Recent decisions of the Serbian Commission for Protection of Competition (“CPC“) show that the CPC increasingly applies a commitment procedure to close antitrust investigations. The CPC has also recently cleared a complex merger concerning some 80% of the sugar market subject only to behavioural measures. Undertakings have their say in the proceedings before the CPC.
Active participation in competition proceedings
Undertakings should not merely reply to information requests and wait for a decision, by virtue of which the Competition Authority could impose a hefty fine, behavioural or structural remedies, or even prohibit a merger. Instead, they can significantly affect the Authority’s decisions, avoiding the harshest sanctions by offering the Competition Authority measures to eliminate its competition concerns. Therefore, the outcome of the proceedings is largely in the hands of the undertakings concerned.
Active participation of undertakings in “creating” the decisions of the CPC is enshrined in the Protection of Competition Act (Official Gazette of RS No. 51/09, 95/13) (“Competition Act“), specifically in its provisions prescribing i) the commitment procedure and ii) conditional approval of concentration. Although these two concepts are applied in different types of proceedings before the CPC, their essence is the same: parties propose measures to the CPC which, if accepted, become binding on them and bring the investigation to an end.
The commitment procedure is considered a win-win solution, which spares all the parties from having to undergo an antitrust investigation. The CPC likes it since it i) speeds up the proceedings; ii) saves CPC resources; and iii) ensures effective competition in the market. On the other hand, it also matches the interests of the undertakings as it helps them to:
- (i) avoid high fines and infringement decisions;
- (ii) escape lengthy and costly antitrust proceedings; and
- (iii) reduce the risk of consumers/customers lodging successful damage actions, as there is no finding of infringement.
In addition to these advantages, the undertakings may actually propose their own, voluntarily offered, commitments. The CPC carries out a market test to check with the relevant stakeholders whether the proposed commitments properly address the identified competition concerns. Then, the CPC adopts a conclusion suspending the procedure, by which measures become legally binding. In case of non-compliance, the CPC may impose fines and re-open the proceedings.
Article 58 of the Competition Act sets out the rules for suspending proceedings enabling parties to submit their offers. However, the parties must submit the commitments before they receive the CPC’s Statement of Objections, which comes at the final stage of the investigation.
The CPC increasingly applies the commitment procedure to end proceedings. In 2016, two investigations concerning alleged abuses of a dominant position were closed by commitment decisions. Both cases related to the activities of public undertakings, one in the railway sector, which concerned denial of access to railway infrastructure (Železnice Srbije, 19 January 2016), and the other in the unified utilities billing system, which concerned discrimination of trading partners (JKP Infostan Tehnologije, 17 August 2016). Unlike in the EU, preliminary assessment or state of play meetings are not inherent to antitrust proceedings in Serbia, and it therefore remains unclear in which cases, or at what time during an investigation, the CPC is willing to start negotiating and accepting the commitments.
The CPC may block a merger if an in-depth analysis shows that the transaction will lead to a restriction of competition. This can affect the business plan of the undertaking, undermining many months of hard work, negotiations and project preparations. To prevent such an outcome, Article 66 of the Competition Act introduces the possibility for the parties to propose measures they are willing to accept, so that the transaction will meet the requirements for approval. The parties may propose the measures at any stage of the proceedings; they usually do it after the CPC has issued a conclusion initiating ex officio proceedings.
On several occasions, the CPC has conditionally cleared concentrations, imposing both behavioural and structural measures. A recent CPC sugar market decision (the Sunoko decision) shows that the CPC is ready to impose behavioural measures even in cases where the joint market share of the merging parties is around 80 %. The decision indicates that there is no need for undertakings to immediately propose structural measures (such as divestiture), but that they should instead engage in negotiations with the CPC, proposing behavioural measures first. Since the measures directly affect the company’s market behaviour and performance on the one hand, and the transaction itself on the other, companies should take special caution when formulating and ranking the measures they are willing to offer to the CPC, starting with the most lenient and gradually progressing to the more stringent as the negotiations with the CPC continue, until agreement has been reached.
How to prepare commitments and remedies
The design of commitments/remedies is one of the most complex aspects of the proceedings before the CPC, which can directly affect the undertaking and the transaction. Undertakings should approach it with maximum caution, as there are no clear guidelines or procedures for defining and proposing measures (commitments or remedies) in Serbia.
The desire to suspend proceedings immediately and avoid fines or a prohibition decision could lead an undertaking to i) offer the CPC more than is needed, ii) make promises that would be difficult to fulfil, or iii) even offer commitments in cases in which the CPC could not prove severe violations of the Competition Act. To avoid this, undertakings should:
- (i) conduct a detailed assessment of the case and of the relevant market;
- (ii) define a strategy to interact with the CPC;
- (iii) identify the CPC’s possible competition concerns; and
- (iv) carefully rank all possible measures acceptable for the undertaking concerned.
Only after such preparation should undertakings approach the CPC with a list of possible commitments/remedies. Competition law expertise and knowledge of the CPC’s practices and procedures are crucial in defining acceptable measures that will address competition concerns and leave undertakings unharmed.
Undertakings should not merely reply to information requests and wait for a decision, by virtue of which the Serbian Competition Authority could impose a hefty fine, behavioural or structural remedies, or even prohibit a merger. Instead, they can significantly affect the Authority’s decisions, avoiding the harshest sanctions, by offering the Serbian Competition Authority solutions to eliminate its competition concerns. Therefore, the outcome of the proceedings is largely in the hands of the companies.