Press release on initiation of investigation procedure for competition infringement against business enterprises Fresenius Medical Care Srbija d.o.o. and Medicon d.o.o.

Commission for Protection of Competition initiated investigation procedure ex officio for infringement of competition, against business enterprises Fresenius Medical Care Srbija d.o.o. and Medicon d.o.o. and their specialized hospitals for hemodialysis, in order to investigate the existence of restrictive agreement under Article 10 of the Law on Protection of Competition, which restricts competition in the market for dialysis services in the Republic of Serbia.

Fresenius Medical Care Srbija d.o.o. and Medicon d.o.o. and their specialized hospitals for hemodialysis are, according to available information, the only private medical centers that can offer the provision of hemodialysis services in the Republic of Serbia for persons insured under the Republic Health Insurance Fund, for which there are no facilities for treatment in medical institutions provided by NHIF Network Plan. At one time, the above business enterprises submitted joint tenders in public procurements for the provision of hemodialysis, which completely excluded competition between these market participants. After the cessation of joint participation, these companies have submitted separate bids, but the specific facts and circumstances indicate that they continued to coordinate their participation in public procurements, which, if confirmed in the investigation procedure, constitutes a restriction of competition in the relevant market. Based on the above, Commission has reasonably assumed the existence of infringement of competition on the ground of consorted practice concerning participation in public procurements conducted by the Republic Health Insurance Fund for provision of dialysis services to persons insured under RHIF.

Commission shall, in investigation procedure, undertake evidentiary actions in order to determine decisive facts, which are important for assessing the existence of infringement of competition.

As always, Commission again pointed out that detecting and sanctioning cartels, especially bid regging in public procurements, is a priority in the work of the Commission on the grounds that this type of restrictive agreements is the most serious infringement of competition, which exclude all the benefits from competitive bidding in the market, increase the spending of budet funds of institutions that regulate public procurements and limit the choice of products/services.

The Commission takes this opportunity to draw attention to all market participants to the legal possibility to be exempted from payment of fine as merger remedy (which amounts up to 10% of total turnover), i.e. that the same be reduced, if they report to Commission existing agreements and/or provide evidence that will enable the issuing of decision on infringement of competition under Article 10 of the Law. The ”immunity” programme is regulated by Article 69 of the Law on Protection of Competition and relevant by-laws (Regulation and Guidelines of the Commission) published on the Commission’s Internet site www.kzk.gov.rs.

In the course of the past week, Commission initiated procedure for establishment of existence of infringement of competition relating to distribution of electronic cigarettes and liquid for electronic cigarettes, and on the strength of its legal powers carried out dawn raids of the premises of the parties on several locations in the territory of the city of Beograde. Procedures were initiated on the ground of suspicion that the undertakings concluded agreements on setting minimum prices in retail trade.

Dawn raid is an unannounced search of premises, i.e.data, documents and effects found in that place, of which a party i.e. holder of premises and property is informed on the spot, at the time of carrying out the search. This instrument is exceptionally efficient in uncovering cartel collusions and other forms of infringements of competition. During dawn raid, Commission had a full cooperation of parties to procedure.

The result of efficient implementation of policy preventing competition infringements is, above all, consumers welfare, through better selection, quality and lower prices of goods and services. Efficient competition policy provides also benefits for competitors, since by preventing cartels and abuse of dominant position, equal conditions for all undertakings are created.

At this instant, Commission is not in position to deliver any additional information, as not to endanger further investigation procedures.

Commission for Protection of Competition of the Republic of Serbia and Agency for Protection of Competition of Montenegro signed today in Podgorica, Memorandum on Mutual Understanding and Cooperation in the field of Competition. This Memorandum, signed by Mr. Miloje Obradovic, President of the Commission and Mr.Miodrag Vujovic, Director of the Agency, represents a continuation of promotion of successful cooperation and development of bilateral relations by ensuring conditions for efficient functioning of market products and services.

Serbian and Montenegrin institutions for protection of competition will thus be even closer to European values in the field of competition law and policy, which constitutes an important segment of the negotiation process for accession to full membership in the European Union.

With this document, Commission for Protection of Competition of the Republic of Serbia completed formal cooperation with all countries in the region, which will significantly facilitate the future work and monitoring and sanctioning of irregularities in the market.

On May 28, 2015, Commission for Protection of Competition approved concentration created by the change of control over company ”Belgrade Waterfront” from Belgrade.The said company was founded on April 26, 2014, as a single-member company, exclusively owned by the Republic of Serbia. After the completition of the underlying transaction, control over that company was transformed from individual into joint which, in addition to the Republic of Serbia, will be exercised also by strategic partner from United Arab Emirates – company Belgrade Waterfront Capital Investment LLC. After increase in capital base, foreign partner will be included in the structure of total equity shares, by becoming a majority member of company with 68%, but in terms of control, members of the company will jointly and equally participate in making all key decisions within the competence of the Company Assembly and Supervisory Board.

The Commission, in making decision  about the permissibility of  concentration, had in mind the fact that its implementation will not restrict, distort or prevent competition in the market of the Republic of Serbia, but in assessing its effects observed  the wider context of implementation of the entire project, in light of the aim of the Law, and the possible benefits from the standpoint of economic progress and the welfare of sociaty, as well as the benefits of the consumers.

Today, in the Serbia Palace, on the occassion of the nine years of work of Commission for Protection of Competition, a conference was hosted on competition policy in Serbia addressing the possibilities for exemption from measures for protection of competition, (application of immunity program – leniency), which was attended by Mr. Zeljko Sertic, Minister of Economy, Mr. Michael Davenport, Head of EU Delegation in Serbia, Ms.Aleksandra Tomic, Ph.D., President of the Parliamentary Committee for Economy, Regional Development, Trade, Tourism and Energy, Ms. Vesna Kovac, State Secretary, Mr.Miloje Obradovic, President of the Commission for Protection of Competition, officials of the Administrative Court, regulatory authorities, academic institutions, as well as law firms and business associations.

The aim of the conference was exchange of experience on the specifics and effects of legal rules on protection of competition, in order for equal market conditions to be created, strengthening the efficiency and development of domestic economy, as well as improving the process of Serbia’s accession to European Union.

Participants agreed that competition is an act of competing where the most agile and the most innovative, lead and determine direction and pace of development of the whole society. That is why the progress, especially economic development, is inseparably tied to competition. For this reason the Commission for Protection of Competition, as a professional and independent government institution, has a key role in protection of competition, or plainly said – its task is to keep the rules of the game in the field of competition, so that each participant has equal conditions for performing its activities, and thus be aware that only from its effectiveness depends the success in production or providing services, to the benefit of all consumers, as was pointed out at the conference.

The conference also served as a framework for the exchange of knowledge in order to promote competition policy in Serbia, as one of the most important policies for the functioning of free market. Once again, it was stressed that its implementation reduces uncertainty faced by market participants, prevents prohibited acts, leading to strengthening of competition in the market or to increase of economic efficiency, economic growth and higher quality of goods and services.

The conference was organized within and with the support of the Project ”Strengthening the Institutional Capacity of the Commission for Protection of Competition of the Republic of Serbia”, funded by European Union.

Council of the Commission for Protection of Competition (hereinafter:Commission) issued on March 25, 2015, two decisions in procedure initiated ex officio against company East Media Group from Moscow, Russian Federation (hereinafter:East Media), because of the reasonable assumption that when purchasing the share of 50% in the company ”Politika Newspapers and Magazines” from Beograd, a concentration was implemented, which did not obtain approval from the Commission in accordance with the provisions of the Law on Protection of Competition.

Decision of the Commission determined procedural penalties to company East Media due to its failure to act according to the resolution of the Commission of January 29, 2015, by which it was ordered to deliver data and documents for the purpose of procedure. The level of procedural penalty amounts to a total of 143.500,00 euros, which currently stands at around 17.286,000 dinars and this amount is to be paid to the budget of the Republic of Serbia. With this resolution, the Commission makes it clear to all market participants that the non-fulfillment of obligations prescribed by the Law for delivery of data necessary for the proper determination of factual situation, will be sanctioned according to the Law.

With other instrument, Commission’s resolution, the procedure against company East Media was suspended, due to the need for previous legal issue in this case to be resolved.
Underlying issue that has to be decided, is whether the contract of share between previous owner of share in company ”Politika Newspapers and Magazines”, company Ost Holding GmbH from Vienna, Republic of Austria – affiliated legal entity of German Media Group Westdeutsche Allgemeine Zeitung Mediengruppe (WAZ) and company East Media, is valid. Based on the collected material evidence and witness statements, the Commission noted that the established facts reasonably indicate the possibility that, when selling share of 50% in the company ”Politika Newspapers and Magazines”, company Ost Holding GmbH did not act in accordance with the obligations stipulated by the Corporate Charter of the company ”Politika Newspapers and Magazines. Namely, collected evidence and witness statements point to a reasonable assumption that the offer for the purchase of share (pre-emption right), was not delivered to other member of the company, which is majority owned by the Republic of Serbia, in the manner and under conditions provided by the company’s by-laws. Given the potential harm to the property rights and interests of the Republic of Serbia, the Commission, bearing in mind the importance of this issue, decided to refer the matter to the State Attorney’s Office, in order to examin the validity of the agreement and decide on the possible initiation of dispute.

Given the importance and complexity of this case, Commision continues active cooperation with the competent authorities in the Republic of Serbia and abroad.

Commission for Protection of Competition approved concentration created by acquisition of direct sole control of the Dutch company Adriatic BidCo B.V. over companies Danube Foods Group B.V. and Clates Holding B.V., thereby acquiring indirect sole control over their subsidiary companies, among which are Bambi a.d., Pozarevac, Imlek a.d., Mlekara a.d. Subotica and Knjaz Milos. The buyer is under the ultimate control of investment fund Mid Europa IV Management Limited, as the ultimate general partner of funds Mid Europa Fund IV LP and Mid Europa Fund IV A LP.

At the request of Commission, the acquirer of control (buyer) presented its express declaration that neither that company nor with it affiliated market participants, namely, the above mentioned investment funds, have subsidiaries or are present in the circulation of goods and/or services in any way in relevant markets, both in Serbia and in the territory of states-signatories to Free Trade Agreement in South East Europe (CEFTA) and the territory of European Union member states.

It transpires from the determined factual position that the acquirer of control has not been present in any segment in Serbia and the region, so that implementation of this concentration shall not lead to change and/or increase in market share and consequently to a significant change in the structure of defined relevant markets, nor shall parties to concentration acquire advantage in any of the markets.
Given that there is no concern with respect to any criteria for assessment of permissibility of concentration under Article 19 of the Law, it has been concluded that that the implementation of this concentration does not lead to significant restriction, distortion or prevention of competition, primarily by creating or strengthening dominant position.

As before, the Commission will monitor and analyze the market situation in order to forestall, and if necessary, act upon and sanction all possible actions and acts which may constitute an abuse of dominant position and/or restrictive agreement.

Note: please forward all potential comments and suggestions to e-mail address: office.kzk@kzk.gov.rs

Legislative frame is one of key elements of business environment, and in that sense, harmonization of regulations with EU Equis shall contribute to improvement of business and investment atmosphere, leading to increase of competitivness and full integration of Serbian economy into EU community market.

Proceeding from assessments and recommendations expressed in EC Report on the Republic of Serbia advancement in the European Integrations Process and UNCTAD Report on the state of competition protection in Serbia, as well as our own observations and experience that particular existing legal solutions have an adverse effect on the actions of the Commission and legal certainty, Commission initiated work on amendments and modifications to the Law.

Initiated amendments and modifications should contribute both to the strengthening of Commission as an institution and its efficiency in acting, as well as to a higher degree of legal certainty and predictability for undertakings.

The following items should be singled out, being of particular importance:

- different concept of dominant position in relevant market, based on market power of undertaking, with clear and transparent criteria, implying deleting currently existing assumption of dominant position in case of 40% or more of market power on defined relevant market, whereas burden of proof is exclusively on Commission (Article 1 of working proposal on amendments and modifications to the Law);

- current provision in Article 58 relating to interruption of procedure is harmonized with rules of a so called commitment decision, by which intend and aim of protection of competition is accomplished, even without determination of a measure for protection of competition (Article 10 of working proposal on amendments and modifications to the Law);

- With regard to statute of limitation period, it has been proposed that a ”division” of the statute of limitation be made, to the period of establishment of infringement and determination of a measure for protection of competition on one hand, and the period for procedure of enforcement of a measure for protection of competition, on the other. In addition, an institute of interruption of statute of limitation period on the grounds of action taken by the authority i.e. Commission has been introduced (Article 14 of the working proposal of amendments and modifications to the Law).

- It has been proposed to delete the provision in paragraph 5, Article 57 of the Law, stipulating that the interest ”in case of decrese in the amount thereof or annulment of administrative measure, shall be born by the Commission.” Such definition represented a serious and dangerous precedent compared to legislation of EU member states and others. Namely, proceeds from the measure are paid to the Republic of Serbia budget, which pays back that amount i.e. ”principal”, and the Commission, which does not utilaze nor disposes with the said proceeds, and has no influnce whatsoever on the period of possible return of funds, is obliged to pay the interest. Further aggrevating factor is that, pursuant to the Law, Commission is financed from its own income, but the funds which have not been utilized in current year, are tranferred to the budget at the end of the year, meaning that the Commission commences each new year without any financial means, and as a consequence, Commission cannot execute its legal obligation to pay the interest in case of such obligation arising in the mentioned period (Articles 3 and 9 of the working proposal of the amendments and modifications to the Law).

Considering the significance of proposed amendments and modifications aimed at prevention of adverse effects to the activities of authority and ensuring conditions for strengthening of legal certainty of undertakings, it has been suggested to the Ministry that the Law should be passed as urgent matter.

It should be pointed out that the Minister in charge for external and internal trade and telecommunications, set up a Work Group in an exeptionaly short period upon receipt of relevant Initiative, to prepare amendments and modifications to the Law. By the decision of the Minister, the Work Group also involved the representatives of CPC.

Work Group prepared working version of the draft amendments and modifications to the Law which is being published. It should be noted that this version represents Draft text to be discussed at public debate during May.

On October 11 and 12, 2012 International Conference was held in Beograd presenting expert analysis of the competition law and policy in Serbia and its results (Peer Review Report). Relevant analysis was made as a result of cooperation between Commission for Protection of Competition and expert team of UN Conference on Trade and Development – UNCTAD.

Report acknowledged enhancement achieved in the field of competition protection from the date of its introduction upto the present date, both as regards application of competition rules, and strenghtening of administrative and institutional capacities of the Commission for Protection of Competition.

It was assessed that Serbia succeeded in introducing modern system  of competition protection, through establishment of an independent institution and adoption and enforcement of relevant legislative frame.

Report includes a series of recommendations, comments and suggestions aimed at further improvement of legislative frame, strenghtening of capacities and efficient application of Law and supporting sub-legal acts.

Among others, Conference was attended by Mr.Petko Draganov, Deputy to Secretary General, UNCTAD, Mr.Hassan Qaqaya, Head of Competition and Consumer Policies Branch, UNCTAD, Prof. William Kovacic, George Washington University, Prof. Vincent Martenet, President of the Commission for Protection of Competition of Switzerland, representatives from European Commission (DG COMP), competition authorities from Sweden, Hungary, Czeck Republic, Russian Federation, Romania, Bulgaria, countries from the region, as well as a large number of experts in the field of competition protection from the country and abroad.

Several lestures were given at the Conference, having as a topic cooperation of government bodies in joint struggle against violation of competition. Also, a round table was organised on the issues concerning importance of raising of awareness on competition protection and acquiring and transferring the knowledge to younger competition authorities.