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Editorial

Serbian parliament adopts amendments to Competition Act

Amendments to the Serbian Law on Protection of Competition were published in the Official Gazette on 31 October 2013 and will come into force on 8 November 2013. The adopted amendments to a large extent follow solutions from the draft which the Government submitted to the Parliament back in July this year. We devoted two earlier blog posts to various drafts of the amendments (apart from the Government's July draft, we also analyzed the initial draft published in April). Now that the amendments have ripened into law, it is worth providing an overview of the most important changes to the competition legislation.

Election of Commission bodies

In the last minute, an amendment has been introduced to prescribe for reappointment of the President and the members of the Council of the Commission for Protection of Competition. By 8 December 2013, the speaker of the Parliament will have announced a public call for the candidates for the President and the Council of the Commission. The mandates of the current President and the members of the Council will be terminated once the new bodies are elected. While the election procedure remains unchanged (the President and Council members are elected by the Parliament upon proposal of the competent Parliament committee), the amendments introduce an important novelty with respect to the composition of the Council, which now must have at least two lawyers and at least two economists among its ranks.

Statute of limitations

The statute of limitations for the imposition of fine has been extended from the existing three-year period (applicable to both imposition and collection of fine) to five-year period which starts running from the last action representing the infringement. The statute of limitations is tolled every time the Commission takes an action towards establishing the infringement, subject to the absolute statute of limitations of ten years. A separate five-year statute of limitations applies to collection of fines. This period starts running from the date when a Commission decision on the imposition of a fine becomes enforceable or, if judicial review is initiated, on the date when the court decision becomes final. The statute of limitations is tolled every time an action is undertaken towards collection, subject to the absolute statute of limitations of ten years.

With respect to the pending proceedings, the statute of limitations from the old law (three years from the infringement for both imposition and collection of fine) continues to apply.

Existence of dominance

The presumption of dominance for undertakings whose market share is 40% or more has been abolished. The Commission in all cases bears the burden of proof concerning the existence of dominance and the size of the market share (even if it exceeds 40%) is now only one of the factors to be taken into account. This, however, does not apply to the pending proceedings for abuse of dominance, in which the presumption of dominance from the old law continues to apply.

Commitments

The amendments bring significant modifications to the commitments procedure. According to the adopted law, the party may submit its proposal of commitments before it receives the Commission's statement of objections. Upon receiving the party's proposal, the Commission conducts a market test - it publishes the proposal on its website and invites interested parties to comment within 20 days of the publication. If, following the receipt of the comments, the Commission establishes that the offered commitments are acceptable, it will issue a decision containing appropriate behavioral/structure measures based on the party's proposal. The law expressly provides that the Commission is not obliged to accept the party's proposal of commitments.

The Commission may resume the proceedings that were suspended based on the commitment proposal accepted by the Commission within three years from the suspension if the circumstances based on which the commitment decision was adopted have significantly changed, the party does not fulfill its commitment obligations or does not deliver adequate proof of their fulfillment, or if the Commission establishes that the commitment decision was adopted based on incorrect, untrue, incomplete or misleading information submitted by the party.

Judicial review

Although the April draft contained a provision seeking to shift competence for judicial review of Commission's decision from the Administrative Court to the Commercial Court of Appeals, the adopted amendments do not disturb the existing competence of the Administrative Court. The amendments do, however, touch upon certain other aspects of judicial review process - the instructive deadline for the Administrative Court to decide on challenges to the Commission's decisions is extended from two to three months. The same deadline is imposed on the Supreme Court of Cassation concerning its review of the decisions of the Administrative Court.

Merger control

In the field of merger control, one of the novelties is that the deadline for the Commission's decision in Phase II proceedings is extended from three to four months. Further, the law now clarifies what the Commission in its practice was already reading into the old law: that the acquisition of a part of an undertaking is subject to merger control if such part represents an independent business unit, and that the one-month deadline to either approve a concentration in Phase I or initiate a Phase II investigation starts running from the date when a complete notification is submitted.

Financing of the Commission

The Commission will continue to set charges applicable in proceedings before it (inter alia, activities related to merger clearance and individual exemption), subject to the consent of the Government. However, the amendments rename those charges from "fee" (Serbian: naknada) to "administrative fee" (Serbian: taksa). This change has been criticized by the Commission as a potential threat to its financial independence.

In spite of the terminological change, the amendments do not change the nature of the financing of the Commission's work. According to the Serbian Law on Budget System (Zakon o budĹľetskom sistemu) and the Law on Administrative Fees (Zakon o republiÄŤkim administrativnim taksama), administrative fee is chargeable for directly rendered public service, or for the proceedings conducted by a competent public body, represents public revenue and is payable directly into the budget. However, the amendments have not touched upon the provisions of the Law on Protection of Competition according to which the Commission is obliged to transfer to the budget only the revenue surplus remaining after its expenses. This implies that the so-called administrative fees will continue to be paid to the Commission's account and not to the budget. This conclusion is reinforced by the fact that the amendments have authorized the Commission to set aside the reserves before it transfers the income surplus to the state budget, a power the Commission did not have under the former legislation.

A possible impact of substitution of "fees" with "administrative fees" could be in the inability to set fees as a percentage of market participants' revenues. Currently, the fee for merger clearance is set as a percentage of total revenues of merger participants, subject to a cap of EUR 25,000 if merger clearance was obtained in Phase I proceedings and EUR 50,000 if merger clearance is issued after investigation. According to the Law on Budget System, administrative fee cannot be set as a percentage but can be expressed only as a lump-sum. Furthermore, the budgetary legislation provides that administrative fee must reflect the costs of proceedings, while the criteria for the assessment of costs are laid down by the Ministry of Finance. It is unclear whether these restrictions on the amount of administrative fee, stemming from the Law on Budget System, will apply to administrative fee referred to in the amended Law on Protection of Competition.

No Commission's obligation to pay interest on refunded amount of fine

Closely related to the Commission's finances is the provision of the amendments which abolishes the obligation of the Commission to pay interest on the amount of fine refunded to a market participant following successful application for judicial review. This amendment was justified by the fact that the amount of fine is payable into the state budget and not to the Commission. Interest is now payable from the budget, in line with the rules regulating tax collection.

Basis for calculation of fine

According to the former version of the Law on Protection of Competition, in case of a competition infringement, the Commission could have issued a fine in the amount of up to 10% of infringer's aggregate worldwide turnover generated in the year preceding the initiation of the proceedings. The amendments now specify that only the infringer's turnover generated on the Serbian market can be taken into account when assessing a fine.

Power to revoke individual exemption

Other notable amendments include the Commission's new power to revoke an individual exemption from prohibition if the conditions underlying the exemption decision have changed, the exemption was based on inaccurate or false information, or the exemption "is being abused".

No appeal to procedural orders

The general availability of separate appeal to the Commission's procedural orders is now abolished and the appeal is available only if expressly provided for in the law, such as in the case of provisional measures ordered by the Commission.

Code of ethics

The law now requires the Commission to adopt its code of ethics, with the aim of "preserving the dignity of the organization, independence and impartiality, raising awareness of responsibility in their work, and protecting and improving their professional integrity". Violation of the code of ethics will be one of the grounds for revoking the President of the Commission or, as the case may be, a member of the Commission's Council.

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