Following a Phase II investigation started back in April, the Serbian national competition authority (NCA) has cleared an acquisition in the baking industry – with strings attached.

By way of the transaction,  Slovenian Don Don is acquiring control over assets used for production of bread, located in the Serbian town of Zaječar. The assets used to belong to a local company active in the production of flour and baking products, now in financial troubles. Actually, Don Don acquired the target assets in enforcement proceedings initiated against the target company.

In its analysis, the Serbian NCA defined two relevant product markets: the production of fresh bread and the wholesale of fresh bread. For both relevant product markets the NCA considered the relevant geographic market to be the municipalities in which the target was present and in which there was an overlap between the parties to the concentration.

During the merger probe, started by a merger filing submitted by the acquirer, the NCA established that the transaction may distort competition on the relevant market, due to the large combined market share of the parties to the concentration. The NCA expressed these concerns in a statement of objections, which was delivered to the applicant during the merger control proceedings.

Responding to the statement of objections, Don Don offered to the NCA certain commitments it was willing to accept to obtain a clearance. Eventually, the NCA accepted the commitments and cleared the transaction with strings attached.

The commitments accepted by the NCA are of behavioral nature – Don Don undertook to send the NCA semi-annual reports concerning its production capacities, output, and sales on the relevant markets. These reporting obligations are supposed to last three years in total.

Key takeaway

The latest clearance confirms a spike in the NCA’s interest in mergers – this is already a second Phase II clearance the Serbian NCA has rendered this year, with one more Phase II probe pending. As a comparison, in each of 2017 and 2018, the NCA had rendered only one Phase II decision apiece.