The Serbian Competition Authority (“SCA”) recently focused on unapproved mergers i.e. gun-jumping. The most recent “victim” of the SCA’s investigations into gun-jumping was Fortenova Grupa d.d. (“Fortenova”), with the only previous undertaking fined for gun-jumping being Prointer IT Solutions. Meanwhile, Ernst & Young are also being investigated under the same allegations. Is this simply a witch hunt or is there something going on here?
Before we get into the heart of the matter let`s define what gun-jumping is. In competition law, gun-jumping is a concept pertaining to an unlawful pre-merger and pre-clearance coordination of commercial activities taking place between parties involved in a merger or an acquisition, or to put it in simpler terms, gun-jumping relates to unlawful pre-merger coordination between the parties to an M&A transaction.
Fortenova was founded as a successor and “a savior” for the Croatian troubled Agrokor. Since Agrokor is also famous to anyone remotely interested in insolvency matters, it is no secret that due to financial difficulties creditors of Agrokor accepted a debt resettlement deal and subsequently Fortenova began its operations.
The SCA announced early in October 2020 that it would investigate whether Fortenova failed to obtain merger clearance when taking over Agrokor’s assets in Serbia. Namely, Fortenova acquired Frikom d.o.o. Beograd, Dijamant a.d. Zrenjanin, Mg Mivela d.o.o. Beograd, PIK Vrbovec d.o.o. Beograd, and other companies that were part of the Agrokor group. After the investigation, we face an interesting and somewhat dubious outcome. On the one hand, the SCA fined Fortenova for failing to submit a transaction notification, but on the other hand, it didn`t find anything troubling with the transaction and cleared it. The fine imposed for gun-jumping, the second of its kind in the SCA`s history, is the largest one issued to date, standing at RSD 8.8 million (approximately EUR 75.000).
Despite being a record-setting fine within Serbian competition law, the fine falls on the lower end of the spectrum provided by the Competition Act. According to the legislation, the maximum possible fine is set at 10% of a business’s annual turnover in Serbia during the relevant year.
Fining businesses because they didn`t notify the authorities of their transactions is not new. Even the European Commission pays attention to such breaches of EU competition law. Most notable examples thereof include the Altice case, Electrabel, Marine Harvest etc. Meanwhile, both Serbian cases, Fortenova and the ongoing investigation into Ernst & Young may indicate that the SCA is developing a harsher stance on merger notifications. The SCA even explained that one of the reasons behind its Fortenova fine was to deter future non-compliance. Will this fine be enough to deter future breaches, making it a one-off thing in Serbian competition law, or will it become a bedrock for future probes remains to be seen…
Author: David Spaić
