Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
The Law on the Protection of Competition (LPC) provides that a merger notification has to be submitted to the Commission within a period no later than 15 days after the signing of the relevant agreement, the announcement of a public offering, the announcement of the start or end date of a public takeover bid, or the acquisition of control (whichever of these triggering events occurs first).
The filing may already be submitted at the time at which the parties have a serious intention to conclude the relevant agreement; that is, they sign a letter of intent, or announce their intention to make a public offer for the purchase of shares in an undertaking.
Late filing may lead to the imposition of a fine by the Commission on the notifying party in the range of €500 to €5,000 per day (but capped at a maximum of no more than 10 per cent of the total annual turnover of that undertaking). The deadline for payment of such procedural penalty is set out in the Commission’s decision imposing such penalty and cannot be less than one month or more than three months following the delivery of the decision.
Which parties are responsible for filing and are filing fees required?
Article 63(3) of the LPC provides that the notification has to be submitted by the person or undertaking acquiring control of all or part of one or more undertakings. In all other cases, the undertakings concerned must jointly submit the notification of a concentration.
The filing fees are determined by a specific tariff (which has been revised as of 14 July 2011), and amount to the following:
- for an expedited procedure (Phase I), the fee is calculated at 0.03 per cent of the combined turnover of all undertakings concerned for the preceding year, but is capped at €25,000; and
- for the regular procedure (Phase II), the fee is calculated at 0.07 per cent of the combined turnover of all undertakings concerned for the preceding year, but is capped at €50,000.
The filing fee for Phase I has to be paid within three days of submission of the merger notification. The filing fee for Phase II (ie, up to additional €25,000) must be paid after the Commission has decided to open Phase II.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
The LPC provides that the intended concentration must not be implemented until the Commission issues a decision authorising the transaction or until the expiry of the waiting period.
The duration of the waiting period depends on whether Phase I or Phase II proceedings are applied.
The Commission decides in Phase I proceedings if the concentration will not prevent, restrict or distort competition on the market, especially by creating or strengthening a dominant market position. The Commission then must issue its decision within one month of the submission of the notification. After expiry of this period, it is presumed by law that the concentration has received approval.
In cases that may raise competition concerns, the Commission may initiate Phase II proceedings within one month of submission of the complete notification. The Commission must then issue a decision within four months of initiating such proceedings. Again, after expiry of this period, it is presumed by law that the concentration has received approval.
The suspension obligation does not prevent the implementation of a takeover bid of which the competent authority has been notified in accordance with the regulations on public takeovers or on privatisation. This applies only under the condition that the filing was submitted on time, and that the acquirer does not exercise its voting rights, or does so only to maintain the full value of the investment and based on an explicit written approval of the Commission.
We are not aware that the Commission’s approach to the suspension obligation has changed as a consequence of the economic crisis.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
In the case of closing before clearance, the Commission may require the undertakings concerned to:
- dissolve the concentration, sell shares, terminate a contract or take other measures necessary to re-establish the same status that existed before the implementation of the concentration (the measure of de-concentration); and
- impose a fine of up to 10 per cent of the total annual turnover of the responsible undertaking generated in the territory of Serbia in the preceding financial year (the protective measure). The deadline for payment of the fine is set out in the Commission’s decision imposing this fine and cannot be less than three months or more than one year following the delivery of the decision. Fines may not be imposed after the expiry of five years following the prohibited implementation of the concentration. Because this five-year period restarts with each Commission’s action directed at discovering the breach, the Commission ultimately loses the right to prosecute the infringement after the expiry of an overall period of 10 years. Once the Commission’s decision imposing the fine becomes enforceable or final, it may only be enforced within five years.
We are not aware that the above measure of de-concentration has so far been applied in practice. However, there are indications that the Commission’s willingness to investigate and sanction infringements of the standstill obligation may be increasing. In April 2013, the Commission opened an investigation against a Serbian company for failure to file (the investigation was based on an anonymous hint and information the Commission extracted from the publicly accessible corporate registry). In the course of that proceeding, the company having infringed the filing obligation submitted the outstanding notification and the Commission cleared the transaction in July 2013. The acquirer was not fined for late filing or for failure to file. However, the Commission, before clearing the case, opened Phase II proceedings and thus the acquirer was required to pay the higher Phase II fees amounting to €50,000 (instead of only €25,000 for Phase I). The Commission applied the same (punitive) approach in at least three other cases in the course of 2014 (all involving unreported acquisitions by a major Serbian telecommunications operator).
Further, in 2014, the Commission opened investigative proceedings against a Russian company for failure to file its acquisition of a 50 per cent share in a Serbian company running one of the oldest Serbian daily newspapers. In the course of the proceedings, the Commission adopted a procedural measure forbidding any disposal of the disputed shareholding until all the relevant facts were established. The Russian company was also required to notify the transaction and, in 2015, the Commission imposed on the Russian company a procedural fine of €143,500 for failure to provide certain information during the merger control proceedings. That was the first time a fine had been imposed by the Commission on a foreign undertaking.
In early 2016, after several public invitations to undertakings to comply with their local notification obligations, the Commission opened investigative proceedings against a local bank for its failure to notify the acquisition of certain real estate property (business premises) in Serbia. These proceedings were stopped in early 2017 owing to the Commission’s finding that no concentration in fact occurred.
In late 2016, the Commission opened investigative proceedings against a local software developer for not reporting its acquisition of sole control in a local computer retailer (the software developer had previously reported its acquisition of joint control in the latter). The company was eventually fined in 2017 with a fine amounting to 0.25 per cent of its turnover generated in Serbia in the preceding year (ie, approximately €56,000).
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
The sanctions for closing before clearance are also applicable in case of foreign-to-foreign mergers. However, we are not aware of any cases where the Commission has applied these sanctions to such mergers since the introduction of the LPC in November 2009. Under the provisions of the Competition Act 2005, only one case has been reported where misdemeanour proceedings were initiated against a Croatian company in connection with a foreign-to-foreign merger.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
There have been indications in practice that in certain instances the Commission may find local ‘hold-separate’ arrangements acceptable to permit the implementation of foreign-to-foreign mergers outside Serbia before clearance in Serbia. However, such arrangements have not been tested formally with the Commission and the Commission has not issued a written opinion in this regard.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
The LPC provides for a filing obligation in the case of a public takeover bid even where the jurisdictional thresholds are not met. The provision generally relates to the (direct or indirect) acquisition of control over open joint-stock companies, the shares of which are traded on the Serbian stock exchange (exceptionally also closed joint-stock companies can be caught).
On 11 November 2009, the Commission issued a statement on the filing deadline for notifications in the case of public takeover bids. The statement had been requested by the Serbian Securities Commission because of the unclear wording of the LPC. The LPC provides that the notification must be filed within 15 days of the announcement of the public takeover bid or its closing (whichever occurs first). The confusion occurred because of the fact that an undertaking launching a takeover bid does not know the exact percentage of the shareholding it will have acquired until the bid is closed (and, respectively whether such shareholding will confer control to the bidder once the bid is closed). The Commission clarified that in such situation the notification will be deemed timely even if submitted within 15 days of the date of the closing of the bid. Another point raised with the Commission with respect to public takeover bids was the question of whether a notification is always required when a public takeover bid is – by law – required in Serbia. On 16 December 2009, the Commission stated that if there is no change of control, there is no filing obligation (irrespective of the fact that a public takeover bid is required in Serbia).
It remains to be seen how the above rules will affect foreign-to-foreign transactions. The Serbian Securities Commission stated that a public takeover bid in Serbia would be required, under certain conditions, if a change of control occurs in a foreign undertaking (that controls a Serbian joint-stock company) (ie, there is an indirect change of control over a Serbian undertaking). Thus, in such cases, an argument can be made that a notification to the Commission would also be required in Serbia (regardless of whether jurisdictional thresholds are met). The Commission has not opined on this issue to date. However, the Serbian takeover legislation has been amended in the meantime to support the aforementioned interpretation of the Serbian Securities Commission.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
On 2 February 2016, a new Regulation on the Form and Manner of Filing a Notification of a Concentration (the Filing Regulation) entered into force. The new Filing Regulation determines the information to be submitted in a merger filing and, for the first time, distinguished between a short and long-form filing.
A short-form notification is sufficient where the undertakings concerned have no overlapping activities in Serbia or where the competitive impact of the transaction would be small (ie, where the combined market share of the undertakings concerned in a horizontal merger is below 20 per cent, and where the individual or combined market shares of the undertakings concerned in a product market which is upstream or downstream of a product market in which any other undertaking concerned is engaged (vertical relationships) is below 30 per cent; or where the combined market share of the undertakings concerned in a horizontal merger is below 40 per cent, and the change (delta or Δ) of the Herfindahl-Hirschman Index (HHI) is below 150). Concentrations concerning changes from joint to sole control will also benefit from a short-form notification. However, even in all these cases, the Commission can ask for a long-form notification under certain conditions (one of such conditions being that a relevant market is a highly concentrated one (ie, where HHI is equal or above 2,000) and the HHI Δ is equal or above 150). Where the notifying party wishes the authority to review and assess restrictions that are directly related and necessary to the transaction (otherwise known as ancillary restraints), it will need to submit a long-form notification.
Short-form filings must in principle provide certain basic information about the business activities of the undertakings concerned, their representatives, revenues and local Serbian activities, as well as their suppliers and customers. Furthermore, the transaction structure must be explained (including the expected deadline for its closing) as well as the markets concerned and the competitive situation therein. To the extent possible, the market and business information provided should also be supported by documentation; apart from that, the authority expects to receive at least the following formal supporting documents: power of attorney, certificates of incorporation and annual reports of the undertakings concerned, and a copy of the transaction documents. Except for the power of attorney (which must be provided as original and addition must also be legalised), simple copies are sufficient (instead of originals).
If a long-form notification is required, the level of detail to be provided with respect to the relevant market increases significantly. In particular, market data must be provided for the last three completed business years (instead of only for the last year prior to the transaction).
The Commission has the right to require additional information and documents. If the notifying party is not able to submit some of the documents or information required, it should provide a brief explanation as to why a particular document or piece of information is not available.
Providing wrong information or ignoring the Commission’s requests for information may lead to fines in the range of €500 to €5,000 per day (but capped at a maximum of no more than 10 per cent of the total annual turnover of the undertaking).
The notification and all documents attached need to be submitted in the Serbian language.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
The concentration must not be implemented until the Commission issues its decision authorising the transaction or until the expiry of the waiting period. In Phase I proceedings, the Commission decides within one month of the submission of a complete merger notification. In Phase II proceedings, the Commission has to issue a decision within four months of initiating such proceedings. If the Commission does not decide within these waiting periods, the concentration is deemed to be approved. In our experience, the Commission typically decides within the given deadlines.
The LPC does not provide the possibility for the parties to obtain a waiver or to apply for expedited proceedings.
What is the statutory timetable for clearance? Can it be speeded up?
The Commission may apply Phase I proceedings if an accurate assessment of the case may be undertaken already based on the submitted evidence or if the assessment can be based on facts already known to the Commission, and it may be reasonably assumed that the concentration is likely not to impede effective competition, mainly by not creating or strengthening a dominant position in the market.
In more complex cases that do not satisfy these criteria, the Commission may initiate Phase II proceedings. Apart from the four-month deadline for decision-making, the procedural setup of such in-depth investigations is largely unregulated and thus subject to the Commission’s discretion.
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29 April 2020