The Merger Control Review 2013 - Serbia Chapter

I INTRODUCTION

The Serbian Competition Commission is well known locally for its track record of imposing fines for antitrust infringements. In late 2009, a new law came to effect authorising the Competition Commission to impose fines directly; however, no one expected that by 2013 the total amount of fines it imposed would reach E40 million.

Outside Serbia, the Competition Commission is best known for being one of the jurisdictions consistently considered in multi-jurisdictional filings. Despite its relatively small population (around 7 million), Serbia has had a disproportionate number of merger control cases - more than 100 a year on average, since the enactment of the first EU-modelled competition law in 2005. Because of its low notification thresholds, European and global transactions involving at least one party with a material business interest in Serbia need to be pre-notified to the Competition Commission in Serbia.

This experience in dealing with merger control cases has helped the authority develop its capacity and gain a better understanding of how markets work. It is now well equipped to handle the most complex cases and deal with them within a relatively short time frame. Additionally, it has consistently shortened the review period in more straightforward cases.

The Competition Law of 2009 moved the Serbian antitrust regime closer to EU law (the case law of the EU courts, the European Merger Regulation ('the EUMR') and various implementing regulations). The substantive regime is substantially identical to the regime introduced by the first EU-modelled competition law, the Competition Law of 2005. Thus, the current regime mostly meets the standard of review that exists in the EU.

Since 2008, the Serbian competition rules have been formally exposed to the influence and case law of the EU. Under the stabilisation and association agreement ('the SAA') with the EU, Serbia formalised its commitment to harmonise its legislative framework with that of the EU.

The Central European Free Trade Agreement ('CEFTA'), similar to the SAA, envisions the application of EU competition law principles and rules to all matters in which trade among the member countries may be affected. Therefore, while Serbian competition law normally would not apply to sales outside Serbia, the CEFTA rules will, together with the laws of Serbia and the laws of the EU, which the national authorities are obliged to follow. While the Commission considered the CEFTA area as a free-trade zone in its merger review practice, there has been no case law so far regarding competition infringements in cross-border trade between member countries.

The Competition Commission, which is seated in Belgrade, is composed of five members (the head of the Commission and four professional case handlers) appointed by Parliament. It is an independent regulatory body that is authorised to implement the law, and is responsible exclusively to Parliament.

The head of the Commission, inter alia, represents the Commission, signs conclusions on commencement of inquiry proceedings, issues decisions in fast-track procedures and decides on appeals against conclusions issued by the case handlers.

Parties may appeal the Competition Commission's decisions to the Administrative Court, which may either set aside the Commission's decisions or take full jurisdiction over the matter and replace the Commission's decision with its own. The Administrative Court is normally required to test the Competition Commission's findings and hear evidence on the issue, although it rarely takes any such action. The Administrative Court's judgments are final, but the parties may appeal them to the Supreme Court of Cassation, which can only decide on points of law.

Over the years, the Competition Commission has blocked several transactions and has imposed remedies in dozens of other cases. With regard to remedies, it has imposed remedies even in foreign-to-foreign transactions. Previously, such remedies had been more behavioural in nature, but recently it has negotiated more complex structural remedies.

In the summer of 2013, Parliament intends discussing certain amendments, but there are no indications that the notification thresholds will change.

Certain specific rules and regulations, including the occasional deviation from the general competition law regime, are contained in the appropriate sector legislation, for example, banking regulations (specific merger thresholds that concurrently have to be approved by the National Bank), telecom rules (ex ante regulation and special rules regarding significant market power operators), public health norms (maximisation of drug prices), media laws ('prohibited media concentrations') or even local ordinances in certain cases (fixing of local taxi and public transport fares).

II YEAR IN REVIEW

Merger control still represents numerically the most significant part of the Commission's practice, accounting for the majority of its decisions (105 in 2012). Most of these (e.g., around 93 per cent in 2012) resulted in summary decisions, which suggests that the thresholds are too broad under the Competition Law. However, there have been a few Phase II proceedings, which always entailed high-profile local cases, with particular scrutiny applied to the kiosks market, the leading sugar producer and telecom prepaid services. Transactions involving local assets need not, however, be the decisive factors in the estimation of the necessity of an inquiry. Besides market shares, a merger is always evaluated in the light of the effects that it can cause after its implementation, so high market shares do not automatically mean that a merger will be thoroughly investigated or that conditions will be imposed.

The end of 2012 and the beginning of 2013 are noteworthy in the development of the Serbian merger control system. 2012 marked the first year that the Competition Commission issued clearances with commitments (conditional clearances) under the new competition law. One involved the kiosks markets (in seven Serbian cities), while the second referred to the acquisition of a major distributor of telecom prepaid services. In March 2013, the Commission issued another conditional clearance concerning the sugar industry. In all three horizontal mergers concerned, the Competition Commission relied on the EC merger control guidelines, model texts and best practices for behavioural measures and divestiture commitments.

The Competition Commission previously decided in two cases to block concentrations. The first decision (Primer C/C Market) was issued in 2006, soon after the first Serbian competition law...