The Serbian Commission for the Protection of Competition (“Commission“) terminated on 15 May 2019 an investigation initiated in November 2015 against Philip Morris, JT International, British American Tobacco and Imperial Tobacco for allegedly having entered into a restrictive agreement in the form of a concerted practice. The investigation, the first one ever in Serbia on the allegations of a concerted practice, was prompted by the Commission’s observation that the parties engaged in parallel behaviour after a period of a price war, where one party would announce a price increase, while the other parties would follow by announcing the price increase in the same amount and with the same or close enough effective date as the effective date published by the first announcer.
After three and a half years of investigation, the Commission concluded that there was not enough evidence that the observed parallel behaviour was a result of concert rather than the market structure and the regulatory framework.
The market of factory-made cigarettes in Serbia is highly transparent as a result of regulatory framework. Retail prices are set by the manufacturers/importers. Each manufacturer/importer is obliged to notify to the Tobacco Administration in advance the retail prices of all SKUs and the date as of which these prices will be implemented. After it obtains from the Tobacco Administration a certificate confirming the retail prices have been duly notified to the Tobacco Administration, the manufacturer/importer is obliged to publish the retail prices and their respective effective dates in the Official Gazette prior to implementing these prices. There is no minimum or maximum period between publication of the retail prices in the Official Gazette and their effective dates. Further transparency is created by the excise calendar, which is known in advance.
The Serbian Competition Act does not define concerted practice. In general, the Commission applies on competition law matters legal tests established in the EU case law. As expressly stated by the European Commission in Polypropylene, Article 101TFEU prohibits collusion but not “mere parallel behaviour with no element of concertation”. In Woodpulp II and Suiker Unie, the ECJ held that Article 101 TFEU does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors. As a result, parallel behaviour by industry participants, such as simultaneous or proximate price increases, is not in itself conclusive evidence of a concerted practice. According to the EU practice, the authority is not allowed to presume that parallel behaviour is a result of concert, unless there is no other plausible explanation for the conduct taking into account the features of the market in question.
Prompted by potential evidentiary difficulties typical of concerted practice cases, the Commission has recently proposed that the draft new Competition Act, currently debated in Serbia, include a provision authorising the Commission it to render decisions based on “facts which are only indirectly established by evidence (probable facts)”. This proposal is ill-conceived. It stems from the provision of the General Administrative Procedure Act which states that “an administrative matter can be decided based on facts which are not completely established or which are only indirectly established by evidence (probable facts)” if the relevant statute regulating particular administrative proceedings so provides. However, the wording of the relevant provision of the General Administrative Procedure Act mixes up the cognitive process of establishing facts (indirectly from evidence) and the standard of proof, i.e. quality and quantity of evidence sufficient to deem a fact established.
According to the General Administrative Act, the default standard of proof in administrative proceedings is establishing the facts fully (in Serbian: “potpuno utvrđene činjenice“) while probability (in Serbian: “činjenice učinjene verovatnim“) can be sufficient only if a special law so provides. The standard of proof required in civil proceedings in Serbia is establishment of facts with certainty (in Serbian “utvrđenje činjenica sa sigurnošću“), while the standard of probability is in contrast sufficient only in the matter of provisional relief. The requisite standard of proof in criminal procedure (in Serbian: “izvesnost“) is similar if not the same as the requisite standard in civil litigation.
The Commission should not be, in our view, authorized by law to apply the more lenient ‘probable facts’ evidentiary standard. Competition law cases are by their nature close to criminal law cases in which the standard of certainty applies. Therefore, it would be inappropriate to impose fines on market undertakings based on the facts which are solely made probable. The authority must establish its finding of infringement with certainty even if it is permitted to do so by inferring the facts from evidence before it in an indirect manner, such as in concerted practices cases. Specifically, if the Commission is to be permitted, in line with the standard of proof developed in Dyestuff, to establish concert based on circumstantial evidence, the Commission should able do so only if the concert is the only plausible (reasonable) explanation of the parallel behaviour under the given circumstances. The only plausible explanation standard is more than probability standard.