Thresholds set this low can (and usually do) result in excessive merger control which eventually brings more harm than good to market competition. In order to put an end to this, a change in decisional practice and/or legislative change in regards to this important aspect of merger control is required.
The Act provides for rather low merger control thresholds, compared both to EU law and countries in the region. Namely, a concentration of undertakings is to be notified to the national Commission for Protection of Competition (the Commission) if:
Generally, low thresholds can result in excessive merger control resulting in mergers without any potential to distort competition on the Serbian market being encompassed.
Apart from placing an overwhelming administrative burden on the Commission and diverting its attention from the real threats to the competition, the inadequate thresholds coupled with extensive interpretation of the notion of merger by the Commission can have a severe impact on market participants.
Firstly, any prospective entry by a large scale foreign investor to the Serbian market, implemented by way of merging with a local company which generates an annual turnover above EUR 10 million, needs to pass through the Commission without exception.
Secondly, the largest local companies, with a global revenue in excess of EUR 100, virtually need to notify the Commission of any planned mergers regardless of its geographic and/or effectual scope.
Finally, ‘foreign-to-foreign’ mergers still need to be notified to the Commission in case the turnover of any of the merger participants exceeds the national threshold.
In parallel to low thresholds, the Commission is not prone to using the ‘local effect’ doctrine in the context of extraterritorial mergers, which is a key tool for bypassing the not-fit-for-purpose merger thresholds, although it has the authority to do so under Article 2 of the Act.
The matter at hand is intertwined with the method of financing the national competition authority. Namely, given that the Commission is funded mainly from its own revenue, a combination of high taxes and low merger control thresholds is continuously preserved in order to ensure a steady stream of revenue on an adequate (or even envious) level. Thus, any legislative modification in this regard would need to include a structural change in how the Commission is financed and consequently, would make future changes in merger control thresholds plausible. Otherwise, a decrease in the number of mergers that must be notified and cleared could be possible only if the Commission retakes the position it took back in 2007, i.e. that only mergers that can objectively affect the Serbian market need to be assessed. However, there is no indication that such an about-face in its decisional practice is on the cards in the near future.
Source: Commission for Protection of Competition of the Republic of Serbia, in Serbian (and partially in English).
This article was previously published by Thomson Reuters/Practical Law and available on our website with the permission of the publisher.
Contributors: Bogdan Gecić and Tatjana Sofijanić, Gecić Law
