Before the existing Law on the Protection of Competition entered into force at the end of 2009, Serbian competition law had a serious flaw: the Competition Commission was unable to issue fines directly, but had to apply to the courts to impose fines on undertakings that had breached competition rules. These court proceedings often led to severe infringements escaping punishment, because the relevant infringements were time-barred by the time the court dealt with them. Now that the commission has the power to impose fines directly, it has been exercising this power.

Mlekara and Imlek case

In 2008 the commission ruled that Mlekara ad and Imlek ad – which were both controlled by Danube Foods Group BV – had abused their dominant position on the market for purchasing milk in Serbia by imposing unreasonable business conditions and by applying dissimilar conditions to identical transactions. The commission found that contracts concluded with raw milk producers obliged those producers to:

  • carry out quality control of raw milk intended for sale only in the purchasers' laboratory, with the results of the laboratory being considered final;
  • provide information on any contact with competitors of the purchasers, as well as any other offers made to them;
  • agree to unreasonable terms of unilateral contract termination;
  • sell all raw milk produced exclusively to the purchasers, irrespective of the number of cattle credited by the purchasers; and
  • agree to a price list determined by the purchasers, with no right of unilateral termination of the contracts was possible unsatisfactory prices.

In its decision, the commission ordered Mlekara and Imlek to:

  • amend the restrictive provisions in the agreements by providing for quality assessments by independent institutions;
  • advise the relevant milk producers of their right to have the quality of milk assessed independently; and
  • provide for unilateral termination of agreements under equal conditions for both parties.

Furthermore, the commission ordered Mlekara and Imlek to prepare a new price list and to distribute it to all milk producers. As the case was decided under the 2005 Law on the Protection of Competition, no monetary fines could be imposed by the commission. Mlekara and Imlek challenged the commission's decision before the Administrative Court, but the court confirmed the commission's decision.

Following this decision, the commission opened ex officio fine proceedings against Mlekara and Imlek regarding the same matter. For the first time in its history, the commission imposed fines directly, making use of its powers under the new competition law. The fine amounted to 1.92% of the undertakings' respective turnovers (ie, approximately €3 million).

The commission's decision is highly disputed, as the final decision which established abuse by Mlekara and Imlek was rendered under the 2005 version of the law. Some critics consider the decision to impose fines for infringements which occurred and were established before the new law came into force to be unlawful and unconstitutional. Under the 2005 law, the commission was not in charge of imposing fines; its competences were limited to determining competition infringements. By adopting this decision, the commission has signalled that it will apply the new law retroactively, which is widely believed to be unconstitutional.

JKP Javna Groblja case

Shorty after the Mlekara decision, the commission fined JKP Javna Groblja for abuse of market dominance in the provision of funeral services. The commission found that JKP Javna Groblja held a dominant position in respect of a cemetery in the city of Kragujevac, and that it had abused its position by tying in unrelated funeral services. The commission imposed a fine of 2.3% of JKP Gradska Groblja's turnover (approximately €25,000).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.