Filing of Extraterritorial Mergers in Serbia: A Possible Loophole

Serbia

Filing of Extraterritorial Mergers in Serbia: A Possible Loophole

A large majority of mergers notified to the Serbian Competition Commission raise little or no competition concern. Their filing is in many cases simply an administrative burden, with no relevance for protection of competition. So, can these notifications be avoided? Actually, they can – even without changes in the law.

Serbia is well known as a jurisdiction with fairly low merger filing thresholds, which catch a number of concentrations with no effect on the Serbian market. The Commission is currently insisting on a conservative interpretation of the statutory provisions, requiring that all concentrations exceeding the turnover thresholds be filed, even those which clearly have no effect in Serbia.

The result: the Commission is swamped with merger filings, with around 100 notifications a year. On the bright side, at least from the perspective of the Commission’s finances, each such notification brings EUR 25,000 to the Commission’s budget. The companies having to pay the fee are probably less impressed.

The most evident example of a notifiable transaction with no effect in Serbia is the situation where a multinational present in Serbia is acquiring a company in another part of the world, with the target having no presence whatsoever on the Serbian market. Such transactions are now routinely notified to (and cleared by) the Commission. However, many are not aware that there has also been a time when the Commission’s view was that such transactions do not need to be filed, as they lack effects in Serbia.

The year was 2007. On the point, the Commission issued two opinions, the summaries of which are available in the authority’s annual report for that year.

In the first opinion, the question referred to the Commission was whether a transaction where a U.S. company having a subsidiary in Serbia acquires another company in the U.S. was notifiable. And the Commission said no! The Commission explained that in the described scenario the filing obligation does not arise since there is no change of control over an undertaking on the Serbian market.

The second opinion was similar. There the question was whether, in case of a joint venture involving a Montenegrin subsidiary of a Serbian company, the transaction needs to be filed in Serbia. The Commission responded that the filing was not required, since such transaction would not have significant effects on the Serbian market.

True, the Commission issued these opinions while the old Competition Act was in force. However, in the relevant parts the current Competition Act does not materially diverge from the old. Nothing prevents the Commission from once again adopting the effects-based doctrine it itself once embraced. Whether it will actually do so is another issue.

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