Serbian competition watchdog investigates foreign company for exclusive distribution in Serbia

The Commission for the Protection of Competition (“CPC”) has initiated formal proceedings against the Polish producer of sports equipment and accessories POLANIK Sp. z o.o. (“Polanik”) and its Serbian distributor GR Sport d.o.o. Sremska Mitrovica (“GR Sport”) for an alleged exclusive distribution arrangement.

Facts

GR Sport and Polanik apparently entered into an exclusive distribution agreement in 2005. Although there has been no such formal agreement since 2006, GR Sport confirmed during the preliminary phase of the investigation that it is acting as the exclusive distributor for Polanik in Serbia and also provided Polanik’s confirmation of the same. Moreover, the CPC discovered that GR Sport is also identified as the exclusive distributor for Polanik in Serbia on the Polanik website.

Legal Background

The CPC preliminary assessed that the share of GR Sport on the relevant local market for wholesale of athletic equipment (excluding footwear and apparel) was likely to be above 25%. The parties therefore should have applied for clearance (so called individual exemption) for their exclusive distribution arrangement. Failure to do this is regarded as an antitrust violation under Serbian law for which fines of up to 10% of the offending company’s annual Serbian turnover may be imposed.

Important messages

Although it may not initially appear so, this investigation sends out some important messages. First of all, this is the first time that the CPC has opened a formal investigation against a foreign legal entity.

Secondly, until now the CPC has exhibited a somewhat relaxed approach to non-exempted exclusive distribution agreements and similar vertical restrictions that qualify as competition restraints “by effect”. The latest actions of the CPC raise justifiable concern that from now on it might depart from its previous lenient approach and subject such arrangements to greater scrutiny.

Finally, even though exclusive distribution typically assumes that the supplier is restricted from selling its products to any other buyer in the territory exclusively allocated to the distributor, the CPC has yet to determine whether such agreement was indeed reached between Polanik and GR Sport, considering that since 2006 there has been no written agreement in place.