02 Sep, 2017

Serbian Chamber of Commerce Proposes Total Revamp of Serbian Competition Law?

Recent developments in Serbia, in particular an unprecedented number of hastily opened investigations and Competition Commission’s push for a complete revamp of the competition act, discussed in a recent PLC article “The Dawn of Dawn Raids or the Twilight of Due Process in Serbia?”, raised many eyebrows and prompted significant dissent from both public and private stakeholders.  The widespread dissent took an interesting twist on August 21, 2017 when the Chamber of Commerce and Industry of Serbia (hereinafter: the Chamber of Commerce) issued an invitation for consultations to the members of its Assembly and Managing Board re the application and announced revamp of the Protection of Competition Act (hereinafter: Competition Act).  The Chamber of Commerce specifically singled out the Austrian model that “foresees a clear separation of powers between the administration and the judiciary”.

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[ UPDATE ]

Following the submission of this article on August 25, 2017, the following developments took place:

[August 30, 2017]

  • Following the Chamber of Commerce invitation for consultations to the members of its Assembly and Managing Board on August 21, 2017, the Ministry of Trade, Tourism and Telecommunications and the Commission for Protection of Competition announced the commencement of work on a new competition bill on August 30, 2017;
  • Peculiarly, the Competition Commission, in said announcement (link), also opined on the nature and qualifications of apparent private correspondence (but without disclosing it) between the Association for Protection of Constitutionality and Legality (UZUZ) and a partner law firm, and certain other companies and entrepreneurs (without disclosing any of their identities, apart from UZUZ). Furthermore, it seems the Commission views said private correspondence to be in breach of Serbian Bar Association rules of conduct.  Consequently, the Commission states in said announcement how it “will address the Bar Association of Serbia with the request to assess infringement of the Code” against an unidentified law farm who partnered with UZUZ in the purported private correspondence.

[August 31, 2017]

  • In response to the Competition Commission’s announcement, UZUZ announced it will file a formal motion for access to information of public importance and informed the Freedom of Information Ombudsman, in order to have the alleged private correspondence and documents acquired by the Commission published, as well as the means by which this public authority came into possession of said correspondence revealed.  UZUZ stated it wanted to validate the private correspondence’s authenticity, while underlining that if valid, Competition Commission’s actions would represent “gross violations of privacy of correspondence guaranteed by the Serbian Constitution and the European Convention on Human Rights”.

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A widespread outcry from both public and private sectors over the recent months reached a new high when the Chamber of Commerce issued an invitation for consultation on the application of the Competition Act (convenience translation provided below). The Chamber of Commerce pointed to the fact that the implementation of the Competition Act, discussed below, has shown there is room for normative improvements, and called on its members to help formulate the position of the business sector.  It is noteworthy that its membership includes the who-is-who of both regional and multinational business.

While not inherently surprising, a call to action from the Chamber of Commerce marks a noteworthy milestone, as it uncovers that the dissent amongst business leaders has grown into a broader coalition.  It also comes at the heels of the Serbian competition authority’s (hereinafter: the Commission) aggressive use of its powers to carry out dawn raids and hastily open an unprecedented number of investigations while maintaining the oddly low merger control thresholds intact.

The Commission’s actions reached their climax with a recent announcement on the creation of a new statute aimed at making its ‘enforcement even more effective’.  This move, similar to the investigations in May of 2017, potentially points to an intention to circumvent / undo certain provisions introduced by the General Administrative Procedure Act (the New Administrative Act), that could in turn reverse the course of due process developments in competition proceeding in Serbia as an ECHR member state.  While it is very common for the Chamber of Commerce to participate in the legislative process, this turn of events has likely aggravated the business sector, effectively prompting the Chamber of Commerce to get involved at a much earlier stage, on behalf of concerned stakeholders from both public and private sectors.

As the Chamber of Commerce noted in its invitation for consultation, in contrast to the US and many European systems, which provide stringent due process safeguards and active judicial involvement and control throughout the process, Serbia’s current Competition Act offers neither.  Specifically, the Competition Act grants the highest legal powers, including the largest fines, to a strictly administrative-inquisitorial body, the Commission.  In addition, while dawn raids are a common tool used by competition watchdogs around the globe, in Serbia they can be conducted without any immediate court control (before or after) and the party in question is notified at the time and place where the dawn raid is conducted.  Invitation also touches upon procedural regulations.

In our opinion, the current statute allows the Commission to conduct these proceedings without basic procedural guarantees, oral hearings and court oversight until the appellate proceedings, while also independently rendering fines up to 10% of annual revenue (in fact the highest fine amount under the Serbian Law).

Another factor that may have forced the Chamber’s hand is the fact that unlike its more cautious predecessors, the current leadership of the Commission decided to tap into these vast and unchecked powers in a very aggressive/peculiar fashion.  Said peculiarity stems from the timing of the increased activity, right before the much heralded and awaited New Administrative Act came into force on June 1, 2017.  Moreover, while the Commission showed no fear in going after the major players in the market – targets of its prosecution include everyone from Banca Intesa, Philip Morris, BAT, Ferrero, to Frikom, the Serbian Bar Association and EPS Distribucija – this apparently positive development is marred by gross due process violations, unclear policy aims and overall arbitrariness with no checks-and-balances in place.

In an attempt to follow the best practical examples in implementing certain regulations, the Chamber of Commerce also outlined a number of proposals and best practices.  As the letter notes, the Chamber of Commerce focused on legal solutions from the European Union, aware of Serbia’s aspirations towards full membership in the EU.  More specifically, the invitation draws attention to the Austrian model, also used in Sweden, Finland, as well as United States and Canada, which includes a clear separation of investigatory and adjudicating functions in competition proceedings.

The choice of the Austrian model is very sensible given the similarities between two countries and the close economic cooperation of the two Chamber of Commerce that could potentially bear benefits of an experienced international partner in the implementation process (link).  Moreover, Mr. Marko Čadež, President of the Serbian Chamber of Commerce, recently stated that the Chamber of Commerce aims “to make the Austrian companies coming to Serbia feel at home, as well as that for the Serbian Chamber of Commerce to provide the support and services similar to those they receive from the Austrian chambers of commerce” (link).

In conclusion, the involvement of the Serbian Chamber of Commerce presents a call for the much-needed public and broad debate about the Act aimed at defending due process, human rights and legal certainty when doing business in Serbia, something that was predicted in the aforementioned earlier piece on the topic.  As emphasized there, a transparent debate is the only way secure that a new antitrust act that fosters a free market and competition while protecting human rights of individuals and market participants introduced by the New Administrative Act and guaranteed under the ECHR and the Serbian Constitution.

The PDF of the above mentioned invitation for consultations by Serbian Chamber of Commerce is attached in the left-side column.

This article was previously published by Thomson Reuters/Practical Law and available on our website with the permission of the publisher.

Authors: Bogdan Gecić and Ognjen Popović, Gecić Law

This article was previously published by Thomson Reuters/Practical Law and available on our website with the permission of the publisher.

Authors: Bogdan Gecić and Tatjana Sofijanić, Gecić Law

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