On 1 February 2018, the Serbian Commission for Protection of Competition ("Commission") published a report on its sector inquiry into the sports footwear, sportswear and sports equipment markets in the Republic of Serbia. The inquiry covered the period from 2014 to 2016. The sector inquiry was prompted by a surge in the number of investigations concerning restrictive agreements on these markets, but it also gave rise to new investigations. Based on the information gathered in the sector inquiry, the Commission has recently fined 15 distributors of sports footwear, sportswear and sports equipment for resale price maintenance.

The primary aim of the sector inquiry was to determine the relevant product market and the market structure. The Commission separately analysed wholesale and retail markets for sports footwear, sportswear and sports equipment. The report shows that all of the targeted markets are highly concentrated, and that the value of total sales on these markets has been on a sharp rise in the reference period. The undertakings active on these markets consider that there are no formal barriers to enter the markets but stress economic volatility, high customs, unpredictable practice of the authorities during market inspection, black market and counterfeit goods as main barriers to entry and growth. The overwhelming majority (93%) of interviewed market participants claim fierce competition on the markets.

General market indicators – size, structure, market players and market concentration

Sports footwear, sportswear and sports equipment

For the purpose of the sector inquiry, the Commission defined the relevant markets in line with the existing case law in merger control and individual exemption proceedings, as follows:

  1. wholesale of sports footwear;
  2. retail of sports footwear;
  3. wholesale of sportswear;
  4. retail of sportswear;
  5. wholesale of sports equipment;
  6. retail of sports equipment.

Total sales of the sports footwear, sportswear and sports equipment in Serbia increased from approx. EUR 160 million in 2014 to approx. EUR 250 million in 2016. This is a 55% growth. Three largest companies per revenue are Sport Vision, Djak Sport and Adidas Serbia. They are active in both wholesale and retail. The market is highly concentrated as the HHI index (a measure of market concentration) is approx. 3000 (HHI above 2000 means the market is highly concentrated).

Wholesale and retail of sports footwear

The Commission analysed purchasing and sales segments of sports footwear as the relevant product. It found that the percentage of direct imports increased from 44% in 2014 to 57% in 2016. Aggregately, the value of purchased sports footwear grew by 66%. This is explained by an increase in demand for these products. In addition, the Commission pointed out that the majority of market players generate almost entire revenue (80-90%) in their own retail stores. The main competitors in the wholesale of sports footwear are Adidas Serbia and Sport Vision group, whereas Sport Vision group and Djak are main players at the retail level.

Wholesale and retail of sportswear

The Commission found that the value of purchased sportswear in 2016 doubled compared to 2014. The value of imports comprises 63% of the aggregate purchased value of sportswear. This market is even more concentrated than the market of sports footwear due to a high market share of Sport Vision group. It grew more intensively than the market of wholesale and retail of sports footwear.

Wholesale and retail of sports equipment

As the sports equipment market was not the prime focus of the sector inquiry, the sector inquiry did not encompass all market players. In terms of the value, this is the smallest market in comparison with sports footwear and sportswear (approx. EUR 35 million) but it has been on a steady rise. Sport Vision group has the highest revenues and market shares on this market, followed by Djak and Planet bike. Other competitors have significantly lower market shares.

Proceedings before the Commission

Resale price maintenance

At the end of 2017, the Commission fined N Sport as seller and 14 of its distributors and retailers as buyers of sports footwear, sportswear and sports equipment for resale price maintenance at the wholesale and retail levels. The investigation was started during the sector inquiry.

Individual exemptions

There were two individual exemptions proceedings regarding relevant markets analyzed in the sector inquiry in 2015 and 2016. The first concerns exclusive distribution agreement concluded between Sport Time and Nike. The Commission did not accept the proposed definition of the relevant markets as the market of manufacturing, import, wholesale and retail of:

  1. sports footwear and footwear for everyday usage;
  2. sportswear and everyday wear;
  3. and sports equipment and accessories.

This is because manufacturing, import, wholesale and retail are at the different levels of the supply chain. Instead, the Commission defined the relevant markets as:

  1. wholesale of footwear;
  2. wholesale of sportswear;
  3. wholesale of sports equipment and accessories.

The exclusive distribution agreement was granted the exemption as it did not contain hardcore restrictions but only standard restrictions for exclusive distribution which did not have an anticompetitive object.

The second individual exemption proceedings concerned selective distribution system established between Sport time and N Sport. The Commission cleared selective distribution in relation to the retail stores that are allowed to sell Nike brand. However, the Commission refused to clear the second layer of selectivity among these stores, which meant to allow only certain members of the selective distribution network to sell particular categories of Nike products, on grounds that intra-brand competition would be adversely affected. The Commission thought that the criteria for retailers' access to certain groups of Nike brands were not entirely clear and objective and that it is not justifiable to add additional restrictions for selling certain categories of Nike products on retailers who are already authorized by Nike to sell Nike brand.