The new Serbian General Administrative Procedure Act (“Official Gazette of RS”, no. 18/2016, the “Act”) came into full effect as of 1 June 2017. The Act also applies to proceedings before the Commission for Protection of Competition (the “CPC”), which are primarily regulated by the Serbian Competition Protection Act (“Official Gazette of RS”, nos. 51/2009 and 95/2013, the “Competition Act”). Certain novelties introduced through the Act may therefore affect proceedings before the CPC in a way which we believe would be beneficial to the parties.

The Principle of Legality and Protection of Reasonable Legal Expectations

The principle of protection of reasonable legal expectations (Article 5 of the Act) has been introduced with the intention of harmonizing Serbian administrative procedure with the European principle of good administration and the principle of protecting reasonable expectations.[1] This principle indicates that the state authorities will take their previous decisions in the same or similar administrative matters into account in their decision-making process. The aim is to consolidate and harmonize administrative practice and to ensure a higher level of legal certainty for the parties.

Although the principle of protection of reasonable legal expectations does not establish a system of precedents, i.e. a state authority is not obliged to follow previous decisions,[2] some authors are of the opinion[3] that the principle being introduced could be interpreted in a way which means state authorities would, as a rule, be obliged to provide justification for diverging from previous practice.

The application of the principle of legality is closely related to the state authority’s discretionary powers - situations in which an authority is entitled to make decisions at its own discretion but within the boundaries set out by the law and according to the rationale behind the given powers.

The CPC has discretionary powers, for example when deciding on setting fines[4], issuing a dawn-raid order[5], conducting summary merger control proceedings[6], deciding on data protection[7] and privileged correspondence[8] and suspending antitrust proceedings upon party’s request[9].

From the perspective of the parties in the proceedings, the most important competences of the CPC are certainly those related to setting fines and deciding on dawn-raids.

The existing legal framework on setting fines, mostly regulated by the Decree on Setting the Fines Paid for the Competition Infringements and Procedural Penalties (“Official Gazette of RS”, no. 50/2010, the “Decree”) and Guidelines on the Application of the Decree (“Guidelines”), provides a certain level of legal certainty to the market participants. Although the Decree and the Guidelines prescribe criteria for setting fines and a range of coefficients to be used for the valuation of each criteria, the criteria and the methodology for determining the coefficients are not precisely set. As a result, the level of fines may differ significantly in proceedings that deal with the same infringement (leaving aside the mitigating or aggravating circumstances that can affect the level of fine).

In this respect it should be noted that, without questioning the CPC’s discretionary powers, the practice of rendering decisions containing very limited explanations regarding the methodology used for determining the coefficients brings about a high degree of legal uncertainty. Consequently, the decision-making practice and the legal stances taken by the Commission in the same legal situations remain unknown to the parties, which then has a detrimental effect on the application of the principle of protection of reasonable legal expectations.

There are also situations in which the CPC valued the same infringing behaviour in different ways. For example, in CPC vs. Jeremić prevoz et al.[10] and CPC vs. Amm Immovables et al.[11], the CPC applied different coefficients for the gravity of infringement, although both cases dealt with the same infringements (so called “bid rigging“).

In two unrelated proceedings, one against the state-owned energy company EPS and the other against public funeral service company JKP Pogrebne usluge Beograd, the CPC found that the companies abused their dominant positions by committing several infringements. Although each infringement is treated differently under the Guidelines in terms of its gravity,  the CPC in both proceedings applied one gravity coefficient for all the infringements it has established and issued one fine.[12]

The CPC also exercises its discretionary powers when deciding on dawn-raids. According to the Competition Act, the CPC’s president is authorized to issue a dawn-raid order when there are reasonable grounds to believe that a danger exists that evidence held by the party(-ies) or third persons will be removed or destroyed.

To the best of our knowledge, the CPC’s dawn-raid orders in its previous dawn-raid cases did not particularly elaborate on the danger of removing or altering the evidence as a basic condition for ordering the dawn-raid in the first place. Similarly, the decisions on the merits, apart from mentioning the dawn-raids performed in the course of the proceedings, did not contain an explanation about the reasons for issuing dawn-raid orders or the information that a danger of evidence being removed or altered existed. An official judicial stance on this issue does not exist, as the dawn-raids performed and evidence gathered are still not contested before the administrative court.

It is therefore necessary that the CPC justifies the reasons behind certain decisions made in the use of its discretionary powers, such as the ones on dawn-raids and fines. The higher level of legal certainty could also be achieved by publishing the previous dawn-raid orders and decisions on fines in an anonymized form on the CPC’s website.

Principle of proportionality

According to the principle of proportionality, the state authorities could limit the rights of the parties or influence their legal interest only if such actions are necessary for achieving the purpose of the law and only if such purpose could not have been achieved through some other, less restrictive, means.

The application of this principle to the CPC’s authority to perform dawn-raids implies that the CPC should resort to this investigatory tool only if the same purpose cannot be achieved with any other less restrictive tools. In other words, the CPC should, as a matter of rule, consider other less restrictive means of obtaining the evidence before resorting to a dawn-raid (for example by ordering the party to produce the requested data and/or documents under the threat of procedural penalty for a failure to comply).  

Irregular Submissions

The Act introduces certain changes in relation to irregular submissions by imposing a duty on the state authorities to react to such submissions more efficiently, i.e. to inform the party on irregularities within eight days of receipt.

The deadline for correction of irregularities may not be shorter than eight days. If the party corrects the errors in a timely manner, the submission will be regarded as duly submitted from the outset, which means that the administrative deadlines run from the date of filing the initial submission and not from the date of filing the corrected submission.

The above applies to the proceedings before the CPC as well, but to a limited extent. For example, the time limit for the decision to be rendered in merger control proceedings initiated upon a request (notification) starts once a complete merger notification is submitted. The notification will be considered complete once the party corrects the errors/supplements the notification in line with the CPC’s instructions and not from the moment when the merger notification is filed.

However, the said novelty in the Act should prevent the state authorities, including the CPC, from being late in responding because the new rule imposes a duty for state authorities to react to irregular submissions within an eight-day deadline as of receipt. In practice, state authorities sometimes react to errors in submission just before the end of the statutory deadline, thereby in effect delaying the deadline for reaching the decision. This is a particularly sensitive question in the aforementioned merger control proceedings, where the one-month deadline for rendering a decision starts when a complete merger notification is filed.

Conclusion

New rules introduced by the Act should support efforts to increase the level of legal certainty in the area of competition law, particularly from the standpoint of the parties to the proceedings before the CPC. However, it should be born in mind that the Act represents a general set of rules adopted with the aim of improving the quality and efficiency of the Serbian administration as a whole and that the quality of the administrative system will largely depend on the level to which special laws align with the Act.

It is also worth mentioning that the CPC commenced drafting a new competition protection act aimed at further harmonizing Serbian competition law with EU acquis communautaire.[13] We believe this is also an opportunity to align the competition protection legislation with the Act.