The International Comparative Legal Guide To: Merger Control 2013 - Serbia

1 Relevant Authorities and Legislation

1.1 Who is/are the relevant merger authority(ies)?

The authority with competence over merger control in Serbia is the Commission for the Protection of Competition [Komisija za zaatitu konkurencije] ("Commission"), an independent administrative body established in 2005 and operative as of 2006. The website of the Commission is accessible at www.kzk.org.rs.

The Commission, competent to enforce competition law in its totality and not just merger control rules, is an independent governmental body responsible for its work to the Serbian Parliament.

The Commission's professional service was in 2011 composed of 31 employees, 20 of them case-handlers. Of relevance for merger control, the merger control department had 6 employees, while the legal and economic analysis departments had 3 employees each. The current number of employees is below the required number provided for by the Commission's internal organisational plan and the Commission sees understaffing as one of its main weaknesses next to financial constraints.

Pursuant to the Commission's Annual Reports, it received 114 merger notifications in 2011, of which it assessed 100 in the same year (and of which 92 resulted in Phase I clearances and two in Phase II clearances). The Commission assessed 73 notifications in 2010, 116 in 2009, 137 in 2008, 125 in 2007 and 56 in 2006.

The Commission in 2011 also had significant activities in terms of rendering official opinions, which it can do on two different grounds. The first grounds relate to interpretation of merger control rules, on the basis of which it received more than 30 requests in 2011, most of which concerned the issue of whether a given concentration is subject to notification. The second ground is founded on the Bankruptcy Act (Official Gazette of the Republic of Serbia, no. 104/2009), pursuant to which the Commission rendered 123 opinions concerning the issue of whether a given acquisition of control via bankruptcy proceedings or bankruptcy restructuring is subject to merger control.

Decisions of the Commission can be challenged before the Administrative Court of Serbia [Upravni sud] ("Administrative Court"), operational as of January 2010.

1.2 What is the merger legislation?

Merger control rules are regulated by the Law on the Protection of Competition [Zakon o zaatiti konkurencije] (Official Gazette of the Republic of Serbia, no. 51/09) ("Competition Act"), which came into force on 1 November 2009. The Competition Act supersedes the 2005 Law on the Protection of Competition (Official Gazette of the Republic of Serbia, no. 79/05), which regulated merger control rules until the entry into force of the Competition Act.

The Competition Act regulates both the substantive and procedural aspects of merger control. To the extent that some procedural rules are not regulated by the Competition Act, the Law on General Administrative Proceedings [Zakon o opatem upravnom postupku] (Official Gazette of the Republic of Serbia, nos. 33/97, 31/01 and 30/2010) applies subsidiarily. Administrative disputes before the Administrative Court are governed by the Law on Administrative disputes [Zakon o upravnom sporu] (Official Gazette of the Republic of Serbia, no. 111/09).

Certain aspects of merger control are further regulated in secondary legislation, namely:

the Ordinance on Criteria for Determining the Relevant Market [Uredba o kriterijumima za određivanje relevantnog tr~iata] (Official Gazette of the Republic of Serbia, no. 89/2009); the Ordinance on Content and the Manner of Submission of Merger Notifications [Uredba o sadr~ini i načinu podnoaenja prijave koncetracije] (Official Gazette of the Republic of Serbia, no. 89/2009) (the "Implementing Ordinance"), which governs the required content and form of merger notifications; the Ordinance on the Criteria for Determining the Amount Payable on the Basis of a Competition Measure and Procedural Penalty, the Manner and Deadlines for their Payment and the Conditions for Determining these Measures [Uredba o kriterijumima za određivanje visine iznosa koji se plaća na osnovu mere zaatite konkurencije i procesnog penala, načinu i rokovima plaćanja i uslovima za određivanje tih mera] (Official Gazette of the Republic of Serbia, no. 50/2010) ("Ordinance on Fines"); and the Commission's Guidelines on the application of the Ordinance on Fines (of 19 May 2011) [Smernice za primenu Uredbe o kriterijumima za određivanje visine iznosa koji se plaća na osnovu mere zaatite konkurencije i procesnog penala, načinu i rokovima plaćanja i uslovima za određivanje tih mera], which supplement the Ordinance on Fines. 1.3 Is there any other relevant legislation for foreign mergers?

There are no specific rules regarding foreign mergers. General merger control rules apply also to foreign mergers provided that the respective jurisdictional thresholds are met (please see questions 2.4 and 2.6 below

1.4 Is there any other relevant legislation for mergers in particular sectors?

The Competition Act applies to mergers irrespective of the sectors they pertain to. However, certain sector-specific regulations apply to mergers in certain sectors:

Banking: Direct or indirect acquisitions of a qualified shareholding (i.e. 5%, 20%, 33% and 50%) in Serbian banks can only be consummated subject to approval by the National Bank of Serbia ("NBS") - Article 94 of the Banks Act (Official Gazette of the Republic of Serbia, nos. 107/05 and 91/10). Acquisitions of control over companies involved in the financial sector, or establishments of such companies by Serbian banks, also require prior approval by the NBS pursuant to Article 7(4) of the Banks Act. Insurance: Direct or indirect acquisitions of a qualified shareholding (i.e. 10%, 20%, 33%, 50% and above 66%) in Serbian insurance companies require prior approval by the NBS - Articles 30 and 32 of the Insurance Act (Official Gazette of the Republic of Serbia, nos. 55/04, 70/04, 61/05, 85/05, 101/07, 63/09,107/09, and 99/11). Investment funds: Direct or indirect acquisitions of a qualified shareholding (10% or more) require the prior approval by the Securities Exchange Commission – Article 11 of the Investment Funds Act (Official Gazette of the Republic of Serbia, nos. 46/06, 51/09 and 31/11). Voluntary pension funds: Direct or indirect acquisitions of a qualified shareholding (10% or more) can be made only on the basis of a prior approval by the NBS - Article 14 of the Voluntary Pension Funds and Pension Schemes Act (Official Gazette of the Republic of Serbia, nos. 85/05 and 31/11). Media: The Broadcasting Act (Official Gazette of the Republic of Serbia, nos. 42/02, 97/04, 76/05, 79/05, 62/06, 85/06, 86/06, and 41/2009) contains provisions under which circumstances a concentration in the media sector can be prohibited. Telecommunication: Change of control clauses contained in issued telecom licences pursuant to the Telecommunications Act (Official Gazette of the Republic of Serbia, nos. 44/03, 36/03, 50/09, 27/10, and 44/10) might require prior consent of the Serbian Agency for Telecommunications for certain qualified transfers of shares in the telecom operators. Public-Private Partnerships and Concessions: Pursuant to the Public-Private Partnerships and Concessions Act (Official Gazette of the Republic of Serbia, no. 88/11) rights stipulated by PPPCs may be transferred to third parties only upon prior approval of the public partner. 2 Transactions Caught by Merger Control Legislation

2.1 Which types of transaction are caught – in particular, how is the concept of "control" defined?

The Competition Act catches the following types of transactions:

mergers and other status changes leading to acquisitions of undertakings; acquisitions by one (sole control) or more (joint control) undertakings of direct or indirect control over another undertaking or undertakings; and establishments of joint ventures or acquisitions of joint control over existing undertakings, performing on a longterm basis all functions of an autonomous undertaking. An undertaking is deemed to have control over another undertaking if it has the possibility to exercise decisive influence on the latter's activities. Such influence can be based on: (i) a controlling shareholding; (ii) ownership or ownership rights over the assets (parts of assets) of an undertaking; (iii) rights deriving from contracts or securities; and (iv) receivables, guarantees over receivables and based on the terms and conditions of business practice.

In opinions issued 1 September 2006 (no. 126/06) and 4 November 2008 (no. 1/0 06-418/08), as well as in its Annual Reports, the Commission clarified that asset deals can equally (such as share deals) constitute a concentration only if the acquirer through purchasing the assets is conferred with decisive influence over the acquired business.

Privatisations that are administered by the Serbian Privatization Agency can be subject to the Competition Act provided that they meet the turnover thresholds.

The Bankruptcy Act provides that acquisitions of control via bankruptcy proceedings as well as bankruptcy restructurings may not be performed contrary to the Competition Act. Thus, such acquisitions of control and restructuring plans are subject to control by the Commission. Should it find that an intended restructuring shall give rise to change of control, and subject to prescribed thresholds, it shall instruct the parties to file a merger notification.

2.2 Can the acquisition of a minority shareholding amount to a "merger"?

Yes, provided that the acquisition of a minority shareholding confers (sole or joint) de facto or de jure control over the target on the acquiring undertakings (see also question 2.1).

As stated under question 2.1, an undertaking is deemed to have control over another undertaking if it has the possibility to exercise decisive influence on the latter's activities. Such influence is not limited to ownership rights, but...