Low notification thresholds
Competition laws of Serbia, Montenegro and Bosnia and Herzegovina have notoriously low merger control notification thresholds.
In all three jurisdictions, it is sufficient for one party to a concentration to have sales on the local market for the concentration to be notifiable. Specifically:
- In Serbia, concentration is notifiable if:
- the aggregate combined annual turnover of the concentration participants generated worldwide in the financial year preceding the concentration exceeds EUR 100 million, provided that the turnover generated from sale the of goods and/or provision of services in Serbia of at least one concentration participant exceeds EUR 10 million in the same period, OR
- the aggregate combined annual turnover of the concentration participants generated from sale of goods and/or provision of services on the Serbian market exceeds EUR 20 million in the financial year preceding the concentration, provided that the annual Serbian turnover of each of at least two concentration participants exceeds EUR 1 million in the same period.
- In Montenegro, concentration is notifiable if:
- the aggregate combined turnover of the concentration participants generated from the sale of goods and/or provision of services in Montenegro exceeds EUR 5 million in the year preceding the concentration; OR
- the aggregate combined worldwide turnover of the parties to the concentration exceeds EUR 20 million in the year preceding the concentration, provided that at least one concentration participant generated a turnover of EUR 1 million from sale of goods and/or provision of services in Montenegro in the same reference period.
- In Bosnia and Herzegovina, which has the strictest notification thresholds of the three, a concentration is notifiable if:
- the aggregate combined worldwide turnover of the concentration participants in the year preceding the concentration is at least BAM 100 million (approx. EUR 50 million); AND
- the aggregate turnover of each of at least two concentration participants generated from the sale of goods and/or provision of services in Bosnia in the year preceding the concentration is at least BAM 8 million (approx. EUR 4 million) OR their combined market share on the relevant market in Bosnia exceeds 40%.
NCAs do not accept exception based on lack of local effects
None of the three jurisdictions allows for an exception based on the lack of local effects. This means that the national competition authorities in Serbia, Montenegro and Bosnia and Herzegovina consider than an obligation to notify the concentration and suspend its implementation until the approval is obtained arises whenever the thresholds are met. In other words, according to the national competition authorities, the turnovers above the statutory threshold are sufficient demonstration of local effects. Following that logic, Serbian and Montenegrin NCAs have recently considered that a transaction involving the acquisition by a foreign undertaking of several brick-and-mortar grocery stores in a neighbouring country is notifiable in Serbia and Montenegro, respectively, solely on the basis that the acquirer had above-the-threshold sales in those two jurisdictions. Both national authorities refused to consider the argument that they do not have jurisdiction to review the transaction which by its nature cannot have any effects on their local markets. This position was taken notwithstanding that both Serbian and Montenegrin competition laws stipulate for their application to the acts undertaken abroad only if those acts have or could have an effect on the competition on the Serbian or, as the case may be, Montenegrin market. Unfortunately, none of the courts of the countries analysed in this article have so far had an opportunity to state their view on a hypothetical jurisdictional defence. This is because gun-jumping investigations are still a rarity. Challenges of the resulting decision are even more of an anomaly, because judicial review proceedings take several years.
No timing guarantee
Furthermore, none of the national laws analysed in this article provides for an effective procedural guarantee that even when a routine notification of a concentrations that does not have any adverse effect on the local market is made, it will receive an approval within the shortest period of time.
The Serbian Competition Act provides for a presumption of approval if within 30 days from the filing of a complete notification, the concentration is neither approved nor formally made subject to an investigation as to its effects on the competition on the relevant market (Phase II). However, the Serbian Competition Commission does not have the obligation to issue a certificate that the notification is at some point deemed complete. Every request for additional information is deemed to reset the 30-day deadline. In practice, however, Phase I merger control proceedings are resolved relatively quickly. Based on our review of a total of 370 published and 2 unpublished decisions of the Serbian Commission for Protection of Competition approving concentrations in Phase I in the period from 2019 to the end of December 2021, the average duration of Phase I review in Serbia in the given period was 36 days from the date of the initial filing. This statistic does not include one specific case where Phase I review lasted for 584 days because it the proceedings were suspended while investigation into another alleged concentration by the same acquirer was pending. The average number of RFIs the authority issued per Phase I proceedings was 1.2. In the same period, the Serbian competition authority opened 6 Phase II investigations, which lasted from 114 days (shortest) to 513 days (longest), measured by the number of days from the initial filing until the decision.
Merger control in Serbia by numbers (2019 - 2021)
Phase I approvals: 372
Average duration of Phase I: 36 days
Average number of RFIs in Phase I: 1.2
Phase II investigations: 6
Duration of Phase II: from 114 days (shortest) to 513 days (longest)
In Montenegro, the presumption of approval arises only if the notified concentration is neither approved nor subject to a formal investigation within exorbitant 105 days from the complete notification. As in Serbia, every RFI resets the deadline. Parties should count on at least one RFI no matter how comprehensive the notification is. Based on our review of 172 decisions of the Montenegrin Agency for Protection of Competition published on its website, all of which approved notified concentrations in Phase I in the period from 2019 to the end of December 2021, we determined that the average duration of Phase I review in Montenegro in that period was 90 days from the filing date. In the same observed period (2019- 2021), Phase II investigation was opened only once, and the authority took 221 days from the initial filing to (conditionally) approve the concentration in question.
Merger control in Montenegro by numbers (2019 - 2021)
Phase I approvals: 172
Average duration of Phase I: 90 days
Phase II investigations: 1
Duration of Phase II: 221 days
The B&H Competition Act also knows the presumption of approval if the concentration is neither approved nor formally made subject to an investigation as to its effects (Phase II) within 30 days. Unlike in Serbia, the 30-day deadline runs from the issuance of a certificate of completion. However, the fact that, unlike in Serbia, the Bosnian authority issues a certificate of completion once it determines that the notification is complete, is a difference without distinction. The B&H authority does not have an obligation to issue the certificate of completion at any particular point in time, so there is no guarantee for the acquirer (s) that the notified concentration will be reviewed and approved within any specific time frame. Based on our review of 16 published decisions of the B&H Council for Protection of Competition approving concentrations in Phase I in the period from 2019 until the end of December 2021, we determined that the average duration of Phase I review in B&H was 118 days from the date of the initial filing.
Merger control in Bosnia and Herzegovina by numbers (2019 - 2021)
Phase I approvals: 16
Average duration of Phase I: 118 days
Phase II investigations: 0
A number of M&A transactions has to be notified to and approved by the national competition law authorities in Serbia and Montenegro even if the target has no or no appreciable sales in any of these jurisdictions. Some of them will also fall within the notification thresholds set by the legislation of Bosnia and Herzegovina. Depending on where exactly in these jurisdictions the transaction must be notified, parties may have to “budget” at least six months for the period between signing and closing. Although the national competition authorities have not officially voiced their position on carve-out arrangements, those should be considered with the legal advisor as a potential alternative to a lagged closing.