 2. "Merlin" Software of EEN 14

Figure 3. "Tavush Cheer" project: "Cheer" brand 16

Figure 4: Social Movement Activity in EU, "Consumer Rights"32

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I. General information and individual report

1. Report Data

1.1 Name and complete data of the foundation

Armenia

SME DNC of Armenia - Small and Medium Entrepreneurship

Development National Center of Armenia -

Headquarters: 5 Mher Mkrtchyan Street, Yerevan 0010,

Armenia.

There is one branch office in every region of Armenia.

Executive Director: Varazdat Karapetyan

1.2 Name of the department

6


There are six departments where I worked one by one:

Information Support programs

International Cooperation Programs

Local Economic Development Programs

Industrial Systems Development Program

Consulting and Training Programs

Financial Support Programs

1.3 Reference person

Varazdat Karapetyan - Executive Director,

E-Mail: [email protected]

Anush Aslanyan - Deputy Executive Director,


Armen Sargsyan - Financial Support Programs Coordinator,


Lusine Sahakyan - HR Officer


1.4 Duration of the internship

The internship started on the 20th of August 2012 until 30th

of November 2012, for the duration of 16 weeks. The internship

was full time, 40 hours per week.

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2. Job description

2.1. Aim towards the internship

I was searching for an internship where I would be able to

learn more than I could expect and especially in my home

country, where I want to use my knowledge, gain more experience

and skills on local level about economic processes and

entrepreneurship sphere which will help me in my future career. I

started my internship at SME DNC of Armenia (thereafter:

Foundation) with big enthusiasm and high expectations. The aim

of my internship is to gain a very well formed inside view about

small and medium entrepreneurship and especially how it is in my

home country. The SME Development National Center was a very good

choice because there I was able to see how every function,

process, development, assistance and etc. work in the field and

how important are the SMEs for the country's economy. One of the

biggest advantages of my internship was that I had the

opportunity to experience different working environments through

the foundation as I worked in every department. I also could

experience how are the regional offices work, because I worked

one week in one of the regional offices (city Sisian, Syunik

region). I was expecting to use my knowledge that I gained during

five semesters of study at the university and I succeeded in my

expectations because the work was very multifunctional and

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besides using the knowledge I had, I also learned a lot about

very specific topics like how are the universal credit

organizations work, credit subsidization, international

cooperations (e.g. EEN- Enterprise Europe Network) and etc.

My main aim was to understand how all the departments work,

how the communication and management is done all over the

country, find out my strengths and weaknesses, develop my skills,

learn how to work in an office and have input in the development

of the foundation and SMEs in Armenia.

2.2. Structure of the foundation and the departments

SME DNC of Armenia is a semi-governmental foundation. It was

founded in 2002 and nowadays it has 80 employees from the six

departments and regional offices, 36 of which are working at the

headquarters and 44 in the regional offices.

2.2.1. Foundation Structure

In 2002, the SME DNC of Armenia was founded by the

government of the Republic of Armenia and is the implementer of

the SME State Support programs. The main governing body of the

Foundation is Board of Trustees leaded by the Minister of Economy

of Republic of Armenia. The main activities of the foundation are

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to establish strong communication between SMEs and state

institutions

to raise the effectiveness and competitiveness of SMEs

to support for start-up SMEs

to support the implementation of innovational, scientific

and developmental programs for SMEs

to support the creation of new SMEs

Internalization of SMEs activities

In the Table 1: Organization Chart SME DNC of Armenia, it is

very well shown the detailed company structure of SME DNC of

Armenia. At the top is the Board of trustees which has with it an

individual Steering Committee. Below the board is the Executive

Director with his assistant, HR Officer, Lawyer, Accountant and

the maintenance staff. There are three Deputy Executive Directors

who are responsible for all the six departments and regions. Two

of them are for the 5 departments’ functions and one of them is

responsible for "Financial Support Programs" Department and all

the regional offices. Every department has its coordinator and

every regional office has its branch director. There were two new

departments created in 2012.

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Table 1: Organization chart SME DNC OF ARMENIA1

2.2.2.1. "Information Support programs" department

The purpose of the department is to provide affordable

information to SMEs about the business environment and legal

framework of the country. It always updates the information by

1 SME DNC of Armenia, "Information Support Programs" Department

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sending info letters to SMEs, e-mails, by making brochures and

flyers, etc. Several times a year the department organizes B2B

(Business to Business) meeting and Business to Service Revenue

Committee. The department prepares and provides info notes and

brochures telling about different SME functions, problems and how

to solve them. The Foundation has its own TV show, which name is

"SME informant". It is being shown twice a month and the schedule

of the program is being written by the Information support

programs department. The department is also doing general needs

assessment for SMEs to find out the problems concerning the field

in general and works on solving them and renewing legal

processes, if needed. It is also responsible for the web-site

(www.smednc.am) and PR strategy of the foundation and the

coordinator manages every PR concept or function which is in

process or is going to be in future.

2.2.2.2. "International Cooperation Programs" department

The department is making connections and deals with

international organizations, such as GIZ, UNDP, JICA, and ADB. It

tries to find new investors, partners and

financial resources for implementing different

projects. One of the most important functions

of the department is the input of

international best-practice models in Armenian

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business environment and especially in working environment of the

foundation. Right now there are several main cooperations: "Black

Sea Cross Border Cooperation 2011-2013" project, JICA - OVOP (One

Village One Product), EEN - Enterprise Europe Network.

EEN is a very important part of the foundation. Armenia is a

member state and there are a lot of Expression of Interest every

month from different member countries and also from Armenia. The

department collects all the offers and once a month publishes an

E-Newsletter(http://smednc.am/?

laid=1&com=module&module=static&id=439 , Figure 12) which is being

sent to more than 4000 SMEs each month and the mailing list is

being expanded. If there are EoIs (Expression of Interest) from

Armenia or BCDs (Business Cooperation Database) country, the

department acts as an intermediary and helps from getting

connected to each other until the final operations.

2.2.2.3. "Local Economic Development Programs" department

The "Local Economic Development Programs" department is one

of the youngest departments at SME DNC. It has only two workers,

one programs coordinator and one programs offices. In 2012 SME

DNC of Armenia has introduced new strategic direction named

“Local Economic Development” and the department of "Local

Economic Development Programs" has been created in the structure

2 SME DNC of Armenia, "International Cooperation Programs" Department

13

Figure 1. EEN E-Newsletter Cover Page

http://smednc.am/?laid=1&com=module&module=static&id=439

http://smednc.am/?laid=1&com=module&module=static&id=439


of SME DNC of Armenia. The purpose of the Department is to

identify the economic potential of communities of Armenia, and to

undertake economic development initiatives on that basis to

enhance local competitiveness. Within the frameworks of local

economic development programs implementation SME DNC had launched

the localization and implementation of the international best

practices. As a result, German PACA3 method and the Japanese OVOP

(One Village, One Product) concept have been invested. 4

2.2.2.4. "Industrial Systems Building Programs" department

This department is also a very young one. It also consists

from two people: Programs Coordinator and Programs Officer. The

purpose of the department is to develop competitive industries

based on local raw materials, make labor force more knowledge

based, renovate industrial systems, development of national

production and promote local trademarks through introduction of

successful business models. The department is mapping the

industrial fields which have inner force to be empowered and

identifies sectors with economic development potential in the

regions of Armenia to select three most competitive sectors for

duplication during 2012. The activity is going to be continued

during 2013 and already 5 competitive sectors are going to be

3 Participatory Appraisal of Competitive Advantages4 http://smednc.am/?laid=1&com=module&module=menu&id=373

14

http://smednc.am/?laid=1&com=module&module=menu&id=373


selected. The Introduction of the sample business models is being

done in the following way:

Identify and select businessmen with some experience in the

selected sector

Create an advisory and training component by combining the

CEFE5 methodology and business model technology elements

Trainings and consultancy for the selected sector

Providing financial support if needed for the development of

the sector and individual SMEs

2.2.2.5. "Training Support Programs" department

The aim of the department is the SME capacity building and

competitiveness raising through consultancy and training. It is

doing different programs connected mainly to trainings and skills

development. The first program is the "Startup support" In

cooperation with UNDP. It organizes start-up support project and

trainings in all regions of Armenia with the minimum of 150

participants and as an output of the project at least 25 new SMEs

should be founded. The Post-project support to new businesses is

done by branch experts (need assessment, roadmaps,

implementation) in all regions of Armenia. Simply saying,

everyone can contact the branch office and ask for support in

every question.

5CEFE - Competency based Economies through Formation of Enterprise

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The second approach is "Consultancy 6 and training for

existing SMEs".

This program is also being done in cooperation with UNDP. The

main activity is organizing trainings on tax legislation changes

in all regions of Armenia and organizing advisory/informative

workshops held by the Accounting Centre of Armenia. The

department is also giving support to SMEs in export and promotion

of their products and services in external markets. The BSPs and

SMEs (Business Service Providers) participate in the “Export

Marketing Planning” workshop held in cooperation with the

Netherlands Centre for the Promotion of Imports from Developing

Countries (CBI) 7

Mechanism and Capacity Building Support Program is targeted

to create a database of start-up SMEs operating in the regions of

Armenia, to conduct needs assessment of SMEs operating in the all

regions of Armenia. It is a very important program, as it builds

capacity for SME DNC experts and staff, both at home office and

the branches, organizing

Organize “Customer Service” training

“Business Need Identification” training

“Consulting Skills” training

CEFE8 Training of Trainers (ToT)

6 New areas of consulting identified based on the survey results are incorporated next year7 The project within the EU Cooperation anticipates complex measures targeting export promotion8 “Competency based economy through formation of enterprises” (CEFE): Negotiations on the trainings are being held with the GIZ.

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The last but not least function of the department is the

Cooperation and Network Development. Meeting with BSPs to discuss

edges of cooperation between SME DNC and BSPs9 during next years

and especially in 2013 and to organize needs-based qualification

trainings for them, which will fasten the field improvement

process.

Right now there is one new program directions on which the

foundation works to be implemented. It is going to be in

cooperation with UNHCR (United Nations Refugee Agency) working

especially with refugees in Armenia "Start-up Support for

Refugees" program.

2.2.2.6. "Financial Support Programs" department

This is the only department which is directly connected to

every department in the foundation, but mainly it works with

"Training Support Programs" department because the main

directions are concentrated on Start-up Support and SME financial

support. The next main direction is going to be the UNHCR

program. The department is aimed to improve the financial support

giving conditions and loan guarantee providing to start-up and

operating SMEs. The department works on simplifying the loan

guarantee giving process and system. Nowadays it takes 5 days

from SME DNC to make the final decision. The process starts from

9 SME DNC intends to introduce a separate capacity building program for BSPs in 2013. This meeting is the first step in identification of their needs.

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the banks. All the banks of Armenia know about the program and

when the SME asks them for loan and does not have enough pledge,

the rest (max 3 million AMD - approximately 7500 USD) can be

asked from SME DNC. The bank makes a loan guarantee application

and during one working day sends to the foundation. The program

coordinator reviews the application and send to the experts group

(consists of 5 people). During 3 working days the experts group

makes the decision and replies with positive or negative. If the

decision is positive, the foundation calls the SME and signs a

contract about giving loan guarantee to him. After these 5 days

the bank decides when and how to give the loan.

2.3. Description of my internship role

Surprisingly my internship role was very big, I was very

excited because I got the opportunity to see every function and

operation in the foundation, how are all the departments

interacted with each other and how big role and importance has

communication and task distribution within a company. First day

of my internship, the executive director asked me to work in

every department for a week and at the end of the week write a

report for him, describing the advantages and disadvantages of

the department, strong and weak sides, to offer new activities,

which in my opinion can be effective and useful for the

department and generally for the foundation. I worked in every

department and I went to a regional branch for one more week, to

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see how are all the programs being implemented outside of the

city and central office. After the seven week of

"monitoring" I continued my work in the "Financial Support

Programs" Department and "Information Support Programs"

Department as I was very interested in Anti-competitive

agreements and consumer protection among SMEs. I got a lot of

knowledge and experience and on the last day of my internship the

Executive Director told me that he would be very happy that I

work at the Foundation, which made me very satisfied and happy. I

could understand that I did not waste my time, I used it usefully

and reached the first heights in my professional career life.

2.3.1. "Information Support programs" department

The department is very important as it is the main source of

information about the foundation and responsible for SMEs being

informed in the country.

In the beginning I started researching the whole department:

what they do, how they do, what materials they have, how they

distribute the info brochures and flyers, how are the PR and

Marketing activities are being done, what is the rating of SME

DNC of Armenia in the online sphere and "SME informant" TV show.

After 2 days I was able to understand all the functions and the

ways how they work. I started working on "amendment offers" which

I could find very useful for the improvements in the work of the

department. First of all I concentrated on the PR and marketing19


activities. Nowadays a very important thing in every company's PR

is the online sphere: Social Media. First of all I offered to

make a very interactive Facebook Page, where all the people can

ask questions, where will be posted news about Armenia's business

sphere, discussions and updates about the upcoming trainings and

workshops. After that I started working on info brochures and

flyers. I think that a very small flyer with the very basic and

most important information is more useful than a big brochure

with many pages and a lot of information. Next offer was to go to

universities and organize Guest Lecturing for last year students,

to make a right vision about business environment and give them a

correct route. Also make Guest Lecturing in high schools, which

could help the pupils make right decisions in their choice of

further studies. There were also some problems in motivation of

employees and I offered to make a get together and discuss,

empower them and make a shared vision, which will make them feel

more engaged in the activities and the general work that they are

doing. The last thing that I could find very important was brand

development for the foundation. That could give big popularity to

the foundation and it is very important to make a the people

think that SME DNC of Armenia is a reliable friend for them and

will only help with every problem or question that SMEs have in

Armenia.

Saying the truth, the executive director liked all my offers

and we started working on implementing them. Now we have working

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social media (Facebook, Twitter, YouTube, E-newsletter, E-media,

etc.), very active working environment, SME DNC of Armenia is not

just an abbreviation for SMEs and also for people. The guest

lecturing program is now in the phase of negotiations with

universities and high schools.

2.3.2. "International Cooperation Programs" department

In the "International

Cooperation Programs" I was able to

gain a lot of knowledge about

international organizations and I

could use my skills to get in touch

with them and also find new

organizations which could help us

in our programs by doing joint

projects. I was actively working on EEN (Enterprise Europe

Network) expansion, because it is the main source of making our

national SMEs more international and help in export/import. There

is a special software, called "First Class" which have all the

partner countries, but now it is being replaced with "Merlin"

software(Figure 210) which is working through intranet. With that

software all the BCD (Business Cooperation Database) profiles are

being posted and the coordinators distribute through local

networks. The distribution in Armenia is through mailing list.

10 SME DNC of Armenia, "International Cooperation Programs" Department

21

Figure 2. "Merlin"


The coordinator prepares the monthly E-Newsletter and sends it to

approximately 3000 SMEs each month. I was working on new ways of

distribution and improvement of the B2B connections. We developed

new mechanisms like Subscription - "Call to action" for the E-

newsletter in the web-site of the foundation, distribution

through mass media, cooperation with consulting firms,

distribution of flyers about EEN. The biggest problem in managing

this network is the regional branches, as not everyone has

computers, internet and actually e-mail. So there was need to

find other and most important, useful ways, as we work a lot on

regions, to help them develop also in international direction.

2.3.3. "Local Economic Development Programs" department

As I mentioned before, "Local Economic Development Programs"

department is pretty young and just started implementing the

projects. In this department I learned how to do mapping of

regions, analyzing that maps find out the regions that have

economic power, how to do PACA and the ways to empower that

regions. First thing is the mapping process which takes not more

than 4 hours per each community, after which we analyze if that

community (village, city, etc.) has opportunities to be empowered

or developed and if we can take it under foundation's programs.

If we find that we can, it is very important to understand which

direction we can give. For example if there is need to do the

"Start-up Support" program, we tell the head of the community to

get in connection with our branch office and tell to organize a

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training for start-ups in their community. We make a protocol and

send it to that branch office to prove that there is a need to do

that.

There is also the most important thing, PACA, which takes at

least one month to do. But before doing we have to find out if

there are some people from that community that can work with the

experts to do the PACA or not. If there is no one it means that

we cannot implement the program.

During my work in that department I did research to find out

if there are another international or national project doing LED.

I found out that we can cooperate with UNIDO, UNFAO, World Bank

LED, Near East Foundation and OSCE - "Syunik" project. Right now

negotiations are in process and the final decisions should be

done for next year as there is need to finalize the financial

support part. The experts that we have are national and I offered

to make agreement with that organizations that they send their

experts to be able to have a "look form aside" to make better

improvements in our work.

2.3.4."Industrial SystemsBuilding Programs"department

In this

department I did a

lot of things, I23


used my knowledge and experience and also gained a lot more.

During my work there, the department was concentrated on cheer

(dry fruit) making "Tavush Cheer" project. All the dry fruit

producers of Tavush region were gathered under one brand to make

the product sales easier and beneficial for producers. The

project was ongoing and I offered to add Intellectual Property as

a part of the project, as "Tavush Cheer" (Figure 311) is a

Geographical Indication and it is very important for SMEs to know

about their rights and importance of IP in business.

During the internship we organized "Areni Wine Festival". It

was a huge festival of wine and we were supporting our start-ups

and different SMEs which asked for help and organized the stands

for them and other small things, for example special festival

bottles and glasses.

2.3.5. "Training Support Programs" department

This department was

one of the several that I was able to use all my skills. Doing

trainings and support is very important and it cannot just be

done. Every training needs to have its direction and style do be

done. As I am an international certified advanced ToT, I was

working with the trainers, with the training group, organizing

part of the trainings, how to choose the participants. It was

very important part in my internship as I know a lot practically

11 SME DNC of Armenia, "Industrial Systems Building Programs" Department

24

Figure 3. "Tavush Cheer"


and theoretically and I could use to help and improve some

activities there.

The department was doing needs assessment for SMEs, to find

out what is good in the field what is bad , what are the

advantages and helping points and what interferes their work. I

learned to do needs assessment especially for the SMEs and how

to write conclusion for the needs assessment papers. It was a

very useful thing as we were doing it for the regions, especially

villages and many small things were found out, that SMEs need or

they do not need at all, but we thought they would.

It was very important that the department organize special

trainings for Executives, for the foundation workers as it would

give more motivation and keep with professional news. I also

offered to invest Peer-to-Peer education system in the

foundation, which would bring a lot of young people, students to

be interested in SME and we could be able to make trainers from

them and raise awareness in the whole country faster and easier.

2.3.6. "Financial Support Programs" department

This was the most useful department in the terms of my

profession. Here I learned how is the loan giving process is

being made in the banks, how the loan guarantees are given, all

the paperwork and process. I got the chance to work with the

participants of the program, both, the start-ups and working

SMEs. During the internship I participated in the whole process.

Start-up training has 4 parts: first is the 10 days training, one

25


day of Marketing Strategy presentation, 11 days of consulting

process which the trainers do with the participants for their

Business Plan making process and the final step is the Business

Plan presentation to the experts of SME DNC of Armenia for

getting the loan guarantees. I participated in the process and

understood how important is to know all the business environment

and knowledge to start a business. I was engaged in the experts

group and we went to different presentations in different regions

of Armenia. I got a lot of knowledge not only about financial

functions and operations but also about different business fields

and activities. After giving the loan guarantees the financial

department also supervises the process and does monitoring to see

how the entrepreneur is working on the plan that he provided to

us.

I was also having connection to different banks of Armenia

and I was able to research all that market, how they work and how

they give the loans to SMEs as nowadays it is a big problem

concerning the financial situation of the country and generally

the business environment.

2.4. Result

The main result was that I learned to work independently. I

learned very quick and after 2 weeks of working for SME DNC of

Armenia I was able to work with the two new employees, provide

with the required information and route in the work. I was very

26


happy to get that opportunity as working with the new employees I

got the opportunity to practice my communication skills and

realize all the information and knowledge that I got. After doing

some staff changes, first of all the executive director asked me

to work with the new PR & Marketing officer as I had a lot of

offers and activities that should have been done. We got along

very good from the first day of work and succeeded in all the

directions that we worked. During the work I understood how

important is the distribution of the work inside the departments

because sometimes it happens that one worker has a lot of

workload but the other one is free the whole day, that is why I

was always helping and that gave me more and more that I could

ever imagine, because when you just do some translation from

Armenian to English, you do not just translate, but also read,

learn and get lots of information from the text e-mail.

I am very happy that I could get along with everyone in the

Foundation and I had a very high level of trust among the

employees. I could understand that as The Vice Executive

Directors were taking me with them to the meetings where very

confidential things were being discussed. With that I was able to

learn the art of negotiations and importance of confidentiality.

Moreover, I increased my level of proficiency in Microsoft

Office and computer skills as I was working with different

software and also I learned SPSS. I started the internship with

little and only theoretical knowledge about SMEs and business

27


environment, but I had the opportunity to learn and understand

everything on experience and practically which, I am sure, will

be very useful in my future.

2.5. Experience gained from the internship

When I started my internship, I had the choice between six

departments or I could decide to mix all of them. I started with

every department one by one to get to have deeper inside view of

the foundation, operations and knowledge about each project which

gave me more confidence and reliance in what and how I was doing.

I have chosen the mixture as I do not have any subject

priority at my university. In the beginning I started with mixed

departments and after some time to go deeper in one of the

departments and I chose the "Financial Support Programs"

Department because it is near to my profession and I had a lot

more to learn from there and especially how are the financial

operations done within project management and coordination.

Now I finished my internship and I can surely say that I

made right decision to do an internship in Armenia and especially

at the SME DNC of Armenia as I am planning to work and contribute

to my country. Sometimes I was having a lot of workload that I

had to stay at the office a lot more than the other but I was

happy because I could understand how it can happen in future

28


working places and how much can be the responsibility for the

work you are doing. I am highly satisfied with the outcome, much

more than I could ever expect, this internship was a huge

experience for my whole life and a starting point for a young

professional.

I was giving my best and was eager to learn new things every

day, day by day improving and developing my skills and knowledge.

I was always working with a big smile on my face, because the

working environment was super positive and all the 36 employees

were very friendly to each other, very helpful and kind to me as

I had a lot of questions and always could go to them when I

needed some help . Every day were getting together in the kitchen

and having a cup of coffee or tea during the break time. Nearly

twice a month there was a birthday of one employee and everyone

was preparing a surprise for him/her to wish happy birthday and

tell good wishes.

II. Scientific paper / Analyses

Title: Protection of Consumer's Rights under Anticompetitive

Agreements

Hypothesis: "Consumer's Rights are affected/violated due to the

Anticompetitive Agreements among SMEs"

Affidavit / Eidesstattliche Erklärung

29


I declare that I wrote this thesis independently and on my

own. I clearly marked any language or ideas borrowed from other

sources as not my own and documented their sources.

I am aware that any failure to do so constitutes plagiarism.

Plagiarism is the presentation of another person's thoughts or

words as if they were my own—even if I summarize, paraphrase,

condense, cut, rearrange, or otherwise alter them.

I am aware of the consequences and sanctions plagiarism

entails. Among others, consequences may include nullification of

the thesis, exclusion from the BA program without a degree, and

legal consequences. These consequences also apply

retrospectively, i.e. if plagiarism is discovered after the

thesis has been accepted and graded.

My name: Hamlet Hayrapetyan

Title of my paper: Protection of Consumer's Rights under

Anticompetitive Agreements.

Date: 14/01/2013

30


Signature: ____________________________

1. Introduction

The developments and global changes in the world during

decades caused different changes in many countries. As much as

the times were changing, theories were being developed and

practical experience was becoming more, most countries,

regardless of their wishes, prefer "Market Economy". Market

economy is a self-regulatory mechanism, it is based on free

economic relations, "Competition Concept" moves the economy

forward and backwards. All the parameters should be satisfied for

each economy and only after that, the economy can have the

competence in distribution of goods, services, recourses and the

social welfare. Every country that is acting with "Market

Economy" develops some minimums, tools or strategies to keep the

effectiveness and stability in their market. In the Market

Economy, there are several rules to be followed to be able to

achieve and develop a competitive market, i.e. free economic

relations, equal competitive conditions for the competitors,

bring in action the fairness principles, for instance, honesty,

equity, actuality, independence and freedom for competitors.

The determination of prices is influenced by economic

entities and consumers as they have different interests and it is

31


the most important feature in market economy. The economic

entities have their own interests and the consumers have their

own ones, they are opposite interested sides and there is need to

interfere the market for the price determination with

"Competition Policy". It is the right way to correctly distribute

resources between price determiners. "Competition Policy" is for

promoting the economic growth and enhancing consumer welfare with

the help of avoiding situations which can affect the product or

service quality negatively or increase the price.12 Legislation

system in Armenia is not perfect in this field. There is a

competition policy, but every kind of enforcement can cause

different problems for economic entities, in terms of lack of

information being provided to entrepreneurs which will lead to

ambiguities between economic entities and legal authorities,

consumers and state authorities.

The competition regulation in Armenia implemented by the

State Commission for Protection of Economic Competition of the RA

based on the RA Law “On the Protection of economic competition”

(hereinafter Competition Law)13. Competition Law protects and

encourages free economic competition, ensures appropriate

environment for fair competition, promotes development

entrepreneurship and protects consumer’s rights in the Republic

of Armenia.14

12 Master's Thesis: Zarine Arushanyan, 2008, "Protection of Consumer's Rights under theAnticompetitive Agreements" 13 RA Law on Protection of Economic Competition, 06 November, 200014 http://www.parliament.am/links.php?lang=eng

32

http://www.parliament.am/links.php?lang=eng


According to Article 5 of "The law of the Republic of

Armenia on protection of Economic Competition"15:

“anticompetitive agreements shall be deemed transactions between

economic entities, which lead to restriction, prevention or

prohibition of competition in any product market”,

“anticompetitive agreement between economic entities referred to

unjustified increase of a product price”, “conclusion of

anticompetitive agreements between economic entities shall be

prohibited”.1617

In our real everyday life, everyone knows that entrepreneurs

want to get high profits and consumers want to spend less money.

To bring that in equilibrium and to have economic stability the

state authorities should make regulations of controlling the

anticompetitive agreements within state. In case of fortunate

controlling, the state authorities get the chance to have more

stable, useful and trustful relationship between government and

consumers.

This scientific paper will be about how are consumer's

rights affected/violated because of the anticompetitive

agreements, especially the field of SMEs will be considered.

Every section of this study develops, discusses and provides deep

legal and entrepreneurial research on the chosen topic. All the

legal and entrepreneurial facts, case studies and examples will 15 http://www.competition.am/index.php?menu=147&lng=216 "The law of the Republic of Armenia on protection of Economic Competition"17 http://law.aua.am/files/2012/02/Zarine-Arushanyan.pdf

33

http://law.aua.am/files/2012/02/Zarine-Arushanyan.pdf

http://www.competition.am/index.php?menu=147&lng=2


be done in parallels between Armenia and European Union as a

comparative study of the subject.

2. Hypothesis

" Consumer's Rights are affected/violated due to the Anticompetitive Agreements among SMEs"

3. Analysis

3.1 Legal framework: Armenia

Armenia is one of approximately 80 nations that have created

their competition system since 1980s. The Law of the Republic of

Armenia on Protection of Economic Competition was passed on 6

November 2000. On 13 January of the following year, SCPEC (The

State Commission for the Protection of Economic Competition of

the Republic of Armenia) was established. The ACPS (Armenia's

Competition Policy System) 10th anniversary is approaching.18

Competition Law is the main legal act which is targeted to

regulate the anticompetitive agreements which are being made in

18Report by the UNCTAD secretariat, New York and Geneva 2010: http://unctad.org/en/Docs/ditcclp20101overview_en.pdf

34


the Armenian market. For the prohibition and general principles

about the agreements in the Competition law is Chapter 2 (which

consists of only "Article 5: Anticompetitive Agreements and their

Prohibition")19, where we can find answers to the very general

problem solving parts of the whole process. Commission for the

Protection of Economic Competition of RA20 has made a special

Order on definition of anticompetitive agreements on September 1,

2004: Order on “Definition of Anticompetitive Agreements”21. The

Commission hopes to discover, prevent, restrict and prohibit

anti-competitive agreements by the review of prices on product

markets, the identification of market sharing trends, the

revelation and elimination of obstacles to market entry for

economic entities.22

With the help of The Order the Commission should discover

the main concepts of the anticompetitive agreements, types of

contract procedures between the sides which are targeted to break

the rule of honest competition. According to the Law of the RA on

the Protection Consumer’s Rights23 consumer is a person who

purchases or rents goods or services for his/her personal,

family, household needs and not for business use24.

19 RA Law on Protection of Economic Competition, , Chapter 2, Article 5, 06 November, 2000: http://www.competition.am/index.php?menu=147&lng=2v20 http://www.competition.am/?lng=221Order on “Definition of Anticompetitive Agreements”, 01 September, 200422AEPLAC Working Papers Series: Effective Enforcement of Competition Law in Armenia, Joe McArdle, No. 9, June 2002 Yerevan: http://siteresources.worldbank.org/INTCOMPLEGALDB/Resources/reform2002.pdf23 RA Law on Protection Consumer Rights, 26 June, 200124 RA Law on Protection Consumer Rights, Article 1, 26 June, 2001

35


The Law of the Republic of Armenia on the Protection of

Consumer’s Rights25 contains general provisions which are created

for regulating the relationship between consumers and economic

entities. The Constitution of the RA, Article 8 stipulates:

“Freedom of economic activity and free economic competition is

guaranteed in the Republic of Armenia”26. Concerning this issue,

there is special article on anti-competitive activities against

the economy: it is "Article 195: "Illegal anti-competition

activity" of the Criminal Code of the RA states:

1. Establishment and maintaining of illegal artificially

high or low monopolistic prices, as well as, restriction of

competition by prior agreement or by coordinated actions, in

order to divide the market by territorial principle, to restrict

the penetration into the market, to force other economic subjects

out of the market, to establish and maintain discriminative

prices, is punished with a fine in the amount of 300 to 500

minimal salaries, or with arrest for the term of 2 to 3 months,

or with imprisonment for the term of up to 2 years.

2. The same action committed:

1) By violence or threat of violence;

25 http://www.consumer.am/categories.php?lang=2&cat_id=101&sub_cat_id=106&pid=24926 RA Constitution, Chapter 1, Article 8: http://www.parliament.am/legislation.php?sel=show&ID=1&lang=eng

36


2) By damaging or destruction of somebody’s property, or by

threat of damaging;

3) By abuse of official position,

4) By an organized group,

is punished with a fine in the amount of 400 to 600 minimal

salaries, or with imprisonment for the term of 3 to 8 years, with

or without property confiscation."27

Thus, for the consumer rights protection and prohibition of

anti-competitive agreements the main responsible body in the

Ministry of Economy of RA which is regulating all the process

with the help of his coordinators in the above mentioned

institutions.

As we could see from the above mentioned legal acts,

everything is very well dictated on paper and it seems that the

regulations can perfectly work. But like in every country, also

in Armenia, there are cases that happen in the entrepreneurial

field. In most of the cases, the greatest response and attention

from the society is given to the anticompetitive agreements among

large businesses, but at the same time, no one pays attention the

small and medium entrepreneurs when they are having anti

competitive agreements. For example, what I experienced during

27 RA Criminal Code, Section 8, Chapter 22, Article 195: http://www.parliament.am/legislation.php?sel=show&ID=1349&lang=eng#11

37


the internship period, the place of the office was in the middle

of the governmental buildings and in that area there were only 2

small shops that were selling coffee. In a casual supermarket

that coffee costs 0.80 EUR but in those 2 shops the price was

1.10 EUR. They were actually competitors, but both of them rose

the price of the coffee with 0.30 EUR that people do not have any

other choice, otherwise they have to walk for 15 minutes to get

the nearest supermarket. So what is the output: 2 shops have

their same clients and have the same prices. They "do not"

compete but continue having more income that is supposed to be.

The only competition in this case is to bring more clients with

just being nice with them. They are only 2 shops in a small part

of the city, but if we continue searching for this kind of cases

in a 1.4 million city, there will be more and as a result, these

kind of SMEs having anti-competitive agreements, bring more

damage to the society than one or two cases with the large

businesses. This was an example from an everyday life and I am

going to bring some case studies which got high public attention.

3.3.1 Case Study

In 2012 there was a scandalous case of a medicine

distributor in Armenia: - "October 5, 2012 - 14:22 AMT,

PanARMENIAN.Net - Market research in the field of procurement of

38


medicines by State Commission for the Protection of Economic

Competition of Armenia has revealed cases of anti-competitive

agreements, with several companies fined.

Natali Pharm, a distributor of medicaments in Armenia, was fined

AMD 50 million (nearly 100.000 EUR). The damage inflicted on the

state budget as a result of the violation of public procurement

process totaled AMD 1,5 billion (nearly 3 million EUR) . With 134

hospitals and 300 companies inspected, the study revealed that

134 health institutions purchased about 100 different medicines

without competitive bidding."28 The SCPEC started the procedure

of inspection because "Natali Pharm" being an SME, a middle class

distributor in Armenia, surprisingly started to grow. The

phenomenon was not understandable and in the field of medicine

distribution in Armenia there is big competition and a lot of

SMEs and large distributors. Thus, as we can see from the article

shown above, big inspection was implemented and legal actions

have been brought.

In 2005, when Yerevan-Istanbul-Yerevan flight was

established between 2 countries, the tour companies started

actively entering the market. In this case there was a very big

issue, where was not only Armenian tour agency fined, but also

national airlines of Armenia and a Turkish tour agency. The anti

competitive enforcement got very international attendance and

starting from October 2005 the case was being inspected: - "

State Commission for Protection of Economic Competition of the28 http://www.panarmenian.net/eng/news/126145/

39


Republic of Armenia (hereinafter also “Commission”) in an open

door hearing on October 19 2005 with the participation of the

representatives of “Kule Air Navigation and Tourism” commercial

LtD (hereafter “Kule” Company) and “Bagratur” LtD (hereinafter

“Bagratur” Company) discussed the issue of signing

anticompetitive agreement between “Kule” and “Bagratur”

Companies."29 This a pretty bigger case than the first one

presented above and it shows a real SME anti-competitive

agreement example not only in Armenia, but also in Turkey, the

cooperation between 2 country SMEs, in the sense, that 2

countries do not have any political or commercial relationship to

each other, the border is closed for the last 80 years and the

situation is very critical, concerning Azerbaijan and Turkey

brotherhood. The Commission decided to do the followings to find

the real problem and find out if it was an anti-competitive

agreement or not: - " "Results of analysis of information

submitted by “Kule” Company revealed that “Kule” and “Bagratur”

Companies on February 1 2005 signed an Appendix #1 to Contract Q-

1 from July 1 2004, which contained provisions evidencing

possible violations of the RA Law on “Protection of Economic

Entities” (hereinafter also “Law”) in the sphere of passenger

transportation in “Yerevan-Istanbul-Yerevan” direction. To

conduct researches in connection with the stated, Commission

opened an administrative proceedings based on Decision # 119-A on

“Opening an Administrative Proceedings in Connection with29 http://competition.am/uploads/resources/vor_eng_2005_10_121.pdf

40


Possible Violation of the RA Law on “Protection of Economic

Competition” in the Sphere of Passenger Transportation (Air

Flights) in “Yerevan- Istanbul (Turkey)-Yerevan” Direction”

adopted on September 16 2005. Based on the same Decision,

Commission upon letters #1793 and 1794 dated September 20 2005

requested respectively “Armavia Aviation Company” and “Kule”

Companies to submit to Commission information referring passenger

transportation (air flights) in “Yerevan-Istanbul-Yerevan”

direction as well as economic entities operating in the flight

organization industry within the defined timeframe."30 After long

investigation and different inspection the following Final

Decisions were made: -

"Decides:

1. Qualify signing of Appendix # 1 to Contract Q-1 on February 1

2005 between “Kule” and “Bagratur” companies which was manifested

in the division of market according to the sales volume as well

as groups of suppliers and led to the restriction, prevention,

prohibition of economic competition on “Implementation of

Passenger Transportation (Air Flights) in “Yerevan-Istanbul-

Yerevan” Direction” product market as anticompetitive agreement.

2. Impose fine at the rate of 1% of the proceeds gained by “Kule’

and “Bagratur” companies from the sale of air tickets for

passenger transportation (air flights) in “Yerevan-Istanbul-30 Decision #121-A, October 19 2005 Yerevan: On Fact of violation of the RA law on “Protection of Economic Competition” by “KULE” and “BAGRATUR” Companies; http://competition.am/uploads/resources/vor_eng_2005_10_121.pdf

41


Yerevan” direction on “Kule’ and “Bagratur” companies for the

anticompetitive agreement signed between them, which was

manifested in the concert action between the agreement

participants and conducting actual actions, in the results of

which both passenger transportation (air flights) in “Yerevan-

Istanbul-Yerevan” direction as well as the sales volume of air

tickets in that direction was restricted.

3. Instruct “Kule” and “Bagratur” Companies to:

a) Exclude infringements directed at restriction, prevention or

prohibition of economic competition in future;

b) Submit to Commission a document verifying the payment of the

fine defined by the present Decision within 10 days’ period.

4. The present Decision shall come into force following the day

of its delivery to “Kule”

and “Bagratur” Companies, respectively."31

Finally, from the above presented 2 cases, we can see that

the legislation on anti-competitive agreements is working, but

the most disappointing part is that there are inspected and

investigated only one case per year. It means that only one anti-

competitive agreement is found in the whole country during the

whole year, which is not saying good, but is very damageable not31 Decision #121-A, October 19 2005 Yerevan: On Fact of violation of the RA law on “Protection of Economic Competition” by “KULE” and “BAGRATUR” Companies; http://competition.am/uploads/resources/vor_eng_2005_10_121.pdf

42


only for the consumers, but also for the whole economy and the

state budget. The most visible cases are from the small

entrepreneurs, but unknowingly, no one pays attention to them.

3.2 Legal Framework: European Union

In the European Union, the main regulating legal acts are

Article 81 and Article 82 of the Treaty Establishing the European

Community, Chapter 1. The Article 81 states that: - "1. The

following shall be prohibited as incompatible with the common

market: all agreements between undertakings, decisions by

associations of undertakings and concerted practices which may

affect trade between Member States and which have as their object

or effect the prevention, restriction or distortion of

competition within the common market, and in particular those

which: 29.12.2006 EN Official Journal of the European Union C 321

E/73(a) directly or indirectly fix purchase or selling prices or

any other trading conditions;

(b) limit or control production, markets, technical development,

or investment;

(c) share markets or sources of supply;

43


(d) apply dissimilar conditions to equivalent transactions with

other trading parties, thereby placing them at a competitive

disadvantage;

(e) make the conclusion of contracts subject to acceptance by the

other parties of supplementary obligations which, by their nature

or according to commercial usage, have no connection with the

subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this

Article shall be automatically void.

3. The provisions of paragraph 1 may, however, be declared

inapplicable in the case of:

— any agreement or category of agreements between undertakings,

— any decision or category of decisions by associations of

undertakings,

— any concerted practice or category of concerted practices,

which contributes to improving the production or distribution of

goods or to promoting technical or economic progress, while

allowing consumers a fair share of the resulting benefit, and

which does not:

(a) impose on the undertakings concerned restrictions which are

not indispensable to the attainment of these objectives;

44


(b) afford such undertakings the possibility of eliminating

competition in respect of a substantial part of the products in

question."32 And Article 82: - " Any abuse by one or more

undertakings of a dominant position within the common market or

in a substantial part of it shall be prohibited as incompatible

with the common market in so far as it may affect trade between

Member States. Such abuse may, in particular, consist in:

(a) directly or indirectly imposing unfair purchase or selling

prices or other unfair trading

conditions;

(b) limiting production, markets or technical development to the

prejudice of consumers;

(c) applying dissimilar conditions to equivalent transactions

with other trading parties, thereby placing them at a competitive

disadvantage;

(d) making the conclusion of contracts subject to acceptance by

the other parties of supplementary obligations which, by their

nature or according to commercial usage, have no connection with

32 Consolidated version of the Treaty Establishing the European Community, Chapter 1: Rules on Competition, Section 1, page C 321 E/73: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:321E:0001:0331:EN:PDF

45

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:321E:0001:0331:EN:PDF


the subject of such contracts."33 These legal acts provide with

the full scope of the consumer right's protection and market

stability. For the implementation of the articles the EU created

different tools, such as: antitrust rules, the Green Paper, in

addition to the Article 81 and 82 there is a special Article 153

in Title XIV (Consumer Protection), which states that: - "...In

order to promote the interests of consumers and to ensure a high

level of consumer protection, the Community shall contribute to

protecting the health, safety and economic interests of

consumers, as well as to promoting their right to information,

education and to organize themselves in order to safeguard their

interests... (b) measures which support, supplement and monitor

the policy pursued by the Member States."34 This means that all

the member states have to bring in action all the actions to

protect their consumers. The measurement is the evaluation of the

member state country, how much that country is investing in the

consumer protection mechanisms and anti-competitive actions

prohibition. To bring in action the rule to have Consumer

Protection Policies, the EU Charter of Fundamental Rights has a

special Article 38: -" Union policies shall ensure a high level

of consumer protection."35

33 Consolidated version of the Treaty Establishing the European Community, Chapter 1: Rules on Competition, Section 1, page C 321 E/74: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:321E:0001:0331:EN:PDF34 Consolidated version of the Treaty Establishing the European Community, Chapter XIV:Consumer Protection, page C 321 E/116: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:321E:0001:0331:EN:PDF35Charter of Fundamental Rights of the EU, Article 38, December 7, 2001: http://www.europarl.europa.eu/charter/pdf/text_en.pdf

46

http://www.europarl.europa.eu/charter/pdf/text_en.pdf




Thus, EU Legislation System is pretty well formed with many

different Articles and legal acts, which are related to each

other, to reach full protection of consumer's rights. The EU

vision for consumer's rights is to give them full support in

health, safety, education, information and many others. Living in

EU for the last 2 years, I can say that I was able to get that

everything, so it seems that in Germany the vision is not only a

vision, but also a reality.

Discussing the theoretical legislation part is very

important, but at the same time, to see how that everything work

we need real time cases, which will be presented in the next part

of this study.

3.2.1 Case Study

A very important and international case is about MasterCard.

In 1992 there was an investigation started against MasterCard.

The clue was that the MasterCard payment organization and the

entities representing it, have infringed Article 81 of the Treaty

and Article 53 of the EEA Agreement by in effect setting a

minimum price merchants must pay to their acquiring bank for

accepting payment cards in the European Economic Area, by means

of the Intra-EEA fallback interchange fees for MasterCard branded

47


consumer credit and charge cards and for MasterCard or Maestro

branded debit cards.36 "The procedure was initiated on the basis

of a complaint submitted on 30 March 1992 by the British Retail

Consortium (BRC), a trade association representing UK retailers.

In its complaint the BRC alleged that each of Europay

International SA and Visa restricted competition by its

arrangements on cross-border interchange fees."37 After long

inspection (which took nearly 15 years) of the case the remedies

of the case were: "(1) As MasterCard’s MIF restricts price

competition between acquiring banks without fulfilling the first

three conditions of Article 81(3) of the Treaty, the MasterCard

payment organization and the legal entities representing it are

obliged to bring the infringement to an end within 6 months after

notification of the Commission Decision by repealing the Intra-

EEA fallback interchange fees, as well as the SEPA/Intra-EuroZone

fallback interchange fees.

(2) The remedy does not apply to MasterCard’s MIF for

commercial cards, a segment that the Commission will further

investigate."38

36 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:264:0008:0011:EN:PDF: (1) Introduction37 Summary of Commission Decision of 19 December 2007 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case COMP/34.579 —

MasterCard, Case COMP/36.518 — EuroCommerce, Case COMP/38.580 — Commercial Cards):

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:264:0008:0011:EN:PDF38 Summary of Commission Decision of 19 December 2007 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case COMP/34.579 — MasterCard, Case COMP/36.518 — EuroCommerce, Case COMP/38.580 — Commercial Cards)- 4.REMEDY: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?

48


The fines and periodic penalties were: -"(1) As MasterCard’s

MIF was notified to the Commission and given the specific

circumstances of the present case, no fine is imposed.

(2) If MasterCard fails to comply with the remedy after the

6- month transition period lapses, the Commission imposes

provisional periodic penalty payments of 3,5 % of MasterCard

Incorporated’s daily consolidated global turnover in the

preceding business year according to

Article 24(1)(a) of

Regulation (EC) No

1/2003."39 As we can see

from the case, it started

in 1992 and the final

decision was only in

2007. During all the

years EU was developing his tools and legislation to reach the

day for being able to make this kind of legal decisions.

EU is also doing

social activities

through the whole Europe to make the people more informed about

their rights. As we can see from the Figure 4, the social

movement is addressed to the consumers, who does not know about

uri=OJ:C:2009:264:0008:0011:EN:PDF39 Summary of Commission Decision of 19 December 2007 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case COMP/34.579 — MasterCard, Case COMP/36.518 — EuroCommerce, Case COMP/38.580 — Commercial Cards)- 5.Fines and...: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:264:0008:0011:EN:PDF

49

Figure 4: Social Movement Activity in EU,


their rights or that all the consumers always get updated. It is

very important to make this kind of passive advertisements, which

give indirect information to people and with the help of these,

they make the revelation process easier and more effective.

3.3 Comparison of Legislation

All the countries work all the time on the policies and

legal acts to make everything more controlled and fair, but on

the other hand, we can see lack of enforcement in consumer

compensation, especially in Armenia, because it is absent from

the legislation, whilst there are the articles in EU legislation

system. This is the biggest difference in comparison of only the

legal acts, but we have to understand that legal acts are legal

acts, but mechanisms for enforcement, prohibition and controlling

have to be developed and used as tools of protection of

Consumer's Rights.

From one hand, it is very good that all the legal acts are

very general and can be used for nearly all the anti-competitive

or consumer rights breaking cases, but from the other hand, it

brings to a disequilibrium the entrepreneurial field. For

instance, in Armenia, there is a huge difference between SMEs and

Large businesses, as in the central registry there are more than

400.000 SMEs registered and nearly 50 Large Businesses which are

50


owned by not more than 20 people in the whole country. In this

case it is very hard to enforce and control the field, thus the

Armenian government, with the leadership of international

competitiveness organizations or consumers rights protection

foundations, should develop new ways and tools for controlling

this kind of misbalanced market.

4. Recommendations

Having thoroughly examined the legislation systems and seen

how they work, I would like to make some recommendations on

improvements of the anti-competitive and consumer protection

mechanisms, especially in Armenia. First of all there is need of

cooperation of SCPEC and all the Consumer's Rights protection

NGOs and foundations. There are many of them, but instead of

cooperate problem solving they mostly compete with each other. It

would be very useful that the Ministry Economy of RA and SCPEC

bring them all together into a committee where they will be able

to bring all their power into one and work more directive to the

problem.

The Partnership Cooperation Agreement between the European

Communities and Armenia, signed in 1999 gives a lot of advantages

in sense of cooperative institutional approaches which, of course

helped in formulating the Armenian legislation system concerning

the Consumers Rights, Anti-competitive agreements and unfair

51


competition, but it would be a move forward if some experts from

the EU visit Armenia, to audit, research, give lectures and do

master classes with the agents and coordinators of the field.

It is very important to make the population/consumers

informed that the entrepreneurs can "rob" them and consumers will

understand in which situation the prices of the products or

unfair competition is being made.

As I have studied at a university in Armenia, I now

understand that there is nothing being thought about Consumers

Rights or unfair competition in sense of consumer protection or

market stabilization. It would be a great decision, to insert

that topic into the study sessions and make it comprehensive for

all the Business and Law departments.

5. Conclusion

Having observed how countries protect their consumers,

market, competition and legislation, implementing a study

research, considering some cases, bringing in front real-life

cases and facts, by the first impression we see that everything

is stable in the market, works in the right direction and the

governments keep the consumer-business relationship under

control. However, when we go deeper into the market we find that

the omissions do exist within the market, that governments mostly52


inspect the Large businesses and do not pay a lot of attention to

SMEs, but if we do simple calculation, we find out that the SME

field is more important economically than some Large

entrepreneurs.

Consumer rights protection under anti-competitive agreements

is becoming more common and important day by day in every

country, because consumers start demanding more quality and less

prices, so the competition is becoming harder and lots of

companies, to survive in the market, go into unfair competition.

The most important consumer protection mechanism should be

focusing about monopoly in the field, especially in the sphere of

primary needs for the consumers. Nowadays, all the primary needs

are being delivered mostly from SMEs, however, only 20 years ago

the government was the only supplier and price controller. After

the radical change in one day, when the USSR collapsed, all the

institutions, economic functions, protection and distribution

mechanisms were totally changed, applying open market economies.

Thus, as long as the market is not fully controlled and is

not safe for the consumers, we find out that "Consumer's Rights

are affected/violated due to the Anticompetitive Agreements among

SMEs".

III. Resume

53


Doing the internship at the Small and Medium

Entrepreneurship Development National Center of Armenia and

implementing the study on anti-competitive agreements and unfair

competition, I got so much knowledge and experience that I

started of thinking on my further researches on these topics and

now I am very eager to work and see that everything from inside.

I can surely say that it was a right choice to do my

internship at the SME DNC of Armenia, as I worked in all the

departments and during 4 months I got the chance to learn about

all the economic, legal, managerial, controlling and

implementation processes as I was working in the 6 departments

and all of them were stick to each other. I understood the

importance of communication skill within a working environment,

work distribution, how responsible are the project coordinators

and how responsible should the executive director be.

I would like to thank all the staff of SME DNC of Armenia for

providing me all the information, giving me motivation and

courage in the work I was doing, being friends from the first

moment and leading me through the whole internship.

I would like to personally thank Zarine Arushanyan, the head of

the "International Economic Cooperation" Department of Ministry

of Economy of Armenia. She is the only person in Armenia who made

a research on Consumer's Rights protection, provided me with her

54


Master's Thesis and spend a lot of time with me on discussing the

issues and points that I could take under research in my

Scientific Paper.

IV. Sources

1. AEPLAC Working Papers Series: Effective Enforcement of Competition Law in Armenia, Joe McArdle, No. 9, June 2002 Yerevan: http://siteresources.worldbank.org/INTCOMPLEGALDB/Resources/reform2002.pdf

2. Approaches to Cartels and Anti-Competitive Agreements, Sandra Marco Colino, 2012

3. CEFE - Competency based Economies through Formation of Enterprise: http://www.microfinancegateway.org/p/site/m/template.rc/1.11.47124/

4. Charter of Fundamental Rights of the EU, Article 38, December 7, 2001: http://www.europarl.europa.eu/charter/pdf/text_en.pdf

55

http://www.europarl.europa.eu/charter/pdf/text_en.pdf

http://www.microfinancegateway.org/p/site/m/template.rc/1.11.47124/

http://www.microfinancegateway.org/p/site/m/template.rc/1.11.47124/

http://siteresources.worldbank.org/INTCOMPLEGALDB/Resources/reform2002.pdf

http://siteresources.worldbank.org/INTCOMPLEGALDB/Resources/reform2002.pdf


5. Consolidated version of the Treaty Establishing the European Community, Chapter 1: Rules on Competition, Section 1, page C 321E/73: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:321E:0001:0331:EN:PDF

6. Deborah A. Garza Chair, Jonathan R. Yarowsky Vice-Chai. Antitrust Modernization Commission, Report and Recommendations. New York: April 2007

7. Decision #121-A, October 19 2005 Yerevan: On Fact of violationof the RA law on “Protection of Economic Competition” by “KULE” and “BAGRATUR” Companies; http://competition.am/uploads/resources/vor_eng_2005_10_121.pdf

8. "Development of SME field in Armenia", S. Suvaryan, Yerevan 2009

9. Master's Thesis: Zarine Arushanyan, 2008, "Protection of Consumer's Rights under the Anticompetitive Agreements": http://law.aua.am/files/2012/02/Zarine-Arushanyan.pdf

10. Order on “Definition of Anticompetitive Agreements”, 01 September, 2004

11. PanArmenian News Agency: http://www.panarmenian.net/eng/news/126145/

12. Participatory Appraisal of Competitive Advantages: http://www.paca-online.de/

13. Parliament web-page of RA: www.parliament.am

14. RA Constitution, Chapter 1, Article 8: http://www.parliament.am/legislation.php?sel=show&ID=1&lang=eng

56

http://www.parliament.am/legislation.php?sel=show&ID=1&lang=eng

www.parliament.am

http://www.paca-online.de/

http://www.panarmenian.net/eng/news/126145/

http://law.aua.am/files/2012/02/Zarine-Arushanyan.pdf

http://competition.am/uploads/resources/vor_eng_2005_10_121.pdf%20%20%20




15. RA Criminal Code, Section 8, Chapter 22, Article 195: http://www.parliament.am/legislation.php?sel=show&ID=1349&lang=eng#11

16. RA Law on Protection Consumer Rights, 26 June, 2001:http://www.consumer.am/categories.php?lang=2&cat_id=101&sub_cat_id=106&pid=249

17. RA Law on Protection of Economic Competition, 06 November, 2000: http://www.competition.am/index.php?menu=147&lng=2

18. Report by the UNCTAD secretariat, New York and Geneva 2010: http://unctad.org/en/Docs/ditcclp20101overview_en.pdf

19. SME DNC of Armenia, "Industrial Systems Building Programs" Department: http://smednc.am/?laid=1&com=module&module=menu&id=373

20. SME DNC of Armenia, "Information Support Programs" Department: http://smednc.am/?laid=1&com=module&module=menu&id=85

21. SME DNC of Armenia, "International Cooperation Programs" Departmenthttp://smednc.am/?laid=1&com=module&module=menu&id=373

22. Summary of Commission Decision of 19 December 2007 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case COMP/34.579 — MasterCard, Case COMP/36.518 — EuroCommerce, Case COMP/38.580 — Commercial Cards):http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:264:0008:0011:EN:PDF

57

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:264:0008:0011:EN:PDF

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:264:0008:0011:EN:PDF





http://unctad.org/en/Docs/ditcclp20101overview_en.pdf

http://www.competition.am/index.php?menu=147&lng=2

http://www.consumer.am/categories.php?lang=2&cat_id=101&sub_cat_id=106&pid=249

http://www.consumer.am/categories.php?lang=2&cat_id=101&sub_cat_id=106&pid=249

http://www.parliament.am/legislation.php?sel=show&ID=1349&lang=eng%2311

http://www.parliament.am/legislation.php?sel=show&ID=1349&lang=eng%2311


V. Appendix

58


Table 1. Organization chart of the SME DNC of Armenia

Source: SME DNC of Armenia, "Information Support Programs"

Department

Figure 1. E-Newsletter cover page

Source: SME DNC of Armenia,"International CooperationPrograms" Department

59


Figure 2. "Merlin" Software of EEN

Source: SME DNC of Armenia, "International Cooperation Programs" Department

Figure 3. "Tavush Cheer” project: "Cheer" brand

60


Source: SME DNC of Armenia, "Industrial Systems Building Programs" Department

Figure 4: Social Movement Activity in EU, "Consumer Rights"

Source: https://www.gov.uk/consumer-protection-rights

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Internship Report at Small and Medium Entrepreneurship Development National Center of Armenia (SME DNC of Armenia); Protection of Consumer's Rights Under Anti-competitive Agreements

Documents