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Competition and Laws and Regulations in North Macedonia

Competition Comparative Guide: 2024
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Contributed by Debarliev, Dameski & Kelesoska.

1. What are the main competition-related pieces of legislation in North Macedonia?

The main legal act regulating competition protection aspects in North Macedonian is the Law on the Protection of the Competition, adopted in 2010, with four amendments that followed, the last being in 2018 (Competition Law). Parallel to the Competition Law, there are several byways which have been adopted in the course of the period between 2012 and 2016 (decrees and guidelines), that are intended to reflect EU competition guidelines and rules locally.

Moreover, in line with the Competition Law, and in accordance with the Stabilization and Association Agreement concluded between the European Communities and North Macedonia (at the moment of signing, Former Yugoslav Republic of Macedonia) (SAA), for determining the forms of disruption of the competition that can have effect to the trade relations between North Macedonia and the European Communities, accordingly, the criteria arising out of the rules of the EU on appropriate application of its competitions rules, apply.

Additionally, the Law on control over state aid, adopted in 2010, (State Aid Law) represents part of the local competition legal framework, along with the several bylaws adopted in respect to the procedure of granting state aid. The State Aid Law is aligned with Articles 107-109 of the Treaty on the Functioning of the European Union (TFEU) and applies to any form of state aid granted by state aid providers, regardless of whether it is granted under the aid scheme or as individual aid, which may affect trade in the state, trade between the Republic of North Macedonia and EU, as well as the trade between the Republic of North Macedonia and other countries which, together with the Republic of North Macedonia, are parties to the internal agreements ratified by the Republic of North Macedonia, which contain provisions for state aid.

As is the case with competition protection rules, also in the case of assessment of granting of state aid, according to Article 69 of the SAA, the criteria for determining the application of state aid rules in the European Union are applied in an appropriate manner locally.

The supervision of the enforcement of the competition legislation in North Macedonia is conducted by the Commission for Protection of the Competition of the Republic of North Macedonia (Commission).

2. Have there been any notable recent (last 24 months) updates of Macedonian competition legislation?

No changes have been introduced in Macedonian competition legislation in the past two years. However, with the aim to align with the EU competition legislation, it is expected that the Macedonian Commission will work in the near future on the alignment with the changes in the EU competition legislation and therefore, we expect the adoption and implementation of the new EU competition legislation to be on the top of the list of priorities of local authorities, including the new EU Vertical Block Exemption Regulation and guidelines on vertical restraints that entered into force in EU back in 2022.

Furthermore, the Macedonian competition legal framework also is expected to be expanded with the adoption of the recently announced draft of the Law on Prohibition of Unfair Trading Practices in the Chain of Supply of Agricultural and Food Products, awaiting the approval of the Assembly of the Republic of North Macedonia.

3. What are the main concerns of the national competition authority in terms of agreements between undertakings? How is the sanctioning record of the authority?

As an overall assessment, the number of infringement procedures initiated by the Commission annually is relatively modest. Namely, based on the latest available annual report of the Commission, a total of six misdemeanor decisions have been rendered throughout 2022, where a total of MKD 114.38 million was imposed as fines under the same (approximately EUR 1.85 million). Of the total six cases, four cases were in respect to prohibited agreements, one for abuse of dominant position, and one case of gun-jumping, as a more severe misdemeanor.

Comparatively, in 2021, the number of misdemeanor decisions was five (with fines totaling approximately EUR 74,640; three prohibited decisions; one case of prohibited agreement and abuse of dominant position; and, again, one case of gun jumping).

In 2020, the number of misdemeanor decisions was three (with fines totaling approximately EUR 110,134; two for concerted practices - cartel and one procedural misdemeanor).

Based on the above, and in line with the available data of the Commission, a slight increase can be noted in the number of sanctioned activities by the Commission annually as well as an increase in the total amount of imposed fines which might be a signal that the Commission is taking a step forward in emphasizing its presence as the relevant authority in the field.

In terms of agreements, the Commission’s practice shows that the main competition concerns are clauses and agreements on dividing markets by customers, resale price maintenance, and non-compete clauses, identified mainly in vertical agreements.

4. Which competition law requirements should companies consider when entering into agreements concerning their activities in North Macedonia?

The competition concerns on agreements between undertakings provided in the local Competition Law are completely aligned with Article 101(1) of the TFEU, providing that such agreements, decisions, and concerted practices, which, as their object or effect aim for the distortion of the competition, are prohibited, specifically those which:

(i) directly or indirectly fix purchase or selling prices or any other trading conditions;

(ii) limit or control production, markets, technical development, or investment;

(iii) share markets or sources of supply;

(iv) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(v) condition the conclusion of contracts 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 contracts.

(jointly referred to as “restricted agreements, decisions, and concerted practices”)

The prohibitions referred to above do not apply to agreements that contribute to the promotion of the production or distribution of goods and services or to promoting technical or economic development, provided that the consumers have a proportionate share of the resulting benefit, and which:

(i) do not impose on the undertakings concerned restrictions that are not indispensable to the attainment of these objectives, and

(ii) do not enable such undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question.

Agreements of minor importance, i.e., agreements between smaller companies, where the joint market share of the parties to the agreement and undertakings under their control on the market does not exceed the threshold of 10% where the agreement is horizontal or the threshold of 15% where the agreement is concluded on the vertical level, are also exempted from the prohibitions given in the definition of restricted agreements, resolutions, and practices. These exemptions will not apply if the agreement involves “hardcore” restrictions such as price fixing and market sharing which are illegal regardless of the size of the parties or their market share.

In the same direction, the local Competition Law provides exemptions from the application of prohibitions i.e., the definition of restricted agreements, practices, and decisions for certain types of agreements, such as:

(i) vertical agreements for the exclusive right of distribution, selective right of distribution, exclusive right of purchasing and franchising;

(ii) horizontal agreements for research and development or specialization;

(iii) agreements for the transfer of technology, license, or know-how;

(iv) agreements for distribution and repairing motor vehicles;

(v) insurance agreements, and

(vi) agreements in the transport sector.

The block exemptions of those agreements are still subject to certain thresholds and conditions provided in the Commission’s guidelines and decrees, however, the exemptions would not apply in case the agreements contain “hardcore” restrictions, such as resale price maintenance or territorial/customer restrictions.

Accordingly, when entering into agreements concerning their activities, companies should assess if the respective agreements have as their object or may result in the distortion of the competition and in that course, should take into consideration the above listed restrictions. Furthermore, the companies should assess their market position and market share on the market of products/activities encompassed by the agreement and the possibilities of the agreements falling under any of the exemptions.

It is advisable that undertakings conduct a self-assessment of the agreements before executing them, as the Competition Law does not give an option to, nor provide obligation, for the parties to ask the Commission to assess and approve the agreements or allow exemption to the respective agreement from the scope of restricted agreements. The Commission may initiate the procedure for assessment of an agreement, i.e., parties’ conduct, in case any concerned third party refers to the Commission and raises the concern on potential anticompetitive object or effect of a respective agreement and/or conduct. The agreements, decisions, or specific articles therein, which are prohibited under local law, are null and void.

5. Does a leniency policy apply in North Macedonia?

Yes. Under the Competition Law – specifically, Article 65 – a leniency policy can be applied to undertakings who have confessed to their participation in a cartel, which can result in complete, or partial relief from the potential imposition of misdemeanor sanctions as a result of their participation in the cartel, subject to fulfillment certain criteria under the Law: (i) providing sufficient proof which will enable the Commission to initiate a misdemeanor procedure, or (ii) provides sufficient proof that will allow the Commission to render a decision in course of an active misdemeanor procedure, if the rendering of such decision would not be possible without the provided evidence from the party seeking application of leniency.

Accordingly, the leniency relief will apply only if the party seeking application of leniency fulfills simultaneously several conditions:

(i) cease to partake in the cartel following the filling of the leniency request;

(ii) cooperates completely and actively with the Commission, including providing necessary data in the shortest possible terms;

(iii) does not inform other cartel members of the filled leniency request;

(iv) prior filling of the leniency request does not disclose its content to third parties, save for authorities that are competent in sanctioning the cartel outside of North Macedonia, and

(v) does not destroy, withhold, or forge relevant evidence that will serve to determine facts of relevance in the course of the Commission’s decision-making process.

6. How is unilateral conduct treated under North Macedonia’s competition rules?

The Competition Law prohibits the collective, but also the unilateral conduct of undertakings limiting competition within the market. Same as Article (101) of the TFEU which is implemented in local legislation, Article 102 of the TFEU which prohibits the abuse of a dominant position, is also implemented in the local Competition Law.

In the meaning of the Competition Law, an undertaking shall have a dominant position on the relevant market if, as a potential seller or purchaser of certain types of products and/or services:

(i) has no competitors in the relevant market, or

(ii) compared to its competitors, it has a leading position in the relevant market, especially in relation to the following:

  • the market share and position and/or
  • the financial power and/or
  • the access to sources of supply or the market and/or
  • the connection with other undertakings and/or
  • the legal or factual barriers to entry for other undertakings on the market and/or
  • the capability to dictate the market conditions, taking into consideration its supply or demand and/or
  • the capability to exclude other competitors from the market by turning towards other undertakings.

The undertaking shall be presumed to have a dominant position if its market share of the relevant market exceeds 40% unless the undertaking proves otherwise. It shall be presumed that two or more legally independent undertakings have a joint dominant position in a relevant market if they act or participate jointly in the relevant market.

Any abuse of a dominant position on the relevant market or a substantial part of it is prohibited. The abuse, within the meaning of Competition Law, in particular, consists of:

(i) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

(ii) limiting production, markets, or technical development to the prejudice of consumers;

(iii) applying different conditions to equivalent or similar legal transactions with other trading partners, thereby placing them in a position of competitive disadvantage;

(iv)  conditioning the execution of agreements with 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 agreements;

(v) unjustified refusal to cooperate or encouraging and requesting from other undertakings or associations of undertakings not to purchase or sell goods and/or services to a certain undertaking, with an intention to harm that undertaking in a dishonest manner;

(vi) unjustified refusal to allow another undertaking to access its own network or other infrastructure facilities for adequate remuneration, if without such access, because of legal or actual reasons, the other undertaking becomes unable to operate as a competitor in the relevant market.

7. Are there any recent local abuse cases of relevance?

The Commission’s practice in terms of abuse cases is relatively modest, yet, in our opinion, it is the result of the still low awareness of companies on their rights and instruments for protection against anticompetitive behaviors or practices of their competitors, especially of the markets leaders.

Looking into the annual reports of the Commission, officially reporting all administrative and infringement cases reviewed annually by the Commission, only two abuse cases were reviewed and sanctioned in the past two years.

Nevertheless, no matter the lack of abuse cases of relevance to be mentioned, it is our impression that lately, the Commission is getting more active in pursuing potential abuses and other types of infringement cases. Overall, the most frequent industries generating competition infringement cases and sanctions are the pharmaceutical and the TMT industry.

8. What are the consequences of a competition law infringement?

Generally, the Competition Law recognizes two types of infringements – “severe” infringements and “light” or so-called “procedural” infringements. Sanctions for infringements provided in the Competition Law are construed according to the category of the infringement. The infringements resulting from breach of rules on restrictive agreements, abuse of dominance, failure to notify concentrations, and gun-jumping, are considered severe infringements and the envisioned sanctions for such infringement are monetary fines which can range up to 10% of the annual worldwide turnover of the undertaking committing the infringement. In addition to the monetary fine, the Commission may impose a temporary ban on the performance of a specific activity in a duration of three to 30 days against the undertaking and a temporary ban on the performance of a profession, activity, or duty in a duration of three to 15 days against the legal representative of the entity.

In the case of procedural infringements, such as failure to act upon the orders of the Commission or obstructing the activities of the Commission, the sanctions are monetary fines which can range up to 1% of the annual turnover of the undertaking committing such infringement.

Parallel to the consequences under the infringement clauses provided in the Competition Law, the beach of the Competition Law may also result in potential civil court claims against undertakings by third parties, concerned and/or damaged with the activities of the undertaking committing the infringement under the Competition Law, potentially resulting with liability to indemnify such third parties’ damages caused by such misconduct.

Furthermore, the prevention, restriction, or distortion of competition is also qualified as a criminal activity and is sanctioned under the Criminal Code (Article 283), specifically providing that:

(1) A responsible person in a legal entity who will enter into an agreement or participate in the conclusion of an agreement, decision, or concerted conduct, prohibited by law, which aims to prevent, limit, or distort competition, and therefore the legal entity will acquire property benefit on a large scale or will cause damage on a large scale, shall be punished with imprisonment from one to ten years.

(2) The responsible person in the legal entity shall be exempted from punishment, if he discovered or made a significant contribution to the discovery of the concluded contract, adopted decision, or concerted behavior prohibited by law, which resulted in the competent authority for the protection of competition in a procedure for determining the existence of a cartel, in accordance with the rules for the protection of competition, to determine an exemption, that is, a reduction of the fine of the legal entity.

9. Is there any competition law requirement in case of mergers & acquisitions occurring or impacting the Macedonian market?

The competition approval of M&A transactions by the Commission should be one of the first concerns of the parties before entering into a transaction. The competition approval by the Commission, where an analysis of the transaction would result in a conclusion that filling of a notification for concentration before the Commission should be made, is usually one of the conditions preceding the closing of the transaction.

Under the Competition Law, M&A transactions which result in a concentration are subject to prior notification to, and approval by the Commission, in case any of the following thresholds are met:

(i) Any of the parties in the transaction has registered corporate presence in North Macedonia and the combined worldwide turnover of all parties in the transaction exceeds EUR 10 million in the year preceding the transaction and/or

(ii) The combined annual turnover of all parties in the transaction, generated in North Macedonia, exceeds EUR 2.5 million and/or

(iii) Any of the parties in the transaction has a market share of 40% on the relevant market or the combined market shares of all the parties in the transaction on the relevant market exceed 60%.

In the meaning of the Competition Law, a concentration shall be deemed to arise where a change of control on a lasting basis results out of:

(i) the merger of two or more previously independent undertakings or parts of undertakings;

(ii) the acquisition of direct or indirect control of the whole or parts of one or more other undertakings by - one or more persons already controlling at least one undertaking, whether by the purchase of securities or assets, by means of an agreement or in other manner stipulated by law;

(iii) the creation of a joint venture performing on a long-lasting basis the functions of an autonomous economic entity.

The essential trigger for existing a concentration is the change of control, while the “control” from the competition aspect understands rights, contracts, or any other means which, either separately or in combination, and having regard to the considerations of fact and law involved, confer the possibility of exercising decisive influence over an undertaking (determining the strategic commercial behavior of an undertaking).

A concentration of shall not be deemed to arise where: 1) banks, saving houses and other financial institutions or insurance companies the normal activities of which include legal transactions and dealing in securities, hold on a temporary basis securities with a view to reselling them within a period of one year from the date of acquisition, and provided that they do not exercise voting rights in respect to those securities with a view to influence the competitive behavior of that undertaking on the market; 2) control is exercised by an authorized person in a procedure related to bankruptcy or liquidation of an undertaking and concerning undertakings that are established outside the Republic of North Macedonia, by persons who perform the corresponding function according to the legislation under which the undertaking is founded; 3) investment funds acquire capital interest in undertakings, provided that they exercise the acquired rights only with a view to maintain the full value of their investments and provided that they do not influence the competitive behavior of the undertakings on the market.

The merger filing shall be made once the transaction act is executed, but before the transaction is closed (standstill obligation).

The filing obligation is on the undertaking/s acquiring control, while in the case of mergers or the creation of a joint venture, the merging parties, i.e., joint venture partners shall make the filing jointly.

The parties in the concentration are obliged to notify the concentration to the Commission prior to its implementation and following the execution of the merger agreement, i.e., the announcement of the public bid for the purchase or the acquisition of the controlling interest in the nominal capital undertaking.

The parties may notify the Commission of their serious intention for concluding an agreement or, in the event of a public bid, when they have publicly stated their intention of participating therein if such an agreement or public bid would have as an effect creation of a concentration.

The Competition Law does not provide for exemptions from the filing obligation in case a transaction meets any of the specified thresholds, even if it is a foreign-to-foreign transaction with no effect on any of the local markets.

M&A transactions that represent concentration in the meaning of the Competition Law may be approved by the Commission with or without certain conditions and/or obligations to the parties or be rejected as being in contradiction to the provisions of the Competition Law.

10. What is the normal merger review period?

The statutory term for reviewing and approval by the Commission of a transaction that represents the concentration in the meaning of the Competition Law, but does not result in any distortion of the competition on the relevant market/s (such as transactions where parties’ activities do not overlap or their market shares are quite low) is 25 business days. The 25-business days term commences as of the date of filing of the complete notification on the concentration, with all mandatory information and appendixes included. The Commission reviews the completeness of the filing and issues a formal certificate of completeness generally within a one-week period following the filing. If the notification is deemed incomplete, the 25-business days’ term will start as of the day the parties complete/supplement the filing with the missing information and/or documents.

If, in the course of the initial 25-business days term for reviewing the filing (first phase), the Commission determines that the transaction could result in serious distortion on the competition in the relevant market, especially with creation of, or straitening the dominant position of any of the parties (which usually could be the case where the parties to the transaction are one of the strongest competitors on the relevant market), the Commission will initiate a detail investigation of the effects of the intended concentration on the relevant market (second phase), which can take up to 90 business days following the date of issuing of the decisions for commencement with the investigation. The term of 90 business days might be extended upon request of the parties, but not for more than 20 business days in total. In the second phase, the parties may propose the Commission with certain measures (behavioral and/or structural) in order to remedy and mitigate the potential negative effect of the transaction on the competition in the relevant market.

Based on experience, the Commission complies and issues the relevant decisions within the statutory terms, however, if the Commission fails to adopt a decision within the statutory terms, the notified concentration will be considered approved, by virtue of the Competition Law.

11. Are there any fees applicable where transactions are subject to local competition review?

The filling fee, payable to the Commission for the merger filing, is MKD 6,000.00 (approximately EUR 100) while the fee for the issuance of the merger clearance decision amounts to MKD 30,000 (approximately EUR 500), which, compared to the filling fees in neighboring countries, are significantly lower.

12. Is there any possibility for companies to obtain State Aid in North Macedonia?

Considering that state aid may cause an unfair advantage to the beneficiary with respect to their competitors and potentially distort the fair competition on the market, there is a general prohibition on state aid, except if it is approved by the Commission in accordance with the State Aid Law. The Macedonian State Aid Law is generally aligned with Articles 107-109 of TFEU.

As an exemption from the general prohibition, the granting of state aid is always permitted in cases where:

(i) the aid is of a social nature, granted to individual consumers, if there is no discrimination related to the origin of the goods and/or services, or

(ii) the aid compensates for the damage caused by natural disasters or other exceptional events, including military actions.

The granting of state aid can be allowed by the Commission if it concerns:

(i) regional aid for promoting the economic development of areas in the state in which the standard of living is extremely low or where there is high unemployment,

(ii) aid intended for the removal of difficulties in the domestic economy or for the promotion of the realization of projects of significant economic interest for the state,

(iii) aid for rescue and restructuring of companies in difficulty,

(iv) aid intended for the promotion of culture and the protection of cultural heritage, when it does not significantly affect trade conditions and market competition,

(v) horizontal assistance, and

(vi) other state aid granted on the basis of legal act.

State aid in North Macedonia can be provided in the form of:

(i) subsidies,

(ii) writing off or assuming debts,

(iii) exempting, reducing, or delaying the payment of public fees,

(iv) granting loans under favorable conditions,

(v) providing guarantees from state aid providers under favorable conditions,

(vi) investments by state aid providers with a rate of return lower than the rate of return on investments that can be expected when investing under normal market conditions and

(vii) reduction of prices of goods and/or services by state aid providers below market prices, especially in case of sale of shares, buildings or land owned by state aid providers. subventions, tax incentives or reliefs, granting loans by the state authorities, etc.

State aid for supporting investment projects (construction or reconstruction of facilities, investments in equipment and machinery, opening new job positions) in North Macedonia is regulated by the Law on financial support of investments, which in the meaning of the State Aid Law, represents a state aid scheme.

During the COVID-19 pandemic, the Government also introduced various instruments to support local businesses to survive the negative impact of the pandemic, and such were subject to assessment by the Commission.

The procedure for approval of state aid by the Commission is similar to the procedure for reviewing and approval of concentrations, except for the terms for the review and approval process, which are longer. Namely, the term for approval of the state aid where it is permissible in the meaning of the State Aid Law is 60 days of the receipt of the complete application for approval, while in cases where the Commission has certain doubts if the proposed state aid is permissible, the Commission will initiate an investigation and the procedure should be completed within an 18 months period.

13. What were the major changes brought by the COVID-19 pandemic? Have any of them stuck and how likely is it for these changes to continue to do so in the foreseeable future?

The COVID-19 pandemic generated not only a major worldwide health crisis but also a major economic one, witnessed by a great disturbance in the supply and demand of many product and services markets globally.

The economic consequences of the COVID-19 pandemic required swift Government action in order to keep the national economy functional. Many state aid measures were introduced by the Government for different types of businesses suffering most from the COVID-19 lockdown, considering that such interventions were necessary to help the businesses overcome the crisis. The Commission, while approving most of such instruments of support of the specific businesses, considered the impact of the pandemic and also the public interest in supporting those businesses.

Evidently, the COVID-19 pandemic increased the level of concentration on markets globally, as companies could not survive the economic impact of the pandemic and rather opted to exit the market or be acquired by stronger competitors. Under the effect of the latter, it is reasonable to presume that the number of mergers has increased.

Although there was no such relevant practice in North Macedonia, in other jurisdictions, competition authorities emphasized public policy objectives in reviewing concentrations during the pandemic, even to the extent of rejecting acquisitions in order to save the national companies or to ensure their production of certain products in their territory.

The changes incurred during the pandemic, with respect to the competition protection concerns and also other regulations and practices, are already leaving the scene in North Macedonia yet would remain a unique practice and we hope that the future will not bring any similar times of crisis where such practice would be needed again. 

Guide Contributors For North Macedonia

Jasmina Ilieva Jovanovik, Partner
ilieva@ddklaw.com.mk
+389 2 3 21 54 71

Ivo Ilievski, Senior Associate
ilievski@ddklaw.com.mk
+389 2 3 21 54 71