The National Assembly of Serbia has recently passed the amendments to the Criminal Code. One of the amendments revamps the provisions on criminalization of cartels.
New Article 229 of the Criminal Code reads:
Whoever within a market undertaking enters into a restrictive agreement to fix prices, limit production or sales, or share markets, and this agreement is not exempted from prohibition within the meaning of the law regulating protection of competition, shall be punished with six months to five years in jail, as well as with a fine.
The person who has committed the act referred to above and who fulfills the requirements for exemption from an obligation by a measure for the protection of competition within the meaning of the Competition Act, may be exempted from punishment.
The new provision criminalizes so-called hard-core cartels. It does not encompass unilateral practices, such as abuse of dominant position on the market. Any person within the market undertaking who enters on behalf of the undertaking into a cartel agreement is subject to criminal prosecution – the personal scope of the provision is not limited to authorized representatives, CEOs or other formal positions. It is a matter of fact who will be deemed in a particular case to have “entered” into a restrictive agreement on behalf of the infringing undertaking. Theoretically, even individuals who enter into a criminal cartel abroad can be prosecuted in Serbia if the cartel is directed at the Serbian market and the individual finds himself in Serbia.
The amendment is a welcome elucidation of the criminal consequences individuals may face for engaging in anticompetitive conduct. It replaces incongruent and obsolete Article 232 of the Criminal Code, which used to criminalize “abuse of monopolistic or dominant position by entering into monopolistic agreements”. This old provision clumsily combined unilateral behavior and restrictive agreements in the description of actus rei. No wonder it has never been enforced in practice.
Where the new Article 229 of the Criminal Code is insufficient is in the part attempting to regulate the exemption from punishment in case leniency is obtained from the Competition Commission. According to the Competition Act, a party to a restrictive agreement who was the first to report the agreement to the Commission or who supplied to the Commission evidence based on which the Commission was able to render an infringement decision, is to be exempted from monetary fine, provided it is not a ring leader.
The new provision states that the individual who has committed this crime “may” be exempted from punishment “if he fulfills the requirements for an exemption from an obligation by a measure for the protection of competition”. The sintagm “obligation by a measure of protection” is confusing – the legislator probably wanted to refer to the “obligation to pay the monetary amount prescribed by the measure for the protection of competition”, which is the language of the Competition Act. More importantly, however the Competition Act contains rules on how the infringing undertaking can be exempted from a fine, not on how a responsible individual within the undertaking can be so exempted. It is our guess that the legislator wanted to say that if the infringing market undertaking obtains immunity from the Competition Commission, the criminal court may exempt from punishment the responsible individual within that undertaking who has been found guilty of participating in the criminal cartel that has been excused through the Commission’s leniency programme. If the infringing undertaking merely secures a reduced fine, this does not represent the basis for exemption from punishment of the responsible individual. Finally, even if the infringing undertaking obtains immunity, the individual guilty of the criminal cartel is not entitled to be spared from punishment but the court has discretion in that respect. The Criminal Code does not contain guidance as to how this discretion is to be exercised. The lack of legal certainty in this regard may have a chilling effect on leniency applicants, as individuals responsible for the company’s involvement in a cartel may understandably not be willing to self-report the infringement only to find themselves criminally liable. This is why countries that criminalize cartels usually offer the individuals within infringing market undertakings an opportunity to avail themselves of the leniency system in their own right. For example, in the UK, an undertaking who comes forward with information about its involvement in a cartel can secure immunity from prosecution through a “no-action letter” issued by the antitrust authority not only for itself but also for its employees and directors, provided certain conditions, including full and continuous cooperation with the authority, are fulfilled. Other jurisdictions, such as Austria and the Slovak Republic, apply a similar system. This is also the case outside of the EU, e.g in Australia.