The record of public enforcement of competition law in Montenegro is modest, despite the efforts which the national Agency for Protection of Competition has put in various investigations.
Part of the problem lies in the dysfunctional enforcement dualism. The Agency is competent to establish the infringements of competition and propose fines. Imposition of fines, however, is within the purview of the misdemeanour courts. Misdemeanour courts are not bound by the Agency’s finding of the infringement.
The Administrative Court published in May 2016 an analysis of the Competition Act and its most important flaws.
Applicable rules of procedure
The proceedings before the Agency are governed by the Competition Act as lex specialis. The Act on General Administrative Procedure and the Misdemeanours Act apply to procedural matters which are not regulated by the Competition Act. The problem is, according to the Administrative Court, that the procedural provisions of the Competition Act are not sufficiently developed and are often badly drafted, while the provisions of the Act on General Administrative Procedure and the Misdemeanours Act are not tailored to fit a competition law investigation.
Initiation of proceedings and notion of party
Article 28 of the Competition Act stipulates that the Agency initiates investigation ex-officio and when it reasonably assumes, based on a third party initiative, that there has been an infringement of competition. The conjunction “and” is used here incorrectly, because a third-party initiative is not a stand-alone ground for initiation of proceedings but just a trigger for the Agency to initiate proceedings ex-officio. The proceedings can be initiated by a party only when they relate to the approval of concentration or individual exemption of a restrictive agreement. This inaccuracy in the Competition Act has created confusion in practice as to whether the person who has submitted to the Agency an initiative to investigate a third party conduct enjoys the status of a party to the proceedings, with all associated rights, or it is an outsider to the proceedings with a narrower set of rights. The correct answer should be that the third party initiator is not a party to the proceedings and it, therefore, has a narrower set of rights. Its rights are restricted to the right to be informed of the development in the proceedings. The Competition Act explicitly stipulates that a person who has submitted an initiative for initiation of proceedings against a third party is not itself a party to the proceedings. Yet, the Competition Act provides for the right of the initiator to receive from the Agency a notice on the statement of objections delivered to the party under investigation and to “object” to the notice within 15 days. The Administrative Court questions the nature of this objection and points out that it is unclear whether the Agency has the obligation to rule on such objection, and if yes, whether its ruling is subject to judicial review.
The Administrative Court criticises the provision of the Competition Act allowing initiation of investigation based on “reasonable assumption that there has been an infringement of competition”. It points out that the administrative decisions cannot be based on assumptions but on “reasonable likelihood that an infringement has occurred”. The Administrative Court may be prone to annul a decision on initiation of competition law investigation which is based on “assumption” rather than on “reasonable likelihood”.
Request for information v. order for information and the impact on business secret
The Administrative Court criticises the drafting of Article 39 of the Competition Act. This Article grants to the Agency the power to request information and documents from third parties and to order the party under investigation to submit information and documents during inspection. It then concludes by prescribing that a person addressed with a request for information or documentation cannot refuse to comply with the request on grounds of business secret. A contrario argument could be that the party under investigation addressed with an order to provide information or documentation may refuse to comply with the order invoking business secret defence. The legislator could not have wanted such a pervert outcome.
The Agency conducts investigation in order to collect information and facts necessary for enforcement of the Competition Act. To that end, the Agency may collect documents and data, take statements from parties and witnesses, engage experts, provisionally confiscate assets and conduct inspections. However, the Court notes that it is unclear under the Competition Act whether the Agency may take all these measures before or only after it has adopted a formal decision on initiation of investigation.
Article 60 of the Competition Act empowers the Agency to impose periodic procedural fines on undertakings which do not comply with the Agency’s orders made during inspection. The Court is of the opinion that this provision is not in line with another provision of the Competition Act, which stipulates that the Agency may impose procedural fine only if the party fails to comply with the Agency’s decision made in the form of a conclusion (zaključak). Given that no conclusions can be rendered in the course of an inspection, there is nothing to breach which could trigger a procedural fine.
Decision on initiation of proceedings
One of material shortcomings of the Competition Act is its provision stipulating that the parties may initiate judicial review against all decisions of the Agency, including procedural ones such as a decision on initiation of investigation. This has proved to prolong the duration of the proceedings before the Agency, which in turn creates a risk that a request for initiation of misdemeanour proceedings for imposition of fine will be time-barred. Misdemeanour proceedings can be initiated no later than within two years from the date when the misdemeanour occurred and cannot be maintained after the expiry of four years since that date. Conclusion on initiation of proceedings is a procedural decision that does not affect substantial rights of the parties to the proceedings. Its objective is to inform the parties of the contents of the investigation and invite them and third parties to submit any relevant information in their possession. The court is of the view that judicial review of procedural decisions of this kind should be available only as a part of judicial review of substantive infringement decision of the Agency, and not on stand-alone basis.
Statement of objections
Before adopting a decision on infringement, the Agency is obliged to deliver a statement of objections to the party concerned and to the party who submitted the initiative for investigation. The party may argue against the findings in the statement of objections and propose additional evidence or witnesses. Unfortunately, the Competition Act, as the Court notices, does not elaborate on further procedure.
The Court has noticed that the Competition Act mandates termination of proceedings (obustava postupka) only when a party has withdrawn its request for individual exemption or concentration approval. The statute is silent as to what happens to the proceedings when the Agency finds no infringement or when further conduct of the proceedings is no longer justified for other reasons.
The Court has expressed its concern that the provisions regulating summary procedure for concentration approval (Phase 1) fail to guarantee the party’s right to a hearing. The Court has obviously disregarded that summary concentration approval proceedings can only result in the Agency’s approval of concentration. In other words, the summary procedure can only have an outcome that is positive for the party to the proceedings. If the Agency is not prepared to approve a concentration in summary proceedings, it must open an investigation. At that point, the party becomes entitled to a hearing.
Case-law of the Administrative Court
Since 2011, only 50 judicial review proceedings have been initiated before the Administrative Court. Seven of these cases are still pending. In the cases decided thus far, the Court reviewed the decisions of the Agency on both substantive and procedural grounds. For example, the Court clarified that the applicable law with regard to the procedural matters is the law in force at the time when the procedure was initiated. With regard to the substantive provisions (i.e. the existence of infringement), the applicable law is the competition legislation which was in force at the time when the infringing action was committed.
Furthermore, the Court granted many complaints on procedural fines, finding that the Agency did not properly assess them.
In one case, the Court confirmed that the Agency is entitled to conduct on-site inspection even if the party had previously delivered to the Agency all requested documents. The Agency invoked the ruling of the European Court of Justice*, which stated that “the right of access would serve no useful purpose if the Commission’s officials could do no more than ask for documents or files which they could identify precisely in advance”.
Finally, the Court expressed its concern that it may not be able to satisfy the mandate from the new Administrative Procedure Act, which is to decide on the merits of the case if the challenged administrative act has been previously annulled twice, provided that the nature of the case allows it. The Courts doubts that it will have sufficient knowledge to run an independent assessment of alleged competition breaches.
*Joined Cases 46/87 and 227/88, Hoechst AG v Commission