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Competition Law in Serbia: 2018

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During 2018, the Serbian national competition authority (NCA), the Commission for Protection of Competition of the Republic of Serbia, has continued with a high level of enforcement activity. This resulted in a number of new cases and in other interesting developments in Serbian competition law.

1) Antitrust

During 2018, the Serbian NCA was quite active in the field of antitrust. Actually, the word ‘hyperactive’ would probably be more adequate to describe the level of the NCA’s enforcement of activity.

This activeness did not reflect that much in the number of closed cases, which was relatively low, but more in the number of new cases the NCA initiated. Specifically, not counting the cases suspended through commitments, during 2018 the Serbian NCA closed four probes – one by terminating the investigation and three by finding an infringement. On the other hand, the number of newly opened cases was much higher.

A) Closed cases

  • Serbian Bar Association (terminated). The NCA was not able to conclusively establish that the Serbian Bar Association concluded a restrictive agreement by the way it was setting the fees for admission to the bar. As a result, the NCA decided to terminate the investigation. [Read More]
  • Electric Power Industry of Serbia (finding of an infringement in a repeated proceeding). Back in 2016, the NCA had found that the Serbian electric power incumbent (EPS) had abused its dominance on the market. Eventually, this decision was quashed in the procedure of court review and in a new decision the NCA repeated its earlier conclusion and imposed a fresh fine on EPS.
  • Price fixing (Škoda motor vehicles). The NCA found that a Serbian importer of Škoda motor vehicles and several of its dealers had engaged in price fixing in public procurement (they agreed to fix the price which the dealers would offer in public procurement bids). The NCA fined all undertakings involved.
  • Bid rigging – hygiene products. The NCA established that four Serbian companies had colluded in order to fix the terms of their bids in the public procurement procedures organized by the Serbian Ministry of Defense. All parties received a fine.

B) New cases

When initiating new cases, the NCA mostly focused on restrictive agreements. However, to complete the enforcement picture, there were also a couple of new abuse of dominance probes.

B.1) Restrictive agreements

  • MasterCard (interchange fees). Perhaps the highlight of the NCA’s enforcement last year was the launch of an investigation against MasterCard, concerning the interchange fees applicable in Serbia. Eventually, MasterCard offered to the NCA certain commitments in exchange for suspension of the proceedings. It remains to be seen whether the NCA will accept them. [Read More]
  • Visa (interchange fees). Not long after starting its probe against MasterCard, the NCA also went after Visa, with basically the same allegations as in the MasterCard case (that Visa was setting the interchange fees in Serbia in contravention of the Serbian competition law). Visa too offered certain commitments to the NCA, the decision on which is pending.
  • Polanik (sports equipment). Here, the Serbian NCA for the first time started an antitrust probe against a foreign-based entity (once the ice was broken, the NCA also started case against MasterCard and Visa). The case is still pending and involves Polish company Polanik Sp. z o.o., active in the production and wholesale of sports equipment, and its Serbian distributor. The NCA has alleged that their exclusive distribution agreement is not in accordance with Serbian competition law. [Read More]
  • Baby equipment. The market for baby equipment seems to be on top of the NCA’s list of priorities – apart from conducting a sector inquiry into this market, the NCA has started proceedings against almost 200 undertakings dealing with baby products. So far, the NCA is focusing on alleged RPM clauses in agreements between market players in this sector.
  • Bid rigging. Apart from baby equipment, another focus of the Serbian NCA is bid rigging. The NCA has led several investigations with respect to this type of infringement and this continued in 2018. The NCA has become more sophisticated when it comes to the assessment of possible bid rigging practices, as it now also discerns the existence of rigging from the patterns of behavior of the colluding parties.
  • Price fixing (technical inspection of cars). Another case the NCA started this year involved proceedings against 11 undertakings active in the market for technical inspection of cars. The NCA started the proceedings on suspicion that the undertakings had colluded with respect to the prices at which they offered their services, which may have amounted to a restrictive agreement within the meaning of Serbian competition law.
  • Non-compete (cinemas). In this case, the NCA is investigating whether a non-compete clause in an agreement between a cinema operator and an undertaking active in displaying cinematographic works through mobile cinema equipment may have led to a restriction of competition in the relevant market.

B.2) Abuse of dominance

  • Abusive pricing (Serbia Broadband). Back in 2017, the Serbian NCA conditionally approved Serbia Broadband’s (SBB) takeover of a competing cable operator. One of the conditions under which the clearance was granted was SBB’s obligation to inform the NCA of any price hike and explain the reasons behind it. In early 2018, the operator increased the price of cable subscription and the NCA has alleged this represented an act of abuse of dominance. [Read More]
  • Abusive pricing (heating plant). The Serbian NCA has started an abuse of dominance probe against the company operating a heating plant in the city of Niš. Specifically, the NCA is investigating the company’s pricing policy from an abuse of dominance perspective.

C) Commitments now regularly implemented in the NCA’s practice

For a few years now, Serbian competition law has contained a commitments procedure comparable to the one found in Article 9 of Regulation 1/2003. Over time, the Serbian NCA has shown it is ready to implement this procedure in practice, which trend continued in 2018.

Specifically, in the previous year, the NCA performed a market test of three commitment proposals submitted by undertakings under antitrust investigation:

  • Sirmiumbus, in an abuse of dominance case involving a bus station in a Serbian town;
  • MasterCard, in the interchange fees case; and
  • Visa, also in the interchange fees case.

At the moment, it is known that the NCA has accepted the commitments proposed by Sirmiumbus and suspended the proceedings against this undertaking. It remains to be seen what conclusion the NCA will reach concerning the commitments proposed by MasterCard and Visa, respectively.

D) Individual exemption from prohibition

Serbian competition law still has a system of individual exemption of restrictive agreements based on an administrative decision of the NCA, comparable to the one which in the EU existed under Regulation 17/62. Under this procedure, the NCA each year individually exempts around 20 agreements. However, for some reason, it publishes only a small number of these decisions. For instance, during 2017 the NCA individually exempted 21 agreements and published only four exemption decisions.

During 2018, the NCA published two individual exemption decisions and at the moment we can only guess the total number of these decisions. In any event, the first published decision pertained to an exclusive distribution agreement between a Serbian distribution and a foreign supplier, while the other was concerning a service production agreement between two Serbian dairies.

For a detailed overview of all individual exemption decisions the NCA rendered in 2017, click here.

E) Dawn raids

While the constitutionality of dawn raids in the Serbian legal system remains an unresolved issue, the Serbian NCA has continued to conduct such unannounced inspections. What is more, apart from raiding parties to the proceedings, the NCA has now also started performing dawn raids on the premises of third parties.

Speaking of dawn raids, during the course of 2018 the NCA published its official guidance on dawn raids, which allows undertakings to prepare in advance for what might await them in an unannounced inspection.

2) Merger control

Traditionally, the Serbian NCA is kept busy with merger control, due to the extremely low merger filing thresholds in Serbian competition law. As a result of such low merger filing thresholds, the number of merger decisions of the Serbian NCA has quickly reached 1,000. And the trend of proliferation of such decisions has continued in 2018.

While the exact number of merger decisions will be known with certainty only when the NCA publishes its official annual report, it is likely that 2018 will be a record year when it comes to the number of approved mergers. Specifically, during 2018 the NCA cleared at least 138 transactions and this number is likely to rise once all clearance decisions are published. As a comparison, during the whole of 2017, the total number of cleared transactions was 139.

A vast majority of these decisions were unconditional Phase I clearances, with only one clearance coming after a Phase II. This Phase II clearance pertained to the acquisition of a Serbian yeast producer (owned by the American Alltech) by the French giant Lesaffre. The clearance was conditional and includes certain reporting obligations by the merged entity.

3) Other developments

A) Sector inquiries

In the previous year, the Serbian NCA devoted a lot of its resources to conducting sector inquiries. Specifically, during the course of the year, the NCA completed as many as eight such analyses, in the following sectors:

  • purchase and export of raspberries;
  • software and computer equipment;
  • sportswear and equipment;
  • retail of oil derivatives;
  • tires;
  • food retail (supermarkets);
  • production and sale of cement;
  • baby equipment.

Considering its increased resources compared to the previous period, in 2019 we can expect a continuation of such market investigations.

B) New Competition Act still in the pipeline

As is widely known in the Serbian competition law community, Serbia is on course to get a new Competition Act. The work on the new legislation started back in 2017 and in the meantime the NCA has prepared a draft of the new law. Currently, the draft is undergoing the process of review by the relevant actors and we can expect that the new law will be adopted during the course of 2019. It then remains to be seen how drastically the new law will change the current competition law landscape in Serbia.

In any event, no matter how exactly the new Competition Act will look like, it would seem that Serbian competition law will finally adopt self-assessment of restrictive agreements.

C) Some welcome clarifications in the law

Finally, during 2018 the Serbian NCA has given some valuable and welcome guidance with respect to the application of Serbian competition law. Specifically, the Serbian NCA has pronounced it has no jurisdiction over extraterritorial vertical agreements (i.e. agreements between a Serbian supplier and a foreign distributor).

However, with respect to extraterritorial concentrations, the Serbian NCA has not changed its approach to extraterritorial mergers – it still considers that all concentrations exceeding the turnover thresholds in the Serbian Competition Act need to be filed with the NCA, even those which clearly have no effect in Serbia.