Obligation to report concentration in case of acquisition of assets in Serbian anti-trust law

The concentration of market participants (short: concentration) is one of the key topics regulated by modern competition law. In its essence, concentration is a direct reduction in the number of market participants, which indirectly may cause a decrease in competition and advantages of a market economy and contest. Though abstract for many citizens, concentrations’ effect on markets and people’s lives can be profound, hence it is not a surprise that modern countries give so much attention to them.

In addition to other forms of concentration between market participants (mergers etc.), acquisition of control (directly or indirectly) over parts of undertaking or assets that form an independent business unit is also considered a concentration, as prescribed by Article 17 paragraph 2 of the Serbian Anti-Monopoly Act (“Law”).

The concentration of market participants is subject to reporting with the Competition Authority when thresholds of revenue are met (in the Serbian market and overall), as prescribed by Article 61 of the Serbian Anti-Monopoly Act.

In case there is a reporting obligation, the Competition Authority will assess the legality of the concentration based on prescribed criteria which aim is to protect the competitiveness of the market.

Transactions between market participants may include different types of assets (immovable and movable assets, equipment, production or retail facilities, IP rights, etc.), and hence, in practice, it is important to determine which transactions pertaining to property are considered to constitute a concentration in the sense of the law. Moreover, another important question is how the revenue of the participants should be calculated in these kinds of cases (to determine whether there is an obligation to report the concentration), i.e., whether the seller’s (or target company’s) entire revenue should be considered.

In line with the official opinion by the Competition Authority from 2018, the purchase of undeveloped construction land for the construction of a business facility is not considered a concentration, since “this is not a distinguishable unit (i.e., part of undertaking) to which a market share could be attributed”. Consequently, it can be inferred that the acquisition of real estate with a clear economic function (e.g., production, sale), would constitute concentration, assuming that a market share could be determined for such facility (meaning that it has distinguishable revenue or output). The same would apply to some forms of movable property used for business activity that generates revenue, such as transportation vehicles.

Following the same principle, the acquisition of administrative business premises should not be considered a concentration, since a market share cannot be attributed to this type of real estate (except perhaps if due to the nature of the participant’s business activity business premises directly generate revenue).

Although not explicitly mentioned in the opinions of the Competition Authority, the lease of property or business unit can also be considered as concentration, especially in the case of a long-term lease.

In any case, if the concentration is realized in form of the acquisition of an independent unit or part of an undertaking, it is the position of the Competition Authority that the participant in the concentration is not the seller (unless it retains joint control) but rather the “target business” or “part of the undertaking subject to acquisition of control” (Competition Authority’s opinion from 2020).

In line with the same opinion by the Competition Authority, if the concentration entails the acquisition of control over part of an undertaking, joint overall annual revenue by the participants in the concentration shall be the sum of the revenue of the acquirer (including the revenue of related market participants in the sense of the Law) and the revenue of just the part of the undertaking which is the subject of acquisition (i.e. the target business which is the subject of purchase). Hence, the overall revenue of the seller shall not be considered.

This text is for informational purposes only and is not legal advice. Feel free to contact us if you need additional information.

Damjan Despotović, partner

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