At the end of last year, the Serbian competition regulator, the Commision for Protection of Competition (“CPC”), finalised, along with the Institute for Economic Sciences, a sector inquiry into automotive and home appliances aftermarkets covering repair services, guarantees and spare parts for motor vehicles, washing machines and refrigerators (“Sector Inquiry”). The CPC recently carried out further investigations that included the review of a number of vertical agreements concluded between manufacturers and importers of motor vehicles and home appliances on one side and authorized dealers and repairers on the other. It consequently discovered a number of anticompetitive arrangements that may be prohibited under Serbian antitrust legislation.

Purpose of the Sector Inquiry

The purpose of the Sector Inquiry and further investigations conducted by the CPC was to examine and determine the market structure, relations between companies, their market shares and market power, as well as to detect potential market imperfections that could lead to anticompetitive outcomes.

Selective Distribution at Stake

The CPC classified all the agreements it had reviewed as selective distribution agreements. These are agreements where the supplier undertakes to sell the contracted goods or services, either directly or indirectly, only to distributors selected on the basis of specified criteria and where these distributors undertake not to sell such goods or services to unauthorised distributors within the territory reserved by the supplier to operate that system.

According to the Serbian Competition Protection Act (“Official Gazette of Republic of Serbia” no. 51/2009 and 95/2013), a selective distribution agreement represents a competition restraint that can be exempted from prohibition by virtue of the block exemption for vertical agreements (“Official Gazette of Republic of Serbia” no. 11/2010, so called “block exemption”) or based on a decision of the CPC (so called “indvidiual exemption”). It is worth noting that the requisite standard of proof for individually exempting selective distribution agreements is demanding, especially as it requires proving that the selection criteria are objective, transparent and necessary for the functioning of the selective distribution system.

Restraints Discovered

The CPC discovered that a number of reviewed agreements contained arrangements that could represent competition restraints and amount to an infringement of the Competition Protection Act.

Automotive Aftermarkets

As for the motor vehicles aftermarkets, the CPC highlighted the following types of competition restraints that were found in the agreements it had reviewed:

  • resale price maintenance;
  • territorial restrictions, such as export restrictions and restrictions of active and passive sales;
  • restrictions forcing repairers to provide repair services with OEM spare parts only, including in the period following the expiry of the guarantee period;
  • single branding arrangements;
  • exclusive purchasing of spare parts from manufacturer or third parties designated by the manufacturer;
  • restrictions of the number of points of sale;
  • restrictions of the assignment of rights under the contract to sub-dealers; and
  • restrictions on using the assigned industrial property rights in accordance with the manufacturer’s instructions.

Home Appliances Aftermarkets

As for the home appliances aftermarkets, the CPC highlighted the following types of competition restraints that were found in the agreements it had reviewed:

  • restrictions forcing repairers to provide repair services with OEM spare parts only, including in the period following the expiry of the guarantee period;
  • restrictions forcing repairers to exclusively purchase spare parts and components from the dealer in cases where repair services were required outside the guarantee period;
  • prohibiting repairers from providing repair services during the guarantee period outside the assigned territory, except when requested by the dealer; and
  • restrictions of disposal of special tools and equipment after the agreement has expired.

The CPC’s Conclusions

According to the CPC, resale price maintenance and territorial restrictions represent by object infringements, which means that such arrangements are almost always prohibited. Restrictions forcing repairers to provide repair services with OEM spare parts only, even in the period following the expiry of the guarantee period, cannot be block exempted and such restrictions are not necessary for the functioning of the selective distribution system, as stated by the CPC. Although this is not explicitly stated, it seems that the CPC will not be willing to individually exempt such arrangements either.

On the other hand, although the CPC has not positioned itself in respect of single branding and exclusive purchasing arrangements, the interplay between such restrictions and restrictions normally contained in selective distribution systems should always be analysed carefully. For example, the combination of selective distribution system and exclusive purchasing typically amounts to an antitrust infringement.

The CPC stated that, in principle, all other identified restraints could represent antitrust infringements, but not necessarily. It remained however silent on how each particular restraint would be treated.

Last Call

It seems the CPC is calling upon market participants in the automotive and home appliances aftermarkets to check that their business operations comply with the Serbian antitrust rules, as it will in future closely scrutinize said aftermarkets and initiate infringement proceedings where needed.