03 Oct, 2017

Famous Trust Buster That Took on Delta, First President & NCA Founder Speaks Up Against the Serbian Antitrust Watchdog

The trust buster himself, President Theodore Roosevelt, looks on as a trust is squeezed by Treasury Secretary George B. Cortelyou Illustration by Udo J. Keppler, courtesy of Library of Congress

In 2015, Professor Dijana Marković Bajalov, one of the founders and  renowned presidents of the National Competition Authority (NCA), and country’s most respected trust-buster – during her tenure at the NCA, Professor Bajalović took on Delta, for illegal takeover of C Market, and other major incumbents, a feat unheard off at the time (and was eventually removed from office in 2010) – along with others, filed a constitutional challenge against the Protection of Competition Act (“Competition Act”) in 2015, thus shedding the light on this important issue and bringing it before the Constitutional Court.  To the surprise of many legal experts, this landmark development, and in many ways clairvoyant as it heralded a broader action that took place in recent months, received little media coverage at the time.  In light of recent developments, covered by our firm in depth (“Serbian Menarini” – Chillin’Competition Weighs in on Serbia Development, Serbia’s National Bar Submits a Constitutional Challenge to the Competition Act, Serbian Chamber of Commerce Proposes Total Revamp of Serbian Competition Law?), Professor Bajalović broke silence and gave a daring interview to the renowned daily paper “Danas“, blasting the Competition Act and current Commission’s leadership and alleging abuse of power.

In an article published on Friday, Professor Bajalović, who famously took on Delta, for the illegal takeover of C Market, and stood up to local tycoon Miroslav Mišković, and was the founder and first president of the NCA, stressed the inadequacy of the Competition Act and called for amendments that would finally limit the extensive powers granted to the NCA.  As depicted in the title itself “Judge, Jury and Executioner”, Professor Bajalović emphasizes that the excessive use of powers by the NCA inherently represents “a State within a State” behavior.

In 2015, Professor Bajalović, together with other experts, presented an in-depth case for the unconstitutionality of the Competition Act, highlighting the need to align it with the European Convention on Human Rights (“ECHR”).  This assessment and critique of the Competition Act predates the recent constitutional challenges, submitted by the national Bar, YUCOM, UZUZ and Gecić Law, by more than two years.  However, as it tends to happen much too often with positions that are ahead of its time, the challenge received little media coverage and remained under the radar of both public and professional community.

However, in light of recent development and international coverage this discussion received in recent months, Professor Bajalović took the opportunity to once again highlight several examples of the NCA’s blatant “(mis)use of powers”, discuss the lack of effective judicial review in Serbian competition law, and stress the important issue of due process and protection of human rights in competition cases.  The piece also reflects on Serbia’s obligation to harmonize the Competition Act with the ECHR, primarily so as to avoid potential damages arising from violations of the ECHR guarantees (more information available at the link).

Convenience translation of the full article is available below.

According to the 2009 Competition Act, the Commission for Protection of Competition has excessive powers: it can conduct unannounced investigations of premises of “accused” companies without a court order; it can impose fines up to 10% of the total annual turnover of a corporation generated on the territory of Serbia and order company breakups, divestment of shares or assets, etc.  The Commission runs quasi-inquisitorial and quasi-adjudicative proceedings in parallel and imposes measures that are by their severity equal to criminal sanctions.  As if this were not enough, the Commission independently adopts secondary legislation for the application of its own governing statute.  A sectoral concentration of all three branches of power in one!

Considerable fears that these powers might be (ab)used by the Commission against companies present in the Serbian market turned to be more than true.  There have been cases of retrospective application of the 2009 Act and imposition of large fines on companies already investigated under the preceding act [previous Competition Act, under which only courts could issue fines].  It is unnecessary to emphasize that this constitutes flagrant breaches of the principle of legal certainty. Recently, it became public that the Commission rushed to launch a considerable number of investigations against companies in Serbia, immediately before the new General Administrative Procedure Act (“New Administrative Act“) would come into force, in order to avoid its mandatory application. The New Administrative Act provides considerable procedural safeguards for investigated parties.   The Serbian Bar Association also reacted by submitting a constitutional challenge against the Competition Act.

Some might say that the situation in Serbia resembles what can be found in the rest of Europe.  In the European Union and a great number of European countries, the competition enforcement system is of administrative nature.  At first instance, proceedings are led by administrative authorities, with powers similar to our Commission.  The advantage of this system is that, in cases of competition infringements, a competition authority can quickly and effectively react. Another important feature of this system (which is disregarded in Serbia) is effective judicial protection.  In the European Union, at second instance [on review], the ECJ examines in detail the facts and conclusions reached by the European Commission and the adequacy of sanctions and measures imposed.  In many countries, there are courts or special court panels specialized in competition law, with judges qualified to make decisions on the merits in complex cases.

Nevertheless, the European competition community and public voices criticism that said administrative system is inquisitorial, because it hinders objectivity between investigative and decision-making functions.  The European Court of Human Rights, in the Menarini case, also opined on the matter.  It concluded that penalties for competition infringements are, because of their severity, of criminal nature, even if not qualified as such by the national legislature. Companies accused of competition infringements must be provided with all the guarantees for a fair trial, in accordance with the European Convention for Human Rights.  Indeed, the ECHR confirmed that the administrative system of competition enforcement is in conformity with the Convention, but only if, at second instance, full review by an independent court exists.  One of the basic principles of the Convention is the separation of investigative from adjudicative functions in criminal matters – the authority that leads the investigation cannot be allowed to, at the same time, decide on whether a competition infringement [has been proven] and impose fines.

The Serbian Competition Act does not adhere to said principles. The Commission for the Protection of Competition has recently publicly announced that it is working on amendments to the Competition Act, without providing any clarity as to their direction.  The only direction in which we must go [with said amendments] is to achieve full compliance with the European Convention on Human Rights.  Otherwise, Serbia risks paying large damages to companies investigated for alleged competition infringements.

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