Contributed by Bojovic Draskovic Popovic & Partners.
1. What are the main competition-related pieces of legislation in the Republic of Serbia?
The main competition-related pieces of legislation are:
- Constitution of the Republic of Serbia (Ustav Republike Srbije “Official Gazette of the RS”, no. 98/2006), which guarantees equal legal status to participants on the market. Article 84 prescribes that acts that are contrary to the Law and restrict free competition by creating or abusing monopolistic or dominant positions are strictly prohibited;
- Law on Protection of Competition (Zakon o zastiti konkurencije “Official Gazette of the RS”, no. 51/2009 and 95/2013) (the Law);
- Law on General Administrative Procedure (Zakon o opstem upravnom postupku “Official Gazette of the RS”, no. 18/2016 and 95/2018 (Authentic Interpretation and 2/2023 – decision of the Constitutional Court)). In the procedure before the Commission for the Protection of Competition (the Commission), the general administrative procedure is applied unless otherwise provided by the Law.
In addition, the following secondary acts of legislation are relevant:
- Regulation on the Content and Manner of Submitting Notification on Concentration (Uredba o sadrzini i nacinu podnosenja prijave koncentracije “Official Gazette of the RS”, no. 5, January 25, 2016);
- Regulation on Criteria for Setting the Amount Payable on the Basis of Measure for Protection of Competition and Sanctions for Procedural Breaches, Manner and Terms for Payment Thereof and Conditions for Determination of Respective Measures (Uredba o kriterijumima za odredjivanje visine iznosa koji se placa na osnovu mere zastite konkurencije i procesnog penala, nacinu i rokovima placanja i uslovima za odredjivanje tih mera’’Official Gazette of the RS’’, no. 50/2010, July 23, 2010);
- Regulation on the Conditions for Leniency from Payment of Measure for Protection of Competition (Uredba o uslovima za oslobadjanje obaveze placanja novcanog iznosa mere zastite konkurencije ‘’Official Gazette of the RS’, no. 50/2010, July 23, 2010);
- Regulation on Agreements on Specialization Between Undertakings Operating on the Same Level of Production or Distribution Chain Exempted from Prohibition (Uredba o sporazumima o specijalizaciji izmedju ucesnika na trzistu koji posluju na istom nivou proizvodnje ili distribucije koji se izuzimaju od zabrane “Official Gazette of the RS”, no. 11/2010, March 5, 2010);
- Regulation on Agreements Between Undertakings Operating on a Different Level of Production or Distribution Chain Exempted from Prohibition (Uredba o sporazumima izmedju ucesnika na trzistu koji posluju na razlicitom nivou proizvodnje ili distribucije koji se izuzimaju od zabrane ‘’Official Gazette of the RS’’, no. 11/2010, March 5, 2010);
- Regulation on Research and Development Agreements Between Undertakings Operating on the Same Level of Production or Distribution (Uredba o sporazumima o istrazivanju i razvoju izmedju ucesnika na trzistu koji posluju na istom nivou proizvodnje ili distribucije koji se izuzimaju od zabrane ‘’Official Gazette of the RS’’, no. 11/2010, March 5, 2010);
- Regulation on the Content of Request for Individual Exemption of Restrictive Agreements from Prohibition (Uredba o sadrzini zahteva za pojedinacno izuzece restriktivnih sporazuma od zabrane ‘’Official Gazette of the RS’’ no. 107/2009);
- Regulation on the Criteria for Defining the Relevant Market (Uredba o kriterijumima za odredjivanje relevantnog trzista ‘’Official Gazette of the RS’’, no. 89/2009, November 2, 2009).
2. What are the main concerns of the national competition authority in terms of agreements between undertakings? How about the sanctioning record of the authority?
The Commission is mostly concerned with horizontal and vertical agreements containing hardcore restrictions (e.g., price fixing and market sharing agreements), as well as with unreported mergers, and finally with the creation and abuse of dominant positions.
In accordance with the information published in the latest Annual Report (2023), the Commission has worked on 104 breaches of competition cases initiated ex officio, out of which 42 were transferred from the previous year and 62 were initiated in 2022. 52 cases were transferred to 2023, 35 were terminated or cancelled and three ended in the imposition of relevant fines (all three for the conclusion of prohibited restrictive agreements).
On April 20, 2023, the Commission reached the conclusion instituting proceedings ex officio against undertakings KTG Solucije d.o.o. Subotica from the Republic of Serbia and Eco sense d.o.o. Subotica from the Republic of Serbia. Proceedings were instituted ex officio to investigate infringements of competition and to establish the existence of a restrictive agreement. The Commission has issued a decision in this proceeding, determining the existence of a restrictive agreement between the mentioned companies.
In another case, in March 2023, the Commission found out about a merger of two companies which was created by the acquisition of control on Hotel Tonanti in Vrnjacka Banja by HOTELSKO, UGOSTITELJSKO I TURISTICKO PREDUZECE MOSKVA DOO BEOGRAD (STARI GRAD) and initiated proceedings against the parties.
Decisions reached by the Commission are publicly available at the following website (https://www.kzk.gov.rs/en/odluke).
3. Which competition law requirements should companies consider when entering into agreements concerning their activities on the Serbian territory?
Companies entering the Serbian market need to consider the same, or at least very similar, competition law requirements as they would when entering any EU jurisdiction. This is due to the fact that the relevant rules in Serbia are largely transcribed from the relevant EU rules (except for the EU-wide context). Namely, to provide a few examples, the companies should conduct basic research regarding:
1) Potential definition of relevant product market(s) where they intend to be active;
2) Market shares of potential business partners on such relevant product markets;
3) Own market share upon entering the market;
4) Pros and cons of potential exclusivity or selective distribution arrangements (e.g., exclusive purchase, sale, distribution, etc.);
5) Level of scrutiny that a particular product market is subjected to by the Commission in accordance with its previous practice.
4. Does a leniency policy apply in the Republic of Serbia?
Yes, there is a leniency policy applicable in Serbia specifically when it comes to restrictive agreements, as envisaged by Article 69 of the Law and the relevant secondary acts of legislation and Commission instructions. Under this regime, participants in a prohibited restrictive agreement may be fully or partially exempted from paying a fine. A party to a restrictive agreement who first notifies the Commission of the existence of an agreement or provides evidence on the basis of which the Commission initiates or terminates proceedings in connection with a restrictive agreement may enjoy full immunity from payment of a fine. Relief from the commitment to pay a monetary sum shall be implemented under the condition that the Commission, at the moment of submission of evidence, had no knowledge of the existence of the agreement or, if it had the knowledge, it did not have enough evidence to enact a conclusion on initiation of proceedings. For the agreement participant who fails to fulfill conditions for full exemption from the fine, the amount of the fine may be reduced, conditioned on the delivery of evidence submitted to the Commission during the procedure that was not available at the time. Provisions of Article 69 shall not apply to an agreement participant who initiated the conclusion of the agreement.
5. How is unilateral conduct treated under the Serbian competition rules?
Competition-infringing unilateral conduct falls under the rules on abuse of a dominant position in the market, which is explicitly prohibited.
The following are listed as examples of abuse of a dominant position under the Law, practices which:
1) directly or indirectly impose unfair purchasing or selling prices or other unfair business conditions;
2) limit production, markets, or technical development;
3) apply dissimilar business conditions to equivalent operations with respect to a variety of undertakings, by which some undertakings are placed in unfavorable positions compared to competitors;
4) condition the conclusion of an agreement with the acceptance of supplementary obligations by the other party, that given their nature or trading customs are not related to the subject of the agreement.
The Commission carries the burden of proving the existence of a dominant position in the relevant market.
6. Are there any recent local abuse cases of relevance?
The Commission publishes all the decisions made about mergers and acquisitions, competition infringements (restrictive agreements, abuse of dominant position, administrative measures), market tests, and individually exempted agreements on its website: http://www.kzk.gov.rs/en.
On August 19, 2022, the Commission reached the decision on measures for the protection of competition in assessment proceedings brought ex officio against undertaking SF1 COFFE d.o.o. Novi Sad. The Commission established that the undertaking SF1 COFFE d.o.o., during regular and auction sales to wholesale customers, negotiated and implemented a business strategy in which it set prices for Nespresso brand coffee machines in further sales. These prices were fixed amounts equal to the retail prices for various models of machines, thereby resulting in restrictive agreements.
In another case, on December 29, 2023, the Commission reached the decision on measures for the protection of competition in assessment proceedings brought ex officio against undertakings companies KTG Solucije d.o.o. Subotica and Eco sense d.o.o. Subotica. The Commission established that the undertakings negotiated terms for participation in public procurement procedures with the buyers Sportski centar Soko from Sombor, Javno komunalno preduzece Stadion Subotica, and Specijalna bolnica za rehabilitaciju Banja Kanjiza. As a result, they entered into a restrictive agreement aiming to significantly disturb, restrict, and prevent competition.
The participants in the restrictive agreement have been imposed with competition protection measures, while the company KTG Solutions had its fine reduced under the leniency program, in accordance with Article 69 of the Law. It is significant that this is the first case in which the Commission has determined the fulfillment of conditions for reducing the obligation to pay a monetary amount of competition protection measures based on a report submitted by a participant in the restrictive agreement during the proceedings (i.e., after the initiation of the proceedings).
7. What are the consequences of a competition law infringement?
The procedure of investigating infringements of competition shall be initiated ex officio when the Commission learns based on submitted initiatives, and/or otherwise available information, that there are plausible indications of the infringement, as well as in the case of investigation of a concentration.
The conclusion on the initiation of the procedure passed by the President of the Commission must contain a description of the action or the provisions of the law which might present the infringement of competition, the legal basis and reasons to initiate the procedure, as well as an invitation to all natural and legal persons to send the Commission the documents and other relevant information they may have.
If the Commission finds that there has been an infringement of competition, it will determine an administrative measure in the form of an obligation to pay a fine. A pecuniary fine of up to 10% of total annual income earned in the territory of the Republic of Serbia shall be imposed on an undertaking if it:
1) abuses a dominant position in the relevant market;
2) concludes or implements a prohibited restrictive agreement, or a restrictive agreement that was not exempted under Article 60 of the Law;
3) does not perform or execute protective measures or the measure of de-concentration (de-merger);
4) implements a concentration that was not approved or does not obey an order to halt the concentration.
The Commission can also impose a measure of elimination of the infringement of competition, such as e.g., preventing the probable occurrence of the same or similar infringement, by giving orders to undertake certain behavior or prohibit certain behavior (behavioral measures).
The decision on the infringement of the competition as well as the order on initiation of the ex officio procedure shall be published in the Official Gazette of the Republic of Serbia and on the Commission’s website. The order to initiate the procedure shall not be published if the President of the Commission assesses that the course of events in the procedure might be jeopardized due to its publication.
8. Is there any competition law requirement in case of mergers & acquisitions occurring or impacting the Serbian market?
Yes, there is, arguably even in cases that do not impact the Serbian market. Namely, the concentration of undertakings occurs in the following cases:
1) mergers and other statutory changes in which a merger of undertakings occurs, within the meaning of the law governing the status of companies;
2) acquisition of direct or indirect control, by one or more undertakings over another or more undertakings or over part or parts of other undertakings, who may represent an independent business entity;
3) the joint venture of two or more undertakings in order to create a new undertaking or to gain joint control over an existing undertaking that operates on a long-term basis and has all functions of an independent undertaking.
Concentrations of undertakings shall be permitted, unless they significantly restrict, distort, or prevent competition in the market of the Republic of Serbia or its part, especially if that restriction, distortion, or prevention is the result of creating or strengthening of a dominant position.
The permissibility of concentration of undertakings shall be determined in relation to:
1) structure of the relevant market;
2) actual and potential competitors;
3) market position of participants in concentration and their economic and financial power;
4) possibility of the choice of suppliers and customers;
5) legal and other barriers to entering the relevant market;
6) level of competitiveness of participants in concentration;
7) supply and demand trends of the relevant goods or services;
8) technical and economic development trends;
9) interests of consumers.
It should be noted that, due to the manner in which the relevant financial thresholds are set up, any concentration engaged in by an entity that achieves over EUR 100 million worldwide and over EUR 10 million in Serbia becomes notifiable in Serbia. This is the reason why many foreign-to-foreign transactions are notified in Serbia, and it has been the target of significant criticism from the professional community.
9. What is the normal merger review period?
The Law explicitly provides that the Commission shall issue a Phase I clearance decision, or a decision to commence a Phase II investigation, within one calendar month of the date of filing a complete notification (complete with all information and supporting documentation including translation of documentation into Serbian language). The one-month period starts running from the first calendar day following the submission of a complete notification.
In practice, the case handlers sometimes extend this deadline by requiring additional information to be submitted by the parties and therefore “stopping the clock” (i.e., indicating that the notification was not complete as submitted).
The Commission issues the clearance in Phase I if the concentration does not lead to the “creation or strengthening of a dominant position.”
A concentration is deemed to be cleared if the Commission fails to deliver a decision within one month following the submission of a complete merger notification (four months if ex officio investigation proceedings are opened).
The Commission is obliged to issue the decision in Phase II within four months from the date of issuing the conclusion on the commencement of Phase II. The 4-month period starts running from the first calendar day following the date of issuance.
10. Are there any fees applicable where transactions are subject to local competition review?
There is an initial filing fee of 0.03% of the global annual turnover of all parties to the concentration (but it cannot exceed EUR 25,000). However, the final fee amount depends on the outcome of the case:
i. if the notification is dismissed (for formal reasons), the fee will amount to EUR 500;
ii. if the notification is withdrawn, the fee will amount to EUR 900;
iii. if the concentration is cleared in Phase I, the fee will amount to 0.03% of the global annual turnover of all parties to concentration (but cannot exceed EUR 25,000);
iv. if the concentration is cleared in Phase II, the fee will amount to 0.07% of the global annual turnover of all parties to concentration (but cannot exceed EUR 50,000); and
v. if the concentration is prohibited, the fee will amount to EUR 1,200.
The fee must be submitted with the application and, if the outcome is (i), (ii), or (v), the Commission will transfer any overpayment back to the parties.
11. Is there any possibility for companies to obtain State Aid in the Republic of Serbia? If yes, under what conditions?
Companies do have the possibility to obtain state aid under certain circumstances.
Categories of state aid that can be granted under the Law on State Aid Control (Zakon o kontroli drzavne pomoci “Official Gazette of RS”, no. 73/2019) and the Regulation on Rules for State Aid Granting (Uredba o pravilima za dodelu drzavne pomoci “Official Gazette of RS”, no. 13/2010, 100/2011, 91/2012, 37/2013, 97/2013, 119/14, 23/2021 – other regulation, 23/2021 - other regulation, 62/2021 – other regulation, 99/2021- other regulation, 62/2021- other regulation, 20/2023 – other regulation, 43/2023 – other regulation and 48/2023 – other regulation) include:
- Regional operating state aid;
- Horizontal state aid for environmental protection;
- Sectoral state aid;
- State aid for providing services of general economic interest.
Specific types of sectoral state aid for which special grant rules are defined in this regulation include:
1) steel sector;
2) coal sector;
3) transport sector.
Depending on the sector in which the state aid is provided, the conditions for obtaining it are different. For example, regional state aid is granted to stimulate economic development in less developed areas, primarily those in which the standard of living is extremely low, or in which there is high unemployment.
Regional state aid for operations can also be granted to cover operating expenditures, but only if the following conditions are cumulatively fulfilled:
1) state aid contributes to equal regional development;
2) state aid is proportionate to the difficulties that need to be removed;
3) state aid is time-limited and diminishing over time.
The conditions for obtaining State Aid are defined in the Regulation on Rules for State Aid Granting available at the following link: https://www.paragraf.rs/propisi/uredba-pravilima-dodelu-drzavne-pomoci.html.
