Changes to the overall Serbian competition regime have been in the pipeline for some time now and during 2019 the work on the new Competition Act intensified. The draft should, once finalized, enter the Parliament’s adoption procedure at some point in 2020. What kind of changes can be expected in the area of merger control?
The merger control regime in Serbia has become notorious among multinational companies and private equity funds with a presence in Serbia for its ability to catch a large number of foreign-to-foreign deals that usually do not have effects on the local market. The reasons are the structure and the value of the merger-filing thresholds.
Currently, if the parties to a concentration together generate a worldwide turnover of more than EUR 100 million and one of them generates a Serbian turnover in excess of EUR 10 million, a filing will be triggered. Because of this, a vast number of notified concentrations are deals in which the target company has no or only an insignificant turnover in Serbia, but the acquirer (i.e. its group) is active in Serbia and meets the Serbian leg of the threshold on its own.
Stakeholders have repeatedly called for a change, not only because of the significant, yet usually unjustified, burden it places on market players, but also because the threshold structure drains the capacity of the Serbian Commission for Protection of Competition (CPC). Reducing the workload caused by numerous extraterritorial merger filings would allow the CPC to reprioritize its enforcement agenda and focus on infringements, sector inquiries and important advocacy activities.
According to the latest draft of the proposed new Competition Act, the merger-filing thresholds should be amended so that a concentration is notifiable to the CPC when the combined annual turnover of all merging parties exceeds EUR 200 million on the worldwide level and EUR 15 million on the Serbian market.
This means that the only significant change would be in the value of turnover thresholds. The structure of the thresholds would remain the same, meaning that one party alone would still be able to trigger the merger filing duty. Only borderline cases would escape the duty to file under the new regime. Multinationals and private equity funds with significant turnovers in Serbia are likely to continue to meet the new threshold too.
Other important amendments include the extension of the statutory deadline for filing to two months – a welcome change as the current 15-calendar-day deadline has often proved to be insufficient for parties to prepare a complete filing. Phase I and Phase II deadlines are likely to be changed as well – the current one-month deadline for Phase I could be increased to 45 days, while the four-month duration of a Phase II investigation could suffer a technical change to 120 days.
A positive novelty of the draft is the introduction of the concept of ancillary restraints, according to which provisions that are otherwise deemed restrictive can be allowed in the context of a concentration if they are directly related to and necessary for a transaction to go ahead (most typically, non-compete obligations imposed on the sellers). Ancillary restraints have been de facto
recognized by the CPC in practice but were not explicitly regulated by law.
The end of 2019 also saw significant changes in the composition of the CPC’s management. In November the Parliament replaced four out of five members of the CPC Council, including the CPC president. The focus of the newly formed CPC should be on public procurement, price cartels, economic analyses and sector enquiries, digital markets and prevention.
In the months to come, market players that could be affected by the expected changes and that often deal with the CPC should be aware of the legislative developments and prepared to adapt to the new rules once they take effect.