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In Which Cases Several Transactions Can Be Considered as One Concentration

In Which Cases Several Transactions Can Be Considered as One Concentration

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According to the latest Position published by the Serbian Commission for the Protection of Competition, it is prescribed whether and in which cases the scope of one concentration can be several undertakings that are not considered interrelated.

Having in mind ever-increasing number of complex transactions on the market and that the Law on the Protection of Competition of RS (the „Law“) does not explicitly prescribes whether the scope of one concentration can be several undertakings that are not considered interrelated undertakings, on August 17, 2022 the Commission for the Protection of Competition (the „Commission“) published "The Position regarding the application of Article 17, paragraph 1 of the Law".

There are several ways for the implementation of concentration between undertakings (merger of two or more undertakings, acquisition of control by one or more undertakings and joint ventures). Having this in mind, the Law makes it indisputable that the scope of acquisition in one concentration can be several undertakings which were previously interrelated. Although the Law does not prohibit, the legal gap in domestic legislation leaves room for different interpretations, when undertakings that are independent i.e., that have not been previously interrelated, are in the scope of acquisition.

By this Position, the Commission clarifies the conditions under which independent undertakings could be the subject of a single concentration, referring to the Council Regulation (EC) No 139/2004 of January 20, 2004, on the control of concentrations between undertakings (the „EU Merger Regulation“) and to the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004, on the control of concentrations between undertakings (2008/C 95/01) (the „ EU Jurisdictional Notice“).

Under Recital 20 of the EU Merger Regulation, it is stated that it is expedient that closely connected transactions should be treated as one concentration, if they are linked by a certain condition or take the form of a series of transactions in securities, which are realized in a short period of time.

The EU Jurisdictional Notice provides special rules regarding those conditions. When acting in such cases, it is necessary to identify the economic reality underlying the transactions i.e., to determine whether the transactions are mutually dependent i.e., connected in such a way that one without the other would not have been executed. Pursuant to the EU Jurisdictional Notice, even if they are interrelated by a condition, it is also necessary that control is eventually acquired by the same undertaking or same group of undertakings, in order for the transactions to be considered a single concentration.

However, if the transactions are not interrelated and not connected by condition, and if the undertakings in the concentration would continue to carry out one transaction, independently of the other, then each transaction should be considered solely, as separate concentrations.

Conditionality is usually shown if the transactions are linked de jure i.e., if their agreements are mutually conditional.

But, in response to the disputed question in the Law, if de facto conditionality can be proved, it will be sufficient to regard the transactions as a single concentration.

Furthermore, by this Position, the Commission recognizes two scenarios that have arisen in the past decisional practice - parallel acquisition and serial acquisition, in which several transactions are considered as one concentration, as the most common situations. Parallel acquisition of control is when, one undertaking (A) acquires control of two or more undertakings (B and C) in parallel from separate sellers on condition that A is not obliged to buy either, and neither the seller is obliged to sell, unless both transactions proceed. Another scenario is a serial acquisition of control i.e., undertaking A acquires control of undertaking B conditional on B's prior or simultaneous acquisition of undertaking C.

In accordance with all of the above, the Commission, when acting, assesses in each case whether several transactions can be considered as one concentration, even if they are not interrelated de jure, and all this, in order to facilitate business in conditions made difficult by the pandemic of the COVID-19 virus and to an ever-increasing number of complex transactions on the market.

By Nikola Poznanovic, Partner, and Zivko Simijonovic, Associate, JPM Jankovic Popovic Mitic

Serbia Knowledge Partner

Committed to redefining a law firm's role in an emerging regional market, Gecić Law is a full-service law firm that advises international and local clients from the public and private sectors in navigating the complex legal landscape of the region across multiple practice areas. Members of the Gecić Law team have graduated from leading universities in the US and Europe. They have extensive local and international experience, with a particular focus on EU regulatory frameworks and international trade and a proven track record in providing innovative and practical solutions in the most complex of matters.

Gecić Law is an exclusive member of two leading global alliances, TerraLex and TAGLaw, extending its international footprint. The firm and its lawyers have continuously been recognized in several practice areas by elite global directories, including The Legal 500, Chambers and Partners and Benchmark Litigation. Gecić Law was named Law Firm of the Year: South Eastern Europe 2021 and Law Firm of the Year: Eastern Europe and the Balkans 2020 at The Lawyer European Awards and was repeatedly nominated in other practice areas.

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