Following an in-depth merger investigation, the Serbian competition law enforcer – the Commission for Protection of Competition – has conditionally cleared a concentration in the retail of consumer electronics. The combination will create the largest retailer of consumer electronics in Serbia.

Who are the parties to the concentration?

The parties to the transaction are Roaming Group (with the retail brand Tehnomanija) and WinWin Group (with the retail brands WinWin and Emmi House). Both undertakings are active in the retail of consumer electronics and home appliances in Serbia and are leading market players.

Based on the transaction, the parties will create a combined entity, in which Roaming will have a 75% share, while the owner of WinWin will have the remaining 25%.

How did we get to the conditional clearance?

The conditional clearance comes after almost year-long merger control proceedings.

Initially, Roaming and WinWin turned to the Serbian competition authority with a notification of a planned joint venture (JV) between the parties. Specifically, the parties had planned to combine their activities by creating an entity over which they would have exercised joint control. The NCA had concerns about such combination and opened a Phase II probe of the merger.

While the JV Phase II was still pending, the parties abandoned the JV idea and withdrew their notification. Instead, they submitted a new merger filing, this time notifying the acquisition of sole control over WinWin by Roaming. The Serbian NCA opened an in-depth investigation of this transaction, too. And now, following, the new Phase II probe, the competition authority has cleared the transaction with strings attached.

How did the NCA approach the relevant market?

Concerning the product dimension, the NCA defined five relevant markets:

  1. Retail of small consumer appliances;
  2. Retail of large consumer appliances;
  3. Retail of TV, audio, and video equipment;
  4. Retail of mobile and fixed telephones; and
  5. Retail of computers and other IT equipment.

When defining the relevant product market, the NCA expressly left out online sales out of such market, focusing only on sales in brick-and-mortar stores. The NCA justified this by small online sales in Serbia, as well as by the finding that Serbian consumers are still not accustomed to purchasing consumer electronics online.

Concerning all five relevant product markets, the Serbian competition authority found that the relevant geographic market was local, comprising the respective cities where the parties are active (15 cities in total).

Why did the NCA have concerns about the transaction?

Roaming and WinWin are both leading retailers of consumer electronics in Serbia. Prior to the concentration, in all relevant geographic markets the parties are among top five undertakings based on market share. Following the transaction, the market share of the combined entity would in several markets exceed 50% and in some it would even approach 80%. The NCA found that this could lead to the creation or strengthening of a dominant position.

Did the NCA also look into the vertical aspects of the transaction?

Yes, the Serbian competition law enforcer also considered vertical aspects of the transaction, since, apart from retail, Roaming is active in the wholesale market for consumer electronics.

Upon examining the relevant markets, the NCA established that the transaction will not lead to any negative vertical effects.

Under what conditions did the NCA clear the merger?

The NCA gave the merger the green light provided that the parties divest 13 of their stores. The stores are located in the Serbian cities of Belgrade, Pančevo, Zrenjanin, and Sremska Mitrovica.

The divestment concerns the sale of the business of these stores, not the physical space where the stores are located. This is since the stores planned for divestment are not owned by the parties to the concentration – rather, the parties lease them.

Alternatively, if divestment by sale would be unsuccessful, the parties would implement the divestment by sub-leasing the stores or by terminating the existing leases.

Will there be trustees to overlook the implementation?

Yes, there will be both a divestiture and a monitoring trustee. The mandate of both must be confirmed by the NCA.

Were third parties able to comment on the proposed merger?

Yes – during the Phase II probe, the NCA turned to the competitors of the parties to the concentration and to other undertakings for which the NCA thought may be affected by the merger. In particular, the NCA inquired whether the merger would affect the bargaining power, barriers to entry, and the behavior of the parties to the concentration.

In their responses, several undertakings expressed their concern about the planned combination. However, the NCA did not take these concerns seriously, as it found that the third parties did not support the concerns by evidence.

How rare is conditional merger clearance in Serbian competition law?

In recent years, there would usually be one or two conditional clearances a year. For instance, in 2019 the NCA launched three Phase IIs in total and in two of those it cleared the transaction with strings attached (including the one discussed here).