This post examines whether and to what extent competition rules in Serbia and Bosnia and Herzegovina apply to public authorities when they prescribe regulations that affect or may affect competition in a particular market.
In the EU, regulatory activity is beyond the realm of competition law. The relevant competition law provisions of the Treaty on the Functioning of the European Union (TFEU) apply to “undertakings” but do not define this term. According to the ECJ, “the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed” (Klaus Höfnerand Fritz Elser v Macrotron GmbH, Case C-41/90, [1991] ECR I-1979, para. 21). The ECJ also noted that“the Treaty rules on competition do not apply to activity which, by its nature, its aim and the rules to which it is subject does not belong to the sphere of economic activity … or which is connected with the exercise of the powers of a public authority…” (J.C.J. Wouters and Others v. Algemene Raad van de Nederlandse Orde van Advocaten, Case C-309/99, [2002] ECR I-1577, para. 57). On this basis, enactment of a regulation imposing fees related to protection of maritime environmentand collection of such fees (Diego Calì & Figli Srl v Servizi ecologici porto di Genova SpA, Case C-343/95, [1997] ECR I-1547, para. 23) and enactment of regulations on air space control (SAT Fluggesellschaft v Eurocontrol, Case C-364/92, [1994] ECR I-43, para. 30) have been found to be immune from the application of competition law.
Both Serbian and Bosnian competition laws heavily draw from the EU acquis in this area. The provisions on the applicability of the competition statute to state bodies are similar. However, the practices of Serbian and Bosnian competition authorities in this respect have been significantly different. While the Serbian authority has recognized that it has no jurisdiction to challenge regulations of state authorities or local municipalities, the Bosnian regulator has not shied away from finding governmental regulations and municipal ordinances to be in violation of competition law and imposing fines on the public bodies that enacted them.
Serbia
Pursuant to its Article 3, the Serbian Law on Protection of Competition applies to any person directly or indirectly involved in the sale of goods or services, including state bodies and local municipalities. Accordingly, state organs are subject to competition law only in relation to their exercise of economic activity, but not in relation to the exercise of public authority to prescribe rules and regulations. The Serbian Commission for Protection of Competition confirmed that it had no jurisdiction to investigate public bodies for their acts undertaken in the exercise of their powers under the law, including the power to prescribe regulations.
However, this does not mean that the Commission has no role whatsoever in relation to legislation which may adversely affect competition. Pursuant to Article 21, paragraph 1,point 7 of the Law on Protection of Competition, the Commission “gives its opinion to the competent organs on draft legislation, as well as on legislation in force which may have an effect on competition on the market.” In the exercise of this consultative authority, the Commission has, for example, issued its negative opinionon the laws and different types of regulations setting minimum premiums for mandatory traffic insurance, technical requirements for trade in oil and oil derivatives or minimum prices of driving lessons, respectively.
Bosnia and Herzegovina
According to Article 2, paragraph 1 of the Bosnian Law on Competition:
“The provisions of this statute apply toall…persons which are directly or indirectly…engaged in production and sale of goods or provision of services and whose conduct may prevent, restrict or distort competition on the entire Bosnian market or a significant portion thereof, i.e. to:
(b)….the state administrative organs and local municipalities when they directly or indirectly participate in or affect the market.”
On the one hand, it follows from the structure of this provision that the requirement from the opening part, that a person be engaged in commercial activity in order to be subject to the jurisdiction of the antitrust statute, applies to state organs as well. On the other hand, sub-paragraph (b) of the quoted provision contains an alternative requirement for state organs and local municipalities that they participate in or affect the market, thus suggesting that it may be sufficient that a public body’s activity (e.g. its legislative activity) “affects the market”, even if the relevant public body is not itself a market participant. In our view, the more plausible reading of this provision, imperfectly drafted as it is, is that the general requirement from the opening statement applies to the ensuing enumerations. However, the Bosnian Council for Protection of Competition has repeatedly challenged the exercise of public authority to prescribe legal rules as competition law infringement, as described in more detail below.
Network of pharmacies in the Sarajevo Canton.In its decision of 20 July 2007, the Council established that the ordinance limiting the number of pharmacies that can operate in the Sarajevo canton, adopted by the Assembly of the Sarajevo Canton, was a restrictive agreement in violation of the competition statute as it limited the market and discriminated between pharmacies which were included into the network and those that were not. The Council ordered the Assembly to amend the disputed regulation but did not impose a fine on the cantonal assembly.
Taxi services in the Sarajevo Canton. In its decision of 14 June 2010, the Council condemned the Assembly and the Ministry of Transport of the Sarajevo Canton for the adoption of ordinances limiting the number of taxi vehicles operating in the Canton and imposing uniform prices for taxi services. The Council found these ordinances to amount to prohibited restrictive agreements and fined the Ministry of Transport of the Sarajevo Canton with approximately EUR 25,000.
Supply of medicines in the Zenica-Doboj Canton. In its decision of 28 February 2012, the Council held the government of Zenica-Doboj Canton in breach of the competition law because of the provisions of its ordinance requiring private pharmacies which have contracts for the supply of medicines with the cantonal Health Insurance Bureau to pay to their employees “realistic” wages which cannot be lower than the average wage in the state-owned pharmacies. Just like in the taxi services decision, the Council qualified the disputed piece of regulation as a restrictive agreement but offered no analysis. The Council also found illegal the provisions of the agreements between the Health Insurance Bureau and private pharmacies containing the same “realistic” wages requirement. According to the Council, by subjecting private pharmacies to a special minimum wage requirement, the cantonal government and the Bureau indirectly affected the market by imposing additional obligations which, by their nature or according to commercial usage, had no connection with the supply of medicines. The Council ordered the cantonal government to amend the disputed ordinance and the Bureau to amend the disputed provisions of the agreements with private pharmacies. In addition, the Council fined the cantonal government and the Bureau with approximately EUR 10,000 and EUR 5,000, respectively.
Medicines covered by public health insurance in the Federation. In its decision of 4 October 2012, the Council declared null and void adecision of the Government of the Federation of Bosnia and Herzegovina containing a list of medicines that were to be funded by public health insurance fund. The Council found that the provision of the decision specifying that the said list may not contain more than five medicines of the same kind (e.g. of the same generic name) represented an illegal restrictive agreement. The same fate affected the provision privileging locally produced medicines over imports. Even though it declared the bylaw null and void, the Council ordered the Government to repeal it. A fine in the amount of approximately EUR 40,000 also ensued.
Energy from renewable resources. Also worth noting is the decision of 4 October 2012, in which the Council assumed jurisdiction to examine a decree of the Government of the Federation of Bosnia and Herzegovina on subsidizing the production of energy from renewable resources but found that the decree in question was not restrictive of competition.
Interestingly, in all cases summarized above in which it found infringement, the Council qualified the disputed regulation as restrictive agreement and not as abuse of dominance as one could expect. Unfortunately, the Council did not offer a shred of legal analysis that led it to conclude that the competition statute applies to the exercise of the public authority to prescribe regulations and that, moreover, such activity amounts to restrictive agreement.
