The Serbian Supreme Court of Cassation addressed in its decision dated 14 February 2013 the issue of standing to challenge decisions on individual exemption of restrictive agreements from prohibition granted by the Serbian Commission for Protection of Competition. The non-confidential version of the judgment was published in May on the court’s website. In the judgment, the court took a narrow view on standing, limiting the standing to sue to the parties to the exempted agreement.
Individual exemption under Serbian law
The Serbian Law on Protection of Competition allows parties to a restrictive agreement to request from the Commission individual exemption of their agreement from prohibition. In order to be successful, the parties must show that the four cumulative conditions laid down in Article 11 of the Law on Protection of Competition are met: the agreement leads to efficiencies, consumers receive a fair share of the efficiencies, the restrictions are indispensable, and there is no elimination of competition. The maximum duration of individual exemption is eight years, with the possibility of extension if requested no later than two months before the initial exemption period expires.
Commission’s resolution on individual exemption is final in administrative proceedings and can be challenged in judicial proceedings before the Administrative Court. The Law on Protection of Competition does not expressly state who has a standing to challenge a Commission’s decision, meaning that the general rules on administrative disputes apply in this respect. According to the Law on Administrative Disputes, judicial review can be initiated by any person whose rights or legal interests have been violated by the challenged administrative act.
Telekom-Centrosinergija agreement
The case analyzed here concerns a distribution agreement entered into between the Serbian telecom incumbent, Telekom Srbije, and the company Centrosinergija, whereby Centrosinergija is appointed general distributor of Telekom’s electronic top-ups for mobile phones. Centrosinergija shall distribute Telekom’s electronic top-ups both through its own retail network and through a sub-distribution network. Published version of the judgment does not explain why the agreement was not covered by the block exemption available under the vertical block exemption regulation. This was likely due to the fact that the 25% market share cap prescribed by the vertical BER was exceeded.
Upon application by the parties, the Commission, in its decision of 17 July 2012, granted an individual exemption to the agreement for a period of four years. The agreement was submitted for individual exemption from prohibition due to its effective exclusivity. The agreement envisaged that Centrosinergija would be the sole general distributor at least during an initial period of the agreement while in their application for individual exemption, the parties acknowledged that it was likely that Centrosinergija would be the largest and possibly the sole general distributor for the entire duration of the agreement.
As a result of the appointment of Centrosinergija as general distributor, Telekom terminated its previous agreements with other distributors. Four of those terminated distributors turned to the Administrative Court requesting annulment of the Commission’s decision to exempt the agreement from prohibition. In its statement of response, the Commission objected that the plaintiffs did not have standing to sue since the exemption decision did not concern their rights or legal interests but only the rights and obligations of the parties to the exempted agreement. In its decision of 25 October 2012, the Administrative Court accepted the Commission’s standpoint and dismissed the distributors’ claim for lack of standing.
Three of the four plaintiff distributors filed before the Supreme Court of Cassation the so-called application for reconsideration of judgment (zahtev za preispitivanje sudske odluke). The applicants submitted that they had standing to inititate judicial review of the exemption decision since the decision violates their rights and legal interests. This was explained by the assertion that Telekom terminated their distribution agreements as a result of the exemption, thereby preventing them from pursuing their business activities. The distributors also maintained that their legal interest to initiate judicial review proceedings against the Commission’s decision on granting individual exemption stems from the fact that they were entitled to submit an “initiative” in the proceedings before the Commission. Presumably, the terminated distributors were referring to the initiative to commence an investigation, which can be submitted by any person having an interest in an investigation taking place.
The Supreme Court of Cassation upheld the conclusion of the Administrative Court that the applicants had no standing to sue, holding that “the challenged administrative act did not clearly affect the plaintiff’s right or legal interest”, but only concerned the rights and obligations of the parties to the exempted agreement. In essence, the Court held that judicial review of a Commission’s decision on individual exemption can be initiated only by the parties to the proceedings before the Commission, i.e. parties to the agreement subject to a request for individual exemption.
EU law
Since the adoption of Regulation 1/2003, EU competition law no longer knows the procedure for obtaining individual exemption of restrictive agreement based on a prior notification. Serbian provisions on individual exemption draw upon Regulation 17/62.
Pursuant to the decision of the Court of First Instance in Metropole télévision and Others v Commission, rendered based on Regulation 17/62, standing to challenge a Commission’s decision on individual exemption was not restricted to the parties to the agreement.
In that case, the European Commission granted an individual exemption to a cooperation agreement aimed at establishing an association of broadcasters called “European Broadcasting Union” (EBU). The purpose of the union was to further program exchanges between member broadcasters. Cooperation within the union included joint negotiations, acquisitions, and sharing of television rights to sports events. The union came under investigation by the European Commission when a sports TV channel (not part of EBU) complained that EBU and its members had refused to grant to it sub-licenses for retransmission of sports events. Following the Commission’s statement of objections, EBU notified to the Commission its rules on acquisition and exchange of sports broadcasts and filed for an individual exemption. Exemption was eventually granted.
However, certain TV stations – non-members of EBU – challenged the decision on individual exemption before the Court of First Instance. The court had to decide whether these entities had standing to sue and found that they did, based on Article 230, paragraph 4 of the EC Treaty (now Article 263, paragraph 4 TFEU). Based on that Treaty provision proceedings against a decision of the European Commission can be instituted not only by the person to whom the challenged decision i addressed, but also by any other person who is directly and individually concerned with the decision. The Court of First Instance specifically emphasized that the plaintiffs were affected by the individual exemption in question since the exempted agreement excluded them from enjoying competitive advantages arising out of EBU membership. The court then engaged in a substantive analysis of the exemption decision and annulled it on the basis that the conditions for exemption were not satisfied.
