In my last post, I reported on the on-going investigation into the 2012 acquisition of a 50% stake in the publishing house Politika newspapers and magazines. The buyer of a 50% stake from the well-known German publisher WAZ was a then unknown, formally Russian, company East Media Group. The other 50% remained in the hands of a state-owned company. 

After Serbian businessman Miroslav Bogićević and its Serbian-based conglomerateFarmakom were outed as persons related to East Media Group, the Serbian Commission for Protection of Competition initiated investigation against Farmakomfor a failure to notify a concentration in the form of a change in indirect joint control over Politika newspapers and magazines.  

The latest update to the case comes with the Commission's press release, announcing that it has imposed a procedural penalty on East Media Group in the amount of EUR 143,500 for the company's failure to submit information and documents required for the assessment of the suspicious concentration. It is unclear from the Commission's press release why the penalty was imposed on Russian-registered East Media Group and not on the Serbian-based Farmakom, the sole party to the investigation. 

Another, unusual, development in the case is the Commission's decision to suspend the proceedings pending the resolution of a preliminary legal issue. The preliminary issue, according to the Commission, is whether the underlying agreement on sale and purchase of a stake in Politika newspapers and magazines is a valid contract or is perhaps null and void, given the indication that the right of first refusal of the remaining shareholder was not fully respected. The Commission referred the issue to the public defender, requesting from it to review the sale and purchase agreement and decide "whether to initiate a dispute". Unfortunately, the Commission's decision has not been published, so I can only second-guess the legal reasoning behind succinct statements in the press release. 

According to the Administrative Procedure Act, which applies to the proceedings before the competition authority to the extent the Competition Act does not regulate a particular procedural matter, if the authority in charge of the proceedings comes across a legal issue indispensable for the resolution of the matter before it, it may either resolve the issue on its own or refer the issue to another competent authority and suspend the proceedings until the issue is resolved. 

In the case at hand, it remains unclear what kind of dispute the public defender could initiate because of the alleged failure by the seller to fully respect the other shareholder's right of first refusal. 

According to the Companies' Act, only the shareholder whose right of first refusal has been violated (in this case, Politika AD) is entitled to request from court to annulthe sale and purchase agreement or to order the defendant to transfer the shares on the plaintiff. The lawsuit with such claim can be filed within 30 days from the date the plaintiff became aware of the sale and purchase agreement, but not later than six months from the date of registration of the transfer. These deadlines have expired. 

According to the Obligations Act, any interested person, including public defender, may request a declaration of nullity of a contract which is contrary to public policy or mandatory norms. However, regarding a contract for the sale and purchase of shares which violates the right of first refusal, the Companies' Act is a lex specialis. 

It is also puzzling why the issue of the validity of the sale and purchase agreement was considered indispensable to the resolution of the investigation conducted by the Commission. The principal issue before the Commission is whether the acquirer was obliged to notify the concentration and suspend its implementation until the Commission's approval is obtained was notifiable and, if yes, whether the concentration significantly limits, distorts or prevents competition on the relevant market. The validity of the sale and purchase agreement, which has not been so far formally challenged, is not indispensable to a decision on these issues. Finally, one wonders why the Commission did not resolve the issue itself if it thought this was indispensable for the resolution of the main matter before it. 

It remains to be seen whether the public defender will take up the case and how long the Commission will be willing to keep the proceedings in the suspension mode.