On 19 November 2012, the Serbian Commission for Protection of Competition (“Commission”) issued a decision finding that Frikom, the largest Serbian ice-cream producer, abused dominance in the wholesale market of industrial ice-cream. Unfortunately, the Commission only made the dispositive part of its decision available on its website, and not the reasoning.
Frikom is only the second abuse of dominance case decided under the present 2009 Law on Protection of Competition, the first one being Kragujevac Cemeteries decided in January 2011 (involving tying).
Frikom’s illegal practices
The Commission established three groups of abusive behavior:
- Price-fixing
The first infringement established by the Commission is vertical price-fixing, a practice the Commission has been particularly keen on investigating (see Idea-Grandprom and Idea-Swisslion). The Commission found that Frikom had engaged both in direct and indirect price-fixing – the company initially mandated retailers to fully comply with retail prices determined by it, while it subsequently switched to a less obvious practice of recommended prices. However, the Commission found that there was no substantial difference between the two, as retailers continued to abide by the recommended prices just like they had previously abided by the express resale price-fixing practice.
- Exclusive dealing
The Commission further found that Frikom had engaged in illegal exclusive dealing arrangements with its retail customers.
It follows from the dispositive part of the decision that some of the retail contracts contained an express obligation of the retailer not to sell competing products, while some other contracts imposed exclusivity in the use of refrigerators. While the Commission in the past struck down arrangements containing an express obligation of a buyer to purchase a product solely from a dominant undertaking (see for example Eki Transfers, decided under the old Law on Protection of Competition of 2005), this is the first time that the Commission considered an obligation which falls short of expressly requiring purchasing exclusivity, but in practice leads to the same effect, such as refrigerator exclusivity, as anti-competitive (for an EU example of a case dealing with refrigerator exclusivity, see the European Commission’s decision in Van den Bergh Foods).
In addition, the Commission found that, through an elaborate scheme of incentives and stimulation for retailers, Frikom decisively influenced retailers to opt for Frikom as their only supplier of ice-cream. Even though the published disposition of the decision does not identify the exact practices that the Commission found illegal, it appears that those practices included so-called loyalty rebates. The legal assessment of loyalty rebates is not always straightforward, as they can be both pro and anticompetitive (see European Commission’s Guidance on its enforcement priorities in applying Article 102 of the Treaty to abusive exclusionary conduct by dominant undertakings, paragraphs 37-46). It would be, therefore, interesting to see the Commission’s economic analysis of this case, which presumably contains the unpublished reasoning of the decision.
The Commission established that Frikom reinforced the retailers’ obligations to maintain retail prices and not to sell competing products by imposing contractual penalties for breaches thereof. The Commission also found that some of the retail contracts contained a clause entitling Frikom to unilaterally terminate the contract for the retailer’s breach of the disputed provisions subject to a three-day notice period.
- Differing payment terms
Finally, the Commission found Frikom’s practice of agreeing different payment deadlines with retailers to be illegal. Specifically, the payment deadlines ranged between one day and 120 days. The disposition, which is the only publicly available part of the Commission’s decision, does not reveal whether and how the Commission analyzed (or lack thereof) the economic justification for such practice.
Measures imposed on Frikom
Having found abuse of dominance on the part of Frikom, the Commission imposed a penalty on the ice-cream manufacturer in the amount of 4% of the company’s revenue generated in 2009 (the year preceding the initiation of the proceedings), which corresponds to approximately EUR 3 million. The Commission also ordered the company to publish a notice on its website informing its retail customers that the disputed provisions of their contracts with Frikom are null and void.
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The published part of the decision referred to above indicates the Commission’s readiness to pursue not only infringements by object, such as minimum RPM, but also practices whose anti-competitive effects are more difficult to prove, such as rebate schemes used by dominant undertakings. If the case goes to the Administrative Court upon Frikom’s challenge, it is expected, based on the practice of this court, that the court will closely examine whether the reasoning of the Commission’s decision contains sufficient economic analysis to support the Commission’s ultimate finding of abuse of dominance.
