This article was originally published in the schoenherr roadmap`10 - if you would like to receive a complimentary copy of this publication, please visit: http://www.schoenherr.eu/roadmap.

A new Serbian competition act (the New Act) entered into force on 1 November 2009. Most notably, it broadens the enforcement powers of the Serbian Commission for the Protection of Competition (the Commission) and empowers it to levy sanctions on undertakings directly. In addition, the New Act provides for new jurisdictional thresholds for mergers and extends the notification deadlines. Based on the Western European model, the New Act will modernise the Serbian competition law regime.

Block exemptions and the de minimis rule

Block exemptions and the de minimis rule will partly overcome the deficiencies of the current mandatory notification regime for restrictive agreements. According to this system, restrictive agreements may only be implemented upon their individual exemption by the Commission from the cartel prohibition. The New Act provides for block exemptions from the cartel prohibition for different types of restrictive agreements, which will be automatically exempted under certain requirements. The de minimis rule sets out the circumstances under which potentially anti-competitive agreements are deemed not to restrict competition appreciably and thus fall outside the ambit of the cartel prohibition.

Restrictive agreements that do not meet the requirements of a block exemption regulation or the de minimis rule must be exempted individually upon request of the undertakings concerned. They have to prove that the respective agreement will create efficiencies that outweigh possible anti-competitive effects. The New Act also provides that such individual exemptions may be granted for up to eight years (under the old act the maximum period was five years).

Public enforcement

In order to vest the Commission with the appropriate tools for public enforcement of competition rules, the New Act sets out explicitly that the Commission may conduct inspections of an undertaking's premises; review, seize, copy and scan business records; seal all premises and documentation; and take statements from responsible persons, including employees. Should an undertaking oppose an inspection, the Commission may resort to the help of the police.

Under the old act the Commission had to apply to the courts for fines to be imposed. The New Act authorises the Commission to determine a violation of competition and to impose sanctions directly. A fine of up to 10% of the total turnover of the implicated undertaking may be imposed if an undertaking infringes the ban on closing transactions before clearance, the cartel prohibition or the prohibition against abusing a market dominant position.

The Commission will also be empowered to request the de-merger of transactions (e.g. if a transaction that is not compatible with competition rules was concluded without prior clearance) and may impose procedural penalties as well as structural and behavioural measures (e.g. undo the anti-competitive effects of abusive behaviour by a market dominant undertaking).

Merger control

The deficiencies of the old merger control regime were primarily due to the low jurisdictional thresholds coupled with the fact that the Commission did not recognise a domestic effects doctrine in its practice. These problems will be partly set aside with the new thresholds. Under the New Act, a transaction requires notification in Serbia if at least one of two thresholds is met:

  • the combined worldwide turnover of the undertakings concerned exceeds EUR 100 mln and at least one undertaking achieves a domestic turnover exceeding EUR 10 mln; or
  • the combined domestic turnover of at least two undertaking concerned exceeds EUR 20 mln and each of at least two undertakings concerned achieves a domestic turnover exceeding EUR 1 mln.

In order to tackle the hitherto common practice of submitting notifications after the filing deadline, the New Act introduced fines for failing to meet the notification deadline. Daily fines will range from EUR 500 to EUR 5,000. At the same time, the filing deadline was extended from 7 to 15 days (upon signing the agreement, submitting or closing a public bid or acquiring control, whichever occurs first).

Also, a concentration will be deemed cleared if the Commission fails to adopt a decision by which it clears the transaction or fails to open investigation proceedings within one month following the submission of the complete merger notification (or within three months in case of ex officio investigation proceedings following the opening of investigation proceeding). This means a shorter review period compared with the previous merger control regime, which provided that concentrations could be implemented (but not deemed cleared) four months after the submission of the complete filing.

Remarks

The New Act is likely to allow the Commission to utilise more resources for market investigations and regulated industries as there will be fewer merger notifications submitted to the Commission owing to the higher thresholds.

The New Act will better serve the interests of foreign investors and companies doing business in Serbia. At the same time, in view of the increased enforcement powers of the Commission, all undertakings active in Serbia are well advised to verify whether their commercial agreements (and practices) with clients, customers, distributors and other undertakings assessed are compliant with the amended competition rules.

The New Competition Act will bring Serbia a step closer towards a modern competition law regime. The changes in merger control rules will mean fewer merger control notifications. The broadened investigation powers will prompt more scrutiny of the business practices of undertakings.

This article was originally published in the schoenherr roadmap`10 - if you would like to receive a complimentary copy of this publication, please visit: http://www.schoenherr.eu/roadmap.

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