March 24, 2010

Block exemption of certain agreements which are prohibited under the Competition Law

The Government of Serbia adopted three Decrees in relation to block exceptions of agreements otherwise prohibited under the Competition Law, which came into force on March 13, 2010.

I. Decree on agreements between undertakings operating at the different level of production or distribution which are exempted from prohibition (hereinafter the "Decree") 

The Decree stipulates conditions under which vertical agreements having some restrictions to competition on the market could be exempted from the prohibition provided under the Competition Law, and thus, can be treated as permissible. Vertical agreements are defined as agreements on sale, purchase or distribution of goods or services between market participants that operate at the different level of production or distribution.

Examples of vertical agreement which are covered by the Decree are:

  • exclusive distribution agreements,
  • agreements on exclusive allocation of buyers;
  • selective distribution agreements;
  • agreements on exclusive purchasing;
  • agreements on exclusive supply;
  • agency agreements;
  • franchising agreements;

and other vertical agreements, including but not limited to agreements between a retail association of undertakings and its members, or between such an association and its suppliers, only if all members are retailers and each member' annual turnover is not higher than EUR 2 million.

Conditions for block exemption includes inter alia the following conditions: (i) each party to the vertical agreement should not have the market share above 25% at the relevant market [this figure also includes the market share of its related parties]; (ii) the agreement should not contain any "hard-core" restrictions, for example, specific way of retail price fixing, certain limitations in connection with the resale territory or the end users in case of further sale, specific restrictions imposed to the members of selective distribution system, and restrictions imposed to the supplier of parts. The Decree also stipulates which non-competition provision (scope and duration) can be exempted from prohibition.

Under certain conditions the Decree also applies to vertical agreements between competitors.

All vertical agreements concluded before the effective date of this Decree have to be harmonized with the Decree by June 13, 2010.

II. Decree on specialization agreements concluded between undertakings operating on the same level of production or distribution which are exempted from prohibition (hereinafter the "SA Decree")

The SA Decree stipulates conditions under which specialization agreements having some restriction to competition on the market can be exempted from prohibition that is provided under the Competition Law. Specialization agreements are defined as agreements concluded between two or more independent market participants operating on the same level of production or distribution that determine conditions under which parties can specialize in production. This category of agreements includes:

  • unilateral specialization agreements;
  • reciprocal specialization agreements;
  • joint production agreements.

Conditions for exemption of specialization agreements include, inter alia: (i) fulfillment of general exemption criteria stipulated under Article 11 of the Competition Law; (ii) that parties accept exclusive purchase/exclusive supply obligation or parties accept not so sell the product independently but provide for a joint distribution or appoint third party distributor who is not a competitor; (iii) the joint market share of the parties to the agreement is not above 20% at the relevant market; (iv) the agreement does not contain any "hard-core" restrictions such as price fixing, limitation of output or sales, or allocation of markets or consumers, with some exceptions.

All specialization agreements concluded before the effective date of the SA Decree have to be harmonized with the SA Decree by June 13, 2010.

III. Decree on research and development agreements concluded between undertakings operating at the same level of production or distribution which are exempted from prohibition (hereinafter the "R&D Decree")

The R&D Decree regulates exemption conditions for research and development agreements concluded between two or more independent undertakings operating at the same level of production or distribution which have as their subject:

  • joint research and/or development of product/production process and joint exploitation of results of such R&D, or
  • joint exploitation of results of research and/or development of product/production process pursuant to the prior agreement between the same parties, or
  • joint research and development of products/production process without obligation to jointly exploit results of R&D.

Conditions for exemption of R&D agreements include, inter alia: (i) fulfillment of general exemption criteria stipulated under Article 11 of the Competition Law; (ii) all parties having access to the results of joint R&D for the purpose of further research or exploitation, with some exceptions; (iii) under certain conditions each party may independently exploit result and existing know-how of a joint R&D; (iii) any joint exploitation of results refer to the results protected by intellectual property or which constitute know-how, and contribute to technical progress; (iv) agreements do not contain any "hard-core" restrictions such as, for example, restriction to undertake R&D in unconnected field, obligation not to challenge validity of IP rights related to the R&D, fixing the price when selling the contract product to third parties, or limitation of output or sales, etc. R&D agreements could be exempted from prohibition during the period of R&D (in case of not competing undertakings) and during 7 years from the time the contract products are placed on the market (in case the results are jointly exploited), provided that the joint market share of the parties at the time of conclusion of agreement is not above 25% at the relevant market [and also following this mentioned period until the joint market share is not exceeding 25%].

All R&D agreements concluded before the effective date of the R&D Decree have to be harmonized with the mentioned Decree by June 13, 2010.