September 07, 2009

New Competition Law

On July 13, 2009 the National Assembly of the Republic of Serbia adopted the new Competition Law, which will be applied as of November 1, 2009 (hereinafter referred to as the “New Law”) and will replace the currently valid law (hereinafter referred to as the “Old Law”) on that date.

The new Law divides the breaches of competition to: restrictive agreements and abuse of dominance.

In respect of the exemption of restrictive agreements, it is set forth to be for up to 8 (eight) years, unlike the Old Law which provided for exemption for up to 5 (five) years. The content of the request for exemption shall be regulated in detail under by-laws which should be adopted by the Government by November 1.

Furthermore, the New Law introduces the institute of agreements of minor importance and sets forth a general exemption for restrictive agreements of minor importance (except in cases of agreements of minor importance fixing prices or limiting the production or sale). The effect of such agreements to the competition is evaluated on the basis of the market share of the parties to the agreement. Please note that it practically represents the translation of Articles 7 and 8 of the EU Commission Notice on Agreements of Minor Importance 2001/C 368/07. Namely, according to this Article, agreements of minor importance are agreements between the market participants whose total market share at the relevant market of products and services at the territory of the Republic of Serbia does not exceed:

• 1) 10% of the market share for horizontal agreements (the ones between parties being on the same level of the chain of production and distribution);
• 2) 15% of the market share for vertical agreements (the ones between parties being on different level in the chain of production and distribution);
• 3) 10% of the market share if the agreement is such that it is difficult to determine whether it is horizontal or vertical; and
• 4) 30% of the market share if the agreements have similar effects to the market and it is concluded between different participants, and if the market share of each of the participants does not exceed 5% of each separate market affected by the agreement[1].

One of the most important changes implemented under the Law is that the procedure for determining the breach of competition may be initiated only ex officio, while third parties may only propose initiation of procedure to the Commission for Protection of Competition.

(b) Merger control

The cases of concentration when merger control applies have not been changed under the New Law, however the New Law sets forth more precisely the exceptions when clearance is not required, being: (i) banks, financial institutions and the insurance companies which temporary acquire shares or portions of shares for further sale, in the course of their regular business activities, provided that such shares or portions of shares are sold within one year as of the acquisition and that such situation does not influence the acquired company's business decisions; (ii) the investment funds and companies managing investment funds when acquiring participation in a market participant, provided that all the rights arising out of that participation are achieved only for maintenance of the value of the investment and that such participation does not influence the competitive actions of that company at the market, (iii) joint ventures with the purpose of coordination of market activities between two independent undertakings and (iv) acquisition of control by bankruptcy administrator.

Under the provisions of the New Law, the thresholds for application of merger control are increased. Namely, the notification is mandatory if:

(i) total annual income of all members of concentration acquired on the foreign market in previous year is higher than EUR 100 million, and where at least one member of concentration has income in Serbia of more than EUR 10 million, or

(ii) total annual income of at least two members of concentration  acquired on Serbian market is above EUR 20 million in previous year, where at least two members of concentration have income on a Serbian market of at least EUR 1 million each.

The deadline for notification of concentration is extended under the New Law to 15 days as of the signing of an agreement, or announcement of a public bid, or acquisition of control (unlike the Old Law which sets forth the deadline of 7 days). Furthermore, unlike the Old Law, the New Law sets forth a fine of EUR 500 to EUR 5,000 for each day of delay in case of late filing (but up to 10% of the total annual income of the parties).

Pursuant to the New Law, the Commission for Protection of Competition is entitled to examine an exercised concentration ex officio in the cases determined under the Law.

(c) Competences of the Commission for Protection of Competition (hereinafter: the Commission) and procedures before the Commission

Unlike the Old Law, the New Law sets forth that the bodies of the Commission are its Chairman and the Council (which consists of the Chairman and 4 members), it clearly separates the competences of the Chairman and the Council and it changes the procedure and the conditions for election of the bodies of the Commission.

Pursuant to Article 33 of the Law the market participant filing a notification of concentration and the market participant requesting individual exemption are parties to the procedure before the Commission, while the persons proposing the initiation of the procedure of examination of breach of competition and the ones providing information and data are not considered as parties thereof.

Furthermore, the New Law generally provides the Commission with broader authorizations in the procedures related to breach of competition, it introduces the concept of dawn raids and the Commission is authorized to determine measures for protection of the competition (including pecuniary fines and various measures).

[1] Please note that the provision itself is rather unclear, however, it may be assumed that it refers to existence of cumulative foreclosure effect of parallel networks to the market.