Contributed by Miljkovic & Partners.
In Bosnia and Herzegovina (BiH), the main piece of competition law related regulation, the Law on Competition (Zakon o konkurenciji - BiH Official Gazette nos. 48/05, 76/07, and 80/09) of Bosnia and Herzegovina (Act), was enacted in 2005 and subsequently amended on two occasions, once in 2007 and a second time in 2009. Inspired primarily by EU law, in particular the Treaty on Functioning of European Union (TFEU), the Act aims at protecting fair competition from prohibited agreements between undertakings (Art. 4 of the Act), abuse of dominant market position (Art. 10 of the Act) and prohibited concentrations (Art. 13 of the Act). Following the adoption of the Act, the competition authority enacted a number of bylaws regulating in more detail different aspects of competition regulation such as procedural framework and standards for application of the Act.
In general, the competition legislation of BiH is largely in line with the rules and principles of the EU competition law regime. Furthermore, Art. 43 para 7 of the Act provides that the BiH competition authority, the BiH Competition Council, "for the purpose of assessment of the case, may apply the practice of the European Court of Justice and the decisions European Commission.” Therefore, the Act introduced the practice of the competition authority of the EU into the local system of competition protection in BiH. Moreover, BiH signed the Stabilisation and Association Agreement (SAA) with the European Community and its member states on June 16, 2008. By signing this document, BiH has received the status of a "potential candidate" in order to achieve full membership in the EU. Thus, BiH entered into a contractual relationship with the EU and recognized the importance of the approximation of the existing BiH legislation to that of the European Community and of its effective implementation. More specifically, in the early stages of the SAA implementation, the legal approximation needs to focus on fundamental elements of the internal market acquis as well as on other trade-related areas. At a further stage, BiH will have a duty to focus on the remaining parts of the acquis.
Approximation of the domestic legislation to that of the European Union started on the date of the signing of the SAA. In other words, since the signing of the SAA, it is the legal duty of BiH institutions to ensure that its existing laws and future legislation are gradually made compatible with the union acquis. BiH institutions are equally obliged to ensure that existing and future legislation is properly implemented and enforced (these provisions are contained in the so-called “Harmonization clause“ of the SAA).
The most relevant provisions for competition law are contained in Art. 71 para. 2 of the SAA, which stipulates that any practices contrary to Article 71 shall be assessed on the basis of criteria arising from the application of the competition rules applicable in the union, in particular from former Articles 81, 82, 86, and 87 of the EC Treaty (now Articles 101, 102, 106, and 107 of the TFEU) and interpretative instruments adopted by the Community institutions, i.e the Commission or the European Court of Justice (ECJ).
Therefore, while the Act gives to the BiH competition authority only the possibility to apply the practice and decisions of the ECJ and the Commission, Article 71, para 2 of the SAA requires mandatory assessment of the case on the basis of the case-law of the ECJ and the Commission. However, it should be noted that the Act was adopted in 2005, while the obligations of BiH arising out of the SAA did not come into effect until 2008. It may therefore be concluded that the obligation to apply the practice of the EU institutions exists for the institutions of BiH when implementing competition-related regulation (The first decision of the appellate division of the Court of Bosnia and Herzegovina (Court of BiH) that confirmed the importance of taking into account the EU legal regime and practice was from March 2012 (the ASA Auto Case). In this decision, the Court of BiH directly referred to the practice of the EJC and the Commission. This development seems to define the position of the Court of BiH in terms of necessary reliance on EU law in order to review a domestic competition case. More precisely, the Court of BiH directly applied criteria from the Decision of the EJC dated April 29, 2004, (the IMS Health Case) but without directly referring to the case in question.. In practice, this is unfortunately not so frequently the case. One of the reasons could be the lack of translations of the decisions of the ECJ and Commission in one of the official languages in BiH and, so far, the training of the relevant officials in this respect has been very limited.
1.1 Recent changes in legislation
As already stated, the Act was adopted in 2005. The Act was amended once in 2007 and once in 2009 mainly with the purpose of extension of certain procedural deadlines and amending the national thresholds triggering merger filing requirements as well as further alignment of the Act with the relevant EU regulation. As to the regulation, there were also no significant changes over the past two years. It is, however, worth mentioning that the BiH Council of Ministers, upon a proposal of the Council, in 2018 adopted the changes to the administrative fees for procedures before the Council increasing it significantly, especially with respect to the fee for Council’s decision passed upon initiation of second-phase investigation where fees were increased from BAM 25,000 (approximately EUR 12,500) to 0,03% of the total turnover of undertakings generated in the BiH territory setting the maximum at BAM 50,000 (approximately EUR 25,000).
1.2 Competition Authority
The BiH competition authority, the Competition Council (Council), is an independent authority responsible for enforcement of the Act and for monitoring competition in the market. It has exclusive competence to decide on the existence of activities prohibited by competition law in the BiH market (Art. 21 of the Act). The Council is competent for enforcing competition law in the entire territory of BiH, covering its entities and autonomous district (the Federation of BiH, Republic of Srpska, as well as the Brcko District of BiH).
The Council consists of six members. The mandate of all members of the Council lasts for six years with an option to be extended for additional six years. The Council submits its annual reports to the Council of Ministers of BiH, the highest executive body in BiH.
The Council is empowered, inter alia, to enact secondary legislation based on the Act; to define terms contained in the Act and applicable bylaws and prescribe their application; to issue opinions and recommendations ex officio or upon request of governmental institutions, undertakings, and their associations; to propose and initiate amendments to the Act; to recommend to the Council of Ministers of BiH the level of administrative taxes; to issue opinions on compliance of legislative acts with the Act; and to cooperate with national competition authorities from other countries.
The Council is a member of the International Competition Network (ICN) since 2005. Through its active participation in negotiations on SAA between BiH and the European Community, the Council cooperated (and still does) with international, European, and national organizations and institutions in the area of competition, and, on that basis, it may provide and request all the data and information related to factual and legal issues, also including confidential data. The Council also concluded a number of bilateral treaties with the countries of the Balkan region concerning cooperation and exchange of relevant information and support in completion law matters. Proceedings carried out before the Council are in their nature administrative proceedings. Therefore, while the Act provides certain specific provisions to be applied in such proceedings, they should mostly follow the general regulation governing administrative proceedings before the state-level governmental institutions. When the proceedings are completed, the Council issues a final decision that may be appealed by the dissatisfied party before the Court of BiH.
2. What are the main concerns of the national competition authority in Bosnia and Herzegovina
As it is the case in most jurisdictions, the Act is also traditionally concerned with the following practices, which will be addressed in detail further below:
- Anti-competitive horizontal agreements (agreements between competitors, g. cartels to fix prices, share markets, or restrict output) and anti-competitive vertical agreements (agreements between different members of the distribution chain, e.g. resale price maintenance);
- Abusive unilateral behavior of dominant undertakings (g. excessive and predatory pricing, refusal to deal); and
- Merger control.
As stated previously, the Act aims at protecting fair competition from prohibited agreements between undertakings. The Act regulates that all agreements, contracts, single provision of agreements or contracts, concerted practices, explicit and tacit agreements between the undertakings shall be prohibited, as well as decisions and other acts of undertakings (agreements) the object and effect of which is to prevent, restrict or distort competition on the relevant market and in particular those related to:
- direct or indirect fixing of purchase and selling prices or any other trading conditions;
- limit and control of production, market, technical development, or investment;
- distribution of markets or sources of supply;
- application of different conditions to equivalent transactions with other undertakings, thereby placing them at a competitive disadvantage;
- conclusion of agreements that force the other party to accept additional obligations which by their nature or according to commercial practice have no connection with the subject matter of such agreements.
In contrast, on the face of the text of the provision, Article 4 of the Act contains a substantial difference as opposed to Article 101 of the TFEU which does not entirely explain itself from the legislative history. While Article 101 of the TFEU prohibits agreements that have as their object or effect the prevention, restriction, or distortion of competition within the common market, Article 4 of the Act contains the same prohibition but for agreements that have aimed at and resulted in the restriction of market competition. Thus, the Act seems to impose cumulative requirements related to the prevention, restriction, or distortion of competition whereas Article 101 of the TFEU requires a harmful object or an effect on competition. This difference in wording would indeed lead to a substantially more narrow application of Article 4 Act – essentially only to hardcore cartels. As Article 101 of the TFEU, in its wide applicability, is an essential part of the internal market acquis, it appears that such wording would not be in line with the duties BiH has undertaken under the SAA. Also, if Article 4 of the Act were only to include hardcore restrictions, it is hard to conceive which purpose the block exemption regulations adapted into BiH law would serve as a block exemption regulation typically aim at offering safe-harbors for agreements that only effect, but do not have as their object a restriction of competition. We have reasons to believe that this was caused by poor translation of Article 101 of the TFEU. Regardless of the cause, the provision should be repaired at the earliest opportunity as even an interpretation that would be in line with the SAA appears to be impossible against the clear wording of Article 4 of the Act.
The Act also makes a distinction between individual exemptions and block exemptions. Until now, bylaws have been adopted in particular for horizontal agreements, i.e the agreements on research and development and specialization; vertical agreements, i.e. the agreements on exclusive distribution, selective distribution, exclusive purchase, and franchising; agreements on transfer of technology, license, and know-how agreements; agreements on distribution and servicing of motor vehicles and insurance agreements. Furthermore, according to Article 7 para 3 of the Act, agreements fulfilling the conditions laid down in Article 4 (3) of the Act do not need to be submitted to the Council for assessment with respect to individual exemption (self-assessment regime).
However, the applicability of a block exemption regulation may help undertakings to assess and draft agreements in order to eventually conclude as to their compatibility with Article 4 paragraph (1) of the Act. Although their effect may be withdrawn by the Council in individual cases, block exemption regulation generally provides a non-rebuttable "presumption" that conditions for exemption are met (safe-harbour).
In BiH, the hardcore restrictions essentially follow the regulation from the EU. The sanctions that may be imposed on undertakings for such restrictions are the same as in the relevant regulation applicable in the EU.
Article 4 paragraph (2) the Act holds that any agreements or decisions prohibited pursuant to Article 4 paragraph (1) shall be automatically void. In practice, this nullity sanction, which is directly applicable by civil courts just as the rest of Article 4, plays an important part in the civil enforcement of BiH competition law as it allows parties to free themselves from anti-competitive agreements by simply relying on Article 4 paragraph (1) in conjunction with Article 4 paragraph (2) of the Act.
Nullity applies as soon as the criteria of Article 4 paragraph (1) are established (ex tunc) and is absolute, meaning that anyone including a party to the prohibited agreement may rely on it. The consequences of nullity, including the destiny of the rest of the contract, which may or may not be severable from the part infringing Article 4 paragraph (1) of the Act, is to be assessed under civil law rules.
Finally, as is the case with the TFEU, there is no presumption of illegality if conditions are not met, meaning that an individual assessment under Article 4 paragraph (3) may still lead to a finding of compatibility with Article 4 paragraph (1) of the Act. Compared to the application of a block exemption regulation, an individual assessment under the four criteria of Article 4 paragraph (3) is a challenging endeavor that usually cannot be undertaken without the expertise of an economic expert. As is the case with Article 101 (3) of the TFEU, Article 4 paragraph (3) outlines the following four criteria and requirements a) efficiency gains, b) fair share for consumers, c) indispensability, and d) no elimination of competition.
The practice of the Council was in general quite slow over the past two years. According to the online record of decisions available at the website of the Council, the authority initiated only two ex officio investigations. One was ultimately halted due to failure of the authority to complete the proceedings within statutory deadlines set in the Act (Case no. UP – 01-26-3-004-43/20) while the second one (Case no. UP-05-26-3-026-53/19) resulted in a fine in the amount of BAM 12,618 (approximately EUR 6,500) while ordering the undertaking also to change its supply contracts. Analyzing the individual decisions passed by the authority, one could conclude that there were no cases of significant relevance. The authority was mainly rejecting the applications of the undertakings on various grounds primarily determining that no violation of the competition regulation was identified during the proceedings. What is however indicative is that most of the cases were filed by local businesses against the government, various government agencies, state-owned enterprises, and other government bodies including telecom incumbent operators and media. As to the industry sectors, cases were mainly related to the media and telecommunication industry, health services, postal, and utility services.
3.1 Leniency policy in Bosnia and Herzegovina
When adopting the set of bylaws regulating certain aspects of competition regulation in more detail in 2006, the Council also adopted the Regulation on the Procedure for Granting the Immunity from Fines (Leniency Policy). In order to harmonize this bylaw with the European Commission Notice on Immunity from Fines and Reduction of Fines in Cartel Cases from 2006, the Council in 2010 adopted a new bylaw on leniency policy. It regulates the procedure and conditions for granting immunity from fines or reducing the fines in cases when an undertaking participates in an agreement from Article 4 paragraph (1) of the Act. For the leniency policy to apply, an undertaking applying for immunity from fine:
- must end all its activities related to alleged infringement of the Article 4 paragraph (1) of the Act at latest upon filing of the application for immunity from fine;
- must not inform other parties to the agreement concerned on its application for immunity from fine;
- must cooperate fully, on a continuous basis and expeditiously throughout the proceedings and provide evidence and information in its possession or under its control, including all forms of information which prove the existence of an infringement of Article 4 paragraph (1) of the Act; and
- must refrain from soliciting other undertakings to participate in a cartel.
If an undertaking does not fulfill the criteria for granting the immunity for a fine, it still can apply for a reduction of the fine. In order for an undertaking to be eligible to benefit from a reduction of any fine that would otherwise have been imposed it needs to provide the Council with information that has significant added value with respect to evidence already in possession of the Council regarding the character or completeness of the evidence. It also has to terminate all further participation in alleged infringement at the latest when delivering evidence and under conditions set by the Council. The term “added value” is interpreted in a way that evidence delivered to the Council will strengthen the ability of the Council to prove infringement of Article 4. As is the case with the Commission Notice on Immunity from Fines and Reduction of Fines in Cartel Cases, the first company to meet these conditions is granted a reduction of the fine of between 30% to 50%, the second between 20% to 30%, and subsequent companies up to 20%.
Please note, however, that the leniency policy is rarely, almost never, applied in practice by the Council. The reasons for such lack of practice of the Council rests most likely in fact that undertakings participating in an agreement do not meet criteria set out in the relevant bylaw or that fines, as quite often argued by the Council, are already low and aimed at raising the awareness of the necessity of undertakings participating in infringement to observe competition regulation rather than sanctioning. This was also the case with the most recent decision of the Council from 2019 in Case No. UP-03-26-2-047-26/18, whereby the Council rejected the application of the leniency policy on this ground.
4. Unilateral conduct under BiH competition rules
The Act regulates that any abuse of a dominant position by one or more undertakings on the relevant market is prohibited. The Act further defines that abuse of a dominant position in particular consist in:
- direct or indirect imposing of unfair purchase or selling prices or other trading conditions which restrict competition;
- limiting production, markets, or technical development to the detriment of consumers;
- applying dissimilar conditions to equivalent or similar transactions with other parties, thereby placing them at a competitive disadvantage;
- conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contract.
In BiH, the concept of abuse of dominant position is not defined in the Act. It only provides a list of examples considered as an abuse of dominant position. These examples reflect those contained in Article 102 of the TFEU. Three groups of cases of abuse of dominant position on the market can be determined to form the list of examples listed in Art. 10 para 2 of the Act, which is not final, i.e. abuse by preventing competitors, abuse by exploitation of competitors, and abuse by deteriorating the structure of the market.
Moreover, in the Regulation on Dominant Position, the Council further specified that a dominant position, as a rule, is not prohibited. However, what is prohibited is the abuse of dominant position by actions of the dominant undertaking(s), “which have, as their object and effect, the exclusion or ‘closure’ of the market to potential competitors, i.e. restriction or distortion of an efficient market.”
In BiH legislation, Article 9 para 1 of the Act defines a dominant position of an undertaking as being created when “due to its market power it can act considerably independently of its actual or potential competitors, customers, consumers, or suppliers, taking into account the market share of the undertaking in question, as well as market shares of its competitors, as well as legal and other entry barriers to the entry of other undertakings in the market.” A presumption of dominance was introduced in the case where an undertaking was having its market share over 40% on a relevant market in BiH, thus shifting the burden of proof on the undertaking concerned to prove the absence of dominance on the market.
As is the case with Article 102 of the TFEU, the Act regulates that a dominant position may be held by one or more undertakings in the relevant market. However, the expression "one or more undertakings" in Article 102 of the TFEU implies that a dominant position may also be held by two or more economic entities legally independent of each other, provided that from an economic point of view they present themselves or act together on a particular market as a collective entity (collective dominance), whereby three cumulative conditions must be met for finding collective dominance:
- each member of the dominant oligopoly must have the ability to know how the other members are behaving in order to monitor whether or not they are adopting the common policy;
- the situation of tacit coordination must be sustainable over time, that is to say, there must be an incentive not to depart from the common policy on the market; and
- the foreseeable reaction of current and future competitors, as well as of consumers, must not jeopardize the results expected from the common policy.
The Act, as well as the Regulation, only contain provisions determining collective dominance on the basis of market shares detained by several undertakings. More specifically, the presumption of collective dominance exists when two or three undertakings together have more than 60% or when four or five undertakings have more than 80% of the market share.
As is the case with forbidden agreements, the practice of the Council related to abuse of dominance over the past two years was not quite extensive. The Council, at least according to the online record of decisions available at the website of the BiH Competition Council, did not initiate a single ex officio investigation against undertakings in BiH and there was also no abuse of dominance case of significant relevance. What is also indicative when it comes to abuse of dominance cases is that most of the applications were filed by local businesses against various government agencies, state-owned enterprises, and other government bodies including telecom incumbent operators and media, which indicates that the process of market liberalization is still undergoing and there is a significant level of interference of government’s, at all levels, into the market.
5. Merger control in Bosnia and Herzegovina
Merger control is essentially and substantially governed by the Act. In addition, in accordance with the competencies delegated under the Act, the Council adopted secondary legislation in which it expanded upon certain aspects of merger control, namely:
- the Regulation on the Form of a Merger Notification and the Criteria for evaluating a Concentration (Official Gazette of BiH, no. 34/10; the Implementing Regulation); governing the required form and content of merger notifications, as well as certain procedural issues;
- the Regulation on Defining the Relevant Market (Official Gazette of BiH, no. 18/06).
5.2 Concept of Concentration
The Act defines a concentration in a similar formulation as in the EU merger regulation:
- a merger by absorption or a merger by the formation of a new entity;
- the acquisition of control or a controlling interest by one or more undertakings over another undertaking or a part thereof (sole control), or a group of undertakings (joint control) or a part thereof through the acquisition of a majority shareholding, or the acquisition of a majority of voting rights, or in any other way under the company laws of BiH; or
- the creation of a full-function joint venture.
Any concentration that results in a significant restriction of competition in the market of BiH may be prohibited, especially if such concentration results in the creation or strengthening of a dominant position in the market.
5.3 Acquisition of Control
The Act provides a rather general and broad definition of “control” without specifying any details that may lead to the existence of control within the meaning of the Act. Following the wording of the Act, “control” exists when one or more undertakings jointly have a dominant influence over another undertaking or group of undertakings, on the basis of the law, an agreement, or any other means, and considering all legal circumstances and facts.
Control is deemed to exist when one or more undertakings jointly:
- have a majority shareholding in an undertaking;
- have a majority of the voting rights; or
- have the right to appoint more than half of the management board members, the supervisory board members, or the appropriate body that manages or controls operations, or otherwise has the right to manage the operations of the undertaking.
Given this broad definition of “control,” the acquisition of minority interest that enables the holder to exercise a dominant influence over an undertaking or group of undertakings is subject to the merger control regime. Pursuant to numerous official opinions and conclusions rendered by the Council (e.g. the Council’s Conclusion No. 01-26-1-02-5-II/11 of March 23, 2011, and the Council Opinion No. 01-26-7-852-2-I/10 of January 18, 2011), intra-group acquisitions and restructurings are not caught by merger control rules.
5.4 Jurisdictional Thresholds
According to Article 14 of the Act, the Council has to be notified of an intended concentration if, in the preceding business year, the following thresholds were met:
(i) the combined worldwide turnover of the undertakings concerned exceeds 100 million convertible marks (approximately EUR 50 million); and
(a) the individual turnover of each of at least two undertakings concerned in BIH amounts to at least 8 million convertible marks (approximately EUR 4 million); or
(b) the undertakings concerned together have a market share of at least 40% on the relevant market in BiH.
In practice, this means that a large number of concentrations which has been notified in the past now fall outside the scope of the merger control regime of BiH. This has already resulted in a significant decrease in the number of submitted notifications.
The Council’s Regulation on the Notification of Concentrations and the Criteria for the Assessment of Concentrations which became effective on May 4, 2010, stipulates, inter alia, that if the undertakings concerned have their seats in BiH the concentration needs to be notified to the Council if the local threshold (ii) (a) or (b) is satisfied, regardless of whether the worldwide threshold (i) is also met. The Council intended to clarify the wording of the Act with this provision. However, its interpretation has led to confusion. In particular, it was unclear whether the Council is at all competent to interpret the Act in such a way in a legally binding manner and whether or not this provision may also have an impact on foreign-to-foreign mergers. Nonetheless, it has been clarified that this narrow interpretation of the jurisdictional test does not affect foreign to foreign transactions since it applies only to cases where all undertakings concerned are purely domestic undertakings (i.e. undertakings which have local shareholders and are not subsidiaries of foreign legal entities).
In any case, the Council enforces Article 2 of the aforementioned regulation in practice and therefore, transactions without a cross-border element only have to meet the national thresholds in order to be notifiable (e.g. Optima Grupa/Zovko/Zovko Oil). In return, local presence is not required for a transaction to be notifiable as long as the national thresholds are met by selling goods and/or services on the market of BiH. (Council’s Opinion No. 01-01-26-738-5-I/09 dated October 21, 2009).
5.5 Jurisdictional Thresholds
The aggregate turnover of the undertakings concerned is to be calculated on a worldwide consolidated basis. Turnover generated by sales between the undertakings concerned is not taken into account.
In the case of an acquisition of one or more parts of an undertaking or of a group of undertakings, irrespective of whether such parts constitute independent legal entities, only the turnover pertaining to the parts subject to the concentration is taken into account. Should there be more than one concentration of the undertakings concerned within a two-year period, they will be considered as one single transaction and it shall be deemed that the transaction occurred on the date of the occurrence of the last transaction.
5.6 Notification and Suspension Obligation
Transactions that fall under the concept of "concentration" as described above and which meet the jurisdictional thresholds are mandatory to be notified to the Council.
According to the Act, the council has to be notified of an intended concentration within 15 days after the signing of the respective agreement, the announcement of a public offer of shares, or acquisition of control, whichever occurs first. However, the undertakings concerned already have the option to notify the Council of the concentration once they can demonstrate their intention to undertake the concentration based on, for example, the conclusion of an agreement in principle, a memorandum of understanding, a letter of intent signed by all parties to the concentration or a public announcement of the intention to submit a purchase offer.
Failure to notify the Council of the concentration within due time may result in a fine of up to 1% of the total turnover of the undertakings concerned, realized in the business year preceding the concentration. Such fine may be imposed regardless of whether the concentration was or was not implemented at the moment when the Council learned of the concentration. Therefore, fines for a failure to notify the Council of a concentration in due time may be substantial (depending on the undertaking’s turnover) and in the practice of the Council have been imposed on several occasions.
In addition, if the Council was not notified of a concentration and it later finds that such concentration had negative effects on competition in the market of BiH, the Council may order that the acquired shares and assets be sold. The Council may also restrict the voting rights of the acquiring undertaking or order the cessation of the joint venture or any other form of acquired control that the Council believes restricts competition in the market of BiH.
In practice, the Council determines fines in relation to the total annual worldwide revenue of the notifying undertakings (as in the Optima Grupa/Zovko/Zovko Oil case and the Volkswagen AG/Scania AB case). The Council’s fining policy for delays in notifying transactions has proven very strict in practice. In the Telekom Slovenia/Blic.Net case, the Council fined Telekom Slovenia 200,000 BAM for a 10-month delay. Other examples are the Cez/Mol/JV case (in which the Council imposed a fine of 150,000 BAM for a 4-month delay) and the Volkswagen AG/Scania AB (a fine of 150,000 BAM was imposed for a 26-day delay).
As stated previously, the amendments of the Act in 2009 intended to further harmonize the competition law regime of BiH with international standards applicable in most jurisdictions in the EU. Inter alia, one significant improvement was related to the competence of the council to impose fines for the breach of the suspension obligation.
For instance, the Council initiated proceedings and imposed a fine on an undertaking for closing a concentration before obtaining prior clearance from the Council (e.g. in the Optima Grupa/Zovko/Zovko Oil case). The fine amounted to 200,000 BAM and was imposed on a local company engaged in the trade of petroleum and derived products derived.
Over the past two years, the Council imposed in two cases fines, one in case of failure to notify a concentration in due time and the second one for the breach of the suspension obligation.
Once the Council issues a certificate of completeness, it has to decide within 30 days whether the proposed concentration raises competition law concerns in BiH. If the Council believes that the proposed concentration will not have any negative effect on competition, it will issue a clearance decision. If the Council does not issue a decision within the 30-day period, the concentration shall be deemed to be approved.
If the Council takes the view that the intended concentration could have a negative effect on competition, it may initiate a second-phase investigation. A second-phase investigation may take up to three months, meaning that the Council is obligated to issue a final decision within three months following the date on which the resolution authorizing the institution to conduct second-phase proceedings is adopted. The second-phase investigation may be extended for an additional three months if the intended concentration involves a sensitive business sector and in cases in which it is necessary to carry out additional analysis defining the state of facts and examination of evidence. If the Council initiates a second-phase investigation but does not issue a decision within the defined deadline, the concentration is deemed to be approved.
In practice, after submission of the filing, it usually takes a rather long period of time until the Council considers the filing complete and issues the certificate of completeness. Therefore, the start of the review period is usually delayed. Against that background and according to our experience it takes between two and three months from the initial submission of the filing until clearance in cases in which the Council does not initiate a second-phase investigation. If a second-phase investigation is launched, the overall proceedings until clearance may take up to eight months. The law does not provide for a formal way of speeding up the procedure.
5.8 Responsibility for Filing and Fees
The responsibility for notifying the Council of the acquisition of a majority shareholding or a majority of voting rights or other controlling interests rests with the acquirer. In the case of an acquisition of control based on a public offering of shares, the responsibility for filing lies with the offeror. In the case of joint ventures and in all other cases, the responsibility to notify the Council of the transaction lies with all undertakings concerned.
An initial filing fee of BAM 2,000 ( approximately EUR 1,000) is payable prior to the submission of the notification, and proof of payment must be submitted to the Council together with the notification. In addition, a fee of BAM 5,000 (approximately EUR 2,500) is payable after the Council issues a clearance decision without performing an in-depth investigation (a second-phase investigation). A fee of 0,03% of the total turnover of undertakings generated at BiH territory setting the maximum at BAM 50,000 (approximately EUR 25,000) is payable if the Council adopts its decision after an in-depth investigation. In practice, the Council will not issue its decision unless the fees are paid.
6. What are the consequences of a competition law infringement?
The BiH Competition Law sets out the penalty ranges for prohibited activities of the undertakings. The Council in line with Act determines the amount of the penalty considering the level of the intention of the undertaking to commit the infringement and the duration of the infringement. According to Article 49 of the Act, the amount of fine goes up to 10% of the total annual worldwide turnover of undertaking for the year preceding the infringement if an undertaking:
- concludes a prohibited agreement or participates in any other way in an agreement that prevents, restricts, or distorts the competition;
- abuses a dominant position;
- participates in the prohibited concentration of undertakings;
- fails to comply with the final and binding decisions of the Council; or
- implements a concentration without a prior decision on concentration.
The Council may also impose fines on the responsible persons of the undertaking referred to above in the amount from BAM 15,000 (approximately EUR 7,500) to BAM 50,000 (approximately EUR 25,000).
Apart from this, the Council may impose fines on the undertakings not exceeding 1% of total turnover in the year preceding the infringement, if it:
- fails to act in line with the Council's request and cooperate with Council by delivering incorrect or misleading information or not providing necessary information within the deadline set by the Council;
- fails to notify the Council of intended concentration;
- submits incorrect or misleading information in the merger control process; or
- fails to act in accordance with the decision or conclusion of the Competition Council or in accordance with an order of the competent court.
The Council may impose fines on the responsible persons of the undertaking referred to above in the amount from BAM 5,000 to BAM 15,000.
The statute of limitations for imposing administrative fines and/or pursuing antitrust infringements is five years from the day on which the infringement is committed, with certain exceptions where a shorter statute of limitation is envisaged. In the case of continuing or repeated infringements, the limitation period runs from the day on which the infringement was committed for the last time. The statute of limitations for enforcement of the fines is also five years and it runs from a moment decision of the Council becomes final.
As a general rule, the decision issued by the Council has no impact on potential criminal and/or civic responsibility, decided by the competent courts. This means that there is a general liability for harm caused to third parties as a result of the infringement of the Act. When it comes to general liability for harm there are two statutes of limitations for bringing a civil case, a “subjective” statute of limitation of three years, which runs from the day when the injured party became aware both of the damage and the responsible person; and an “objective” statute of limitation of five years, which runs from the day when the damage was inflicted. After this term expires, no claim can be brought. There are, at present, no relevant precedents.
7. Is there any possibility for companies to obtain State Aid in Bosnia and Herzegovina? If yes, under what conditions?
The legal framework in BiH does envisage a system of state aid. BiH has adopted the Law on the State Aid System in Bosnia and Herzegovina (Official Gazette of BiH no. 10/12 and 39/20; State Aid Law) back in 2012 and adopted one amendment in 2020.
The State Aid Law is, to a certain extent, harmonized with the regulation of the European Union, nevertheless, the application of the State Aid Law in practice has been very limited which further means that there is no settled practice in the application of the State Aid Law. According to information available at the website of the State Aid Council since 2015 State Aid Council has passed merely about 30 decisions.
State aid, according to the definition provided in State Aid Law is any real or potential expenditure or minimized public revenue, existing, planned, or potential, which can be awarded or planned directly or indirectly by state aid provider, in any form, which distorts or bears the risk of distorting market competition by putting in more favorable position certain companies, production, or trade of certain products or provision of certain services, if that affects obligations of BiH related to this area.
In general, state aid can be provided based on a scheme of state aid or in cases of individual state aid, subject to a filing request for clearance.
The State Aid Law also defines de minimis state aid for which clearance of the State Aid Council is not required. The threshold for de minimis state aid are defined the same as the thresholds defined under the Commission Regulation (EU) No 1407/2013 (the EU De Minimis Aid Regulation), i.e. for single undertaking EUR 200,000 over a period of three fiscal years, and for undertakings performing road freight transport EUR 100,000 in any moment over the period of three fiscal years.
The purpose and criteria, as well as procedure of state aid clearance, is defined by decrees passed at the BiH entities level (Decree on the Purpose, Criteria and Conditions for Granting State Aid in Federation of Bosnia and Herzegovina (Official Gazette of FBiH no. 27/18); Decree on the Manner and Procedures for Reporting State Aid in the Federation of Bosnia and Herzegovina (Official Gazette of FBiH no. 104/13); Decree on the Purpose, Criteria and Conditions for Granting State Aid in Republic of Srpska (Official Gazette of RS no. 111/20); Decree on the Manner and Procedures for Reporting State Aid in the Republic of Srpska (Official Gazette of RS no. 105/13). The entity regulation although similar is not identical. In both entities, conditions and criteria for awarding state aid are in detail provided for horizontal (e.g. for promotion of regional development, for helping SMEs, for research, development and innovation, etc.), and vertical state aid (e.g. for aid to certain sectors such as transportation, post services, steel production, carbon mining, etc.), as well as for specific instruments of the state aid such as guarantees and sale of public real estates.
Both regulations in the Federation of Bosnia and Herzegovina and Republika Srpska provide that state aid is awarded if, state aid scheme or state aid project fulfills conditions stipulated in respective entity decrees but also in Article 71 paragraph 2 of SAA between the European Community and their Member States and BiH.
As for the procedure, both in Republika Srpska and the Federation of Bosnia and Herzegovina state aid providers are obliged to file an application to respective ministries of finances (organized at the entity level) which further forwards it to the State Aid Council for clearance.
7.2 Major changes brought by the COVID-19 crisis in the field of state aid
As for State Aid and bearing in mind that implementation of it is quite underdeveloped, the COVID-19 crisis did not bring any major changes in this field. The BiH Governments at all levels passed certain regulations to help the local economy, not in form of state aid but rather in a form of certain tax relieves, subsidies for social contributions, deadlines for payment of such duties, etc.
According to available data, the State Aid Council has passed merely four decisions in 2020 and 2021. All four decisions were related to state-owned enterprises and none of it was related to consequences related to pandemic. It is also hard to say that amendments to the State Aid Law from July 2020 were driven by the COVID-19 crisis since amendments introduced missing de minimis state aid regulation, made clarifications to certain aspects of regulation and certain procedures (e.g. financing of infrastructure by public funds, the meaning of granted state aid, return of state aid and statute of limitations, etc.). Whether this will be changed in the upcoming period, remains to be seen.