Unlike the Serbian capital, which has seen somewhat of an irregular summer temperature wise, the Serbian Competition law arena has been sizzling hot lately, with the past few months marked by substantial activity in the fields of anticompetitive agreements, mergers, abuse of dominance, and even dawn raids. To top it all off, the Serbian Commission for the Protection of Competition (“Commission“) has been busy networking with antitrust agencies far and wide and enhancing its burgeoning toolkit. A brief list of the main cases and events, together with our comments, is presented below.
Investigation into possible sports equipment resale price maintenance scheme concocted by local heavyweights
On 29 August 2016, the Commission initiated proceedings against 16 undertakings active in market for the wholesale and retail of sports equipment, sports clothing, sports accessories, and sports footwear suspected of having infringed Article 10 of the Competition Act, which prohibits agreements with the object or effect of preventing, restricting, or distorting competition. After conducting a dawn raid at the premises of “N Sport” on 18 August 2016, the Commission found sufficient evidence to conclude that “N Sport” and 15 other undertakings, including Đak and Office shoes, had entered into agreements which contained clauses on resale price maintenance (“RPM“) i.e. clauses which require the retailer not to sell a product below a price set by the seller. According to the Commission’s findings, the agreements involve well-known international brands such as Puma, Sergio Taccihini, and Russell Athletic, amongst others.
Although the status of RPM as a “hard core”, by-object competition law restriction has been questioned for some time now by prominent commentators across the EU, the official position of the Commission remains that RPM constitutes one of the most egregious competition law violations, and should therefore be vehemently opposed – and fined accordingly (see here). On a different note, this case underlines the Commission’s determination to rely more and more on dawn-raids as an evidence-gathering tool, something which companies operating in Serbia should take note of.
State-owned electrical company in the Commission’s cross-hairs for alleged abuse of a dominant position
On 2 August 2016 the Commission initiated proceedings against EPS Distribucija, the Serbian incumbent electric utility power company, for a supposed infringement of Article 16 of the Competition Act, which prohibits the abuse of dominant position. Article 16 of the Competition Act precludes, inter alia, undertakings in a dominant position from imposing dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage. According to the Commission, upon negotiating access to the electrical distribution system EPS Distribucija imposed certain burdensome obligations on all users of the distribution system, except EPS Snabdevanje. EPS Distribucija may in doing so have abused its dominant position by placing EPS Snabdevanje, a related undertaking operating downstream, in a favorable position vis-à-vis other competing distributors of electrical energy.
With over 31,000 employees, EPS is the largest company in the country and one of the few Serbian firms featured in Deloitte’s Central Europe top 500. The fact that the Commission has decided to challenge such a leviathan shows that the Serbian watch-dog is growing in strength and confidence, and that it will not settle for frying the little fish (but it will also continue to fry those, as we shall see below).
Local bus station operator suspected of engaging in exploitative unilateral conduct at the expense of consumers
On 29 August 2016, the Commission initiated proceedings ex officio against “Inter Turs Plus”, a bus station located in the small municipality of Topola, in central Serbia. The Commission has reason to believe that “Inter Turs Plus”, as the only operator of a bus station in Topola, has charged excessive prices for bus platform services to its customers.
Exploitative practices, i.e. practices that are directly harmful to consumers, such as imposing unfair (excessive) selling prices or other unfair conditions, are seldom pursued by the European Commission. Like its European counterpart, the Commission has traditionally been more bent on cracking down on exclusionary abuses by dominant undertakings, i.e. practices that exclude competitors from the relevant market and restrict competition, such as predatory pricing, tying and bundling, or refusal to supply.
However, the present case proves that, while still rare in Serbia, exploitative practices are not entirely outside of the Commission’s realm of interests. It also shows that relatively obscure firms operating in local markets are not free from the Commission’s scrutiny – a point that was hammered home by the Commission in the Niš transportation case from last October, which we discussed here.
Sunoko dodges the structural remedies bullet: Commission approves sugar merger in Phase II proceedings subject to behavioral remedies
On 11 August 2016, the Commission green-lit the acquisition of the TE-TO sugar factory in Senta (ultimately owned by Italian SFIR SpA), in northern Serbia, by domestic sugar giant Sunoko, subject to certain conditions. In a previous post we predicted that Sunoko would have to propose remedies to allay the Commission’s competition concerns, which related mainly to the strengthening of Sunoko’s dominant position on the markets for the production and sale of sugar as a result of the acquisition of the TE-TO sugar factory.
The Commission imposed certain conditions on Sunoko aimed chiefly at preserving the market structure, maintaining current sugar production capacities in Serbia, enhancing transparency in Sunoko’s sugar pricing policy, and monitoring investments made by Sunoko in the TE-TO sugar factory.
Wait, there’s more
There is more in the way of indications that the Commission is about to seriously step up its game. In August, the Serbian competition authority flew its chief economist to Japan for a three-week training with the notoriously economics savvy Japan Fair Trade Commission (“JFTC“), which is regarded as one of the top antitrust agencies in the world; while in September it published a statement promising to bolster cooperation with the more experienced Bundeswettbewerbsehörde, the Austrian competition authority, with a special focus on strengthening dawn raid procedure and information gathering techniques.
To sum up, apart from a couple Olympic medals, the summer has brought Serbia its fifth dawn raid (and third in 2016), its fourteenth conditional merger clearance, two abuse of dominant position cases against players big and small, a high-profile RPM case, mentoring from some of the best competition agencies in the world, and some wonderful antitrust Japanese manga-style cartoons courtesy of the JFTC. Given the level of activity displayed by the Commission, and the rate at which it is conducting dawn raids, more is to be expected from the Serbian watchdog very soon.
Don’t put your sun lotions away just yet: a hot and exciting competition year is ahead of us.