In accordance with the Law on Protection of Competition that entered into force in 2009 and was amended in 2013 (the “Law”), the Commission for Protection of Competition (“Commission”) instituted ex officio antitrust proceedings for possible infringement of competition rights in the market of the Republic of Serbia against domestic legal entities dealing with retail and/or wholesale in consumer electronics.
Namely, based on the Eurostat (European statistics published by the European Commission) data for 2019, the Commission established that the prices of consumer electronics in the Republic of Serbia were by 13 percent higher than the EU average prices.
The Commission further compared the prices in the Republic of Serbia with those in Hungary and established that the prices for certain product categories in the Republic of Serbia, e.g. TVs, were higher than those in Hungary by 33 to 39 percent.
While comparing the prices of consumer electronics in the above manner, it is important to note that the value added tax in Hungary is 27% (compared with the 20% value added tax in Serbia), whereas the prices of consumer electronics in Hungary are below the EU average by 2.5%.
By analyzing concrete competition conditions in the market, the Commission passed three separate conclusions on initiation of proceedings for investigating alleged competition infringement against four different domestic legal entities and the Commission found reasonable grounds to believe the existence of competition infringement in terms of Article 10 of the Law that refers to prohibition of restrictive agreements.
I. Definition of restrictive agreements
Restrictive agreements are defined as agreements between market participants aimed at significant restriction, distortion or prevention of competition in the territory of the Republic of Serbia. Restrictive agreements may be in form of agreement, individual provisions of agreement, explicit or silent arrangements, concerted practice, as well as decisions of association forms of market participants, which notably:
- Directly or indirectly establish purchase or selling prices or other trading terms;
- Restrict and control manufacturing, market, technical development or investments;
- Apply uneven business terms among different market participants for same businesses, whereas market participants are put in unfavorable position compared to their competitors;
- Condition the conclusion of contracts or agreements by accepting additional obligations that are not related to the subject of agreement considering their nature and commercial practice;
- Divide markets or sources of supply.
It is noteworthy that restrictive agreements are prohibited and void unless they are generally or individually exempted from prohibition under the provisions of the Law.
II. Examples in the market of the Republic of Serbia
Prior to passing the conclusions on initiating proceedings to investigate the infringement of competition, the Commission analyzed three different types of consumer electronics and established the following facts.
To substantiate the statements in the conclusion, the Commission selected one TV brand owned by a domestic legal entity (subject to the investigation of competition infringement initiated by first conclusion) and on the basis of official websites of 10 different retailers, the Commission established that for five different TV models of one brand, 10 of the observed retailers offer identical prices.
“Coffee machine“ Case
In addition to “TV” Case, the Commission substantiated the statements from a separate conclusion by using the coffee machine brand which is exclusively imported by a domestic legal entity (subject to the investigation of competition infringement initiated by second conclusion) and on the basis of official websites of six different retailers, the Commission established that for four different models of coffee machine of the same brand, six of the observed retailers offer identical prices.
“Console game“ Case
In addition to the above cases, the Commission substantiated the statements from a separate conclusion by using the brand of console game, imported by two domestic legal entities (subject of the investigation of competition infringement initiated by third conclusion), which legal entities are owned by a third domestic legal entity, and in accordance with the Law, they are to be considered as one market participant.
On the basis of official websites of seven different retailers, the Commission established that all seven retailers offer identical prices for the console game. In addition to the console game, the legal entities subject to investigation for infringement of competition are importers of two more TV brands that are sold at identical prices by several retailers.
What is common for all three cases is that the Commission found reasonable grounds, based on the analysis and collected evidence, that the domestic legal entities that are subject to the investigation for infringement of competition, that are importers or distributors of consumer electronics affected product prices in their further sale, having in mind that the prices of consumer electronics in the market of the Republic of Serbia are balanced, yet higher than the prices in the EU.
III. Following steps
In accordance with the Law, upon rendering the conclusions the Commission will conduct an investigative procedure, in which the Commission will collect evidence so as to achieve accuracy in fact-finding. If the Commission finds that the legal entities that are subject to the investigative procedure have indeed infringed competition, the Commission will enact a decision establishing the infringement of competition, whereas the Commission may also impose a measure for protection of competition in form of monetary fine in the amount that is equal to maximum 10% of total annual profit realized in the territory of the Republic of Serbia.
This article is to be considered as exclusively informative, with no intention to provide legal advice.
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By Milan Petrovic, Managing Partner, and Sara Necic, Senior Associate, PR Legal