The Serbian Commission for protection of Competition has circulated to the legal community for comments its proposal of a new decree on the content of merger notification ("Draft Merger Decree"). I will not discuss all proposed changes and shortcomings of the new draft but will focus on major structural changes to the present merger notification regime and point to what are, in my view, main points calling for improvement.

The gist of the proposal is to introduce into the Serbian merger control law a bifurcated system of merger notification. In cases which are unlikely to give rise to competition concerns, a simplified merger notification will suffice, whereas long-form notification will be required only in those cases which objectively call for a more detailed review of the underlying facts and circumstances.

This relaxation of the merger control system is long overdue. Serbia still has relatively low merger notification thresholds. A notification is mandatory when the total aggregate turnover of all concentration participants in the year preceding the concentration exceeds EUR 100 million world-wide, provided that at least one concentration participant has generated more than EUR 10 million in Serbia in the same reference period, or the total aggregate Serbian turnover of all concentration participants in the year preceding the concentration exceeds EUR 10 million, provided that at least two concentration participants have each generated more than EUR 1 million in Serbia in the same reference period. In addition, the Serbian Commission has so far refused to apply any local effects doctrine, in spite of Article 2 of the Competition Act which states that the statute applies to the actions committed in Serbia or abroad, but in the latter case only if they have or could have an influence on the competition in Serbia. In fact, the Commission considers that a potential local effect exists whenever the thresholds are exceeded. As a result, a number of foreign-to-foreign concentrations qualify for a clearance in Serbia, even though they can have no impact on the competition on the local market. For example, a corporate joint venture (JV) between two foreign companies, established in a foreign country for the purpose of pursuing a business outside Serbia, would require a clearance in Serbia if one of the JV parties has generated more than EUR 10 million in Serbia (provided the total world-wide turnover of both parties is over EUR 100 million), even if the Serbian turnover originates from a line of business completely unrelated to the JV purpose.

In order to ease the burden imposed on businesses by the ex ante control, the Commission is now proposing that a short-form notification should be sufficient in the following categories of concentration:

  • two or more undertakings merge, or one or more undertakings acquire sole or joint control of another undertaking, provided that:
    • none of the parties to the concentration are engaged in business activities in the same product and geographic market, or in a product market which is upstream or downstream from a product market in which any other party to the concentration is engaged; or
    • either of the following two conditions is fulfilled:
      • the combined market share of all the parties to the concentration that are engaged in business activities in the same product and geographic market (horizontal relationships) is less than 20 %; or
      • the individual or combined market shares of all the parties to the concentration that are engaged in business activities in a product market which is upstream or downstream from a product market in which any other party to the concentration is engaged (vertical relationships) are less than 30 %; or   
  • a party is to acquire sole control of an undertaking over which it already has joint control; or  
  • the combined market share of all the parties to the concentration that are in a horizontal relationship is less than 40% and the increment (delta) of the HHI resulting from the concentration is below 150.

The proposed condition under (c) is lighter than the one prescribed in the EU. The Commission Notice on a simplified procedure refers to a 50% threshold and, moreover, does not confer a right to a simplified procedure but rather empowers the Commission to approve one at its discretion.

Unfortunately, the Draft Merger Decree does not contain a provision such as Section 5 (a) of the Commission Notice on a simplified procedure, which allows simplified notification in case of a JV that has no, or has negligible, actual or foreseen activities within EEA. An analogue provision allowing short-form notification in case of foreign-to-foreign JVs not directed at the Serbian market would be welcome.

Just like the Commission Notice on a simplified procedure, the Draft Merger Decree provides that the Serbian authority may disapply the short-form procedure and request the concentration participant(s) to submit a long-form notification in cases where it is difficult to define the relevant markets or to determine the parties' market shares. Other situations that may lead to disapplication of the short-form procedure involve:

  • concentration taking place on a highly concentrated relevant market (HHI ≥2000) which is likely to exclude competitive pressure or enable the concentration participants to prevent the strengthening of competitors;
  • change from joint to sole control by integrating a former joint venture into the group and/or network of its remaining single controlling shareholder, whereby the disciplining constraints exercised by the potentially diverging incentives of the different controlling shareholders are removed and its strategic market position could be strengthened as a result; and
  • change from joint to sole control where the acquisition of joint control had not been reviewed by the Commission.

The Draft Merger Decree provides that a long-form notification is required in spite of the conditions for a short-form notification being present, "if the concentration involves restrictions which represent a condition for, and are directly related to, the implementation of the concentration, and which require a special assessment by the Commission". This is a reflection of the 'ancillary restraints' doctrine. However, the proposed formulation is flawed because it requires long-form notification whenever ancillary restraints "require a special assessment by the Commission". The parties cannot be certain when such assessment is required unless they themselves have requested it from the Commission. In this respect, the text of the Draft Merger Decree should be improved to specify that long-form notification is required whenever parties to the concentration have requested the Commission to undertake an express assessment of the restrictions claimed to be directly related to, and necessary for, the implementation of the concentration.  The future merger decree should also specify that an unconditional approval of concentration also extends to restraints assessed by the Commission to be ancillary to, and necessary for, the implementation of the concentration.

With respect to the content of the short-form notification, the Draft Merger Decree relaxes the burden of document and information production, but only to a modest extent.  For example, it is still required that the acquirer (or JV partners) submit the data on top 5 suppliers and top 5 customers, together with the value of sales attached to each supplier/customer, for each of the three years preceding the concentration. It is to be hoped that this overreaching and unnecessary requirement will be abandoned in the course of public debate. The same hope is nurtured in relation to the wanton bureaucratic requirement that the notification be submitted in Cyrillic script.