1 Legal and enforcement framework
1.1 Which legislative and regulatory provisions apply to cartels in your jurisdiction?
A single regulation for the entire Bosnia and Herzegovina concerning cartel conduct is the BiH Law on Competition. This Law applies to all entities directly engaged in the production, sale of goods and provision of services throughout the entire territory of Bosnia and Herzegovina.
1.2 Do any special regimes apply to cartels in specific sectors?
There are additional specific regulations for specific sectors (such as trade or banking sector) that further strengthen the arrangement of business relationships within the cartel.
1.3 Which authorities are responsible for enforcing the cartel legislation?
Above all, it is the Competiton Council which is an autonomous and independent authority with the status of a legal entity established in Sarajevo. The Council, inter alia, monitors and supervises the agreements and arrangements between the economic entities that may affect the relevant market. In addition to the Council, significant authorisations are also provided by the ministries, such as the Federal Ministry of Trade within which the sectors have been formed. Those sectors supervise the implementation of all laws, regulations and any other provisions in the area of trade.
In the area of insurance and insurance companies, the FBiH Insurance Supervisory Agency and the Republika Srpska Insurance Agency play an important regulatory and control role. Their role, as non-profit and independent institutions, is to preserve the safety and stability of the insurance market in accordance with the principles of effectiveness, impartiality, public and transparency.
In the banking sector, the supervision role is exercised by the FBiH Banking Agency and the Republika Srpska Banking Agency.
1.4 How active are the enforcement authorities in investigating and taking action against cartels in your jurisdiction? What are the statistics regarding past and ongoing cartel investigations? What key decisions have the enforcement authorities adopted most recently?
If companies through joint action distort or restrict market competition, the BiH Council of Competition will initiate proceedings at the request of a party or ex officio. Request for initiation of proceedings before the Council of Competition may be submitted by: any legal or natural person having a legal or economic interest, chambers of commerce, associations of employers and entrepreneurs, consumer associations as well as executive power bodies in Bosnia and Herzegovina. It may be said that the Council of Competition is quite active in the investigation of cartel conduct when the party's request for an action is submitted. Current decisions and statistics on both initiated and completed proceedings are regularly published on the official Council website.
2 Definitions and scope of application
2.1 How is a ‘cartel' defined in the cartel legislation?
Legislation of Bosnia and Herzegovina does not expressly define the term "cartel". However, the term implies a group of several market participants who negotiate and conclude agreements with each other in order to increase profits and market domination. Registration of associations of several economic operators to protect and promote their interests is permitted. However, unfair and disloyal treatment aimed at the "destruction" of any other market participants is strictly forbidden.
In the context of the term cartel, Article 4 of the BiH Law on Competition stipulates that prohibited are the agreements, contracts, certain provisions of agreements or contracts, joint actions, explicit and tacit agreements of economic entities, as well as decisions and other acts of economic entities aiming at and resulting in prevention, restriction or distortion of market competition in the relevant market and which relate to the following: the fixing of selling and purchase prices or any other trade conditions, limit and control on production, markets, technical development or investment, share of markets or sources of supply, application of dissimilar conditions to equivalent transactions with other economic entities thereby placing them at a competitive disadvantage, conclusion of contracts subject to acceptance by the other parties of additional obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
2.2 What specific offences are defined in the cartel legislation?
Common offences mean the conclusion of agreements and arrangements between economic entities, which prevent, restrict or distort market competition in the relevant market. This refers in particular to the joint determination of purchase and sale prices, limitation and control of production, technical development or investment, market segmentation, etc. Such agreements shall be null and void if they aim to achieve the above effects. Misuse of a dominant position of several economic entities on the relevant market has been defined as offence too.
2.3 Is liability under the cartel legislation civil, criminal or both?
First of all, it is a civil responsibility. If the Council of Competition finds a violation of the Law, it may prohibit any further conduct of the economic entity, set the deadlines and measures for the elimination of consequences and it may impose fines.
The decision of the Council of Competition is final and a dissatisfied party to the proceeding may initiate an administrative dispute before the Court of Bosnia and Herzegovina within 30 days of the receipt of the decision, that is, from the date of publication of such decision.
2.4 Can both individuals and companies be prosecuted under the cartel legislation?
It is possible to punish both natural and legal persons at the same time. It is provided that an economic entity may be fined up to 10% of the total annual revenue of the previous year if it concludes a cartel agreement or otherwise participates in the restriction or prevention of market competition, while a responsible person may be punished by a fine amounting to between BAM 15,000 and BAM 50,000.
2.5 Can foreign companies be prosecuted under the cartel legislation?
Yes. If it is established that foreign companies operating in the territory of Bosnia and Herzegovina violate the provisions which prohibit restrictive action or distortion of competition, they may be given sanctios in accordance with the provisions on competition as well as other laws regulating the activities of economic entities.
2.6 Does the cartel legislation have extraterritorial reach?
The legal provisions adopted in Bosnia and Herzegovina which prohibit "cartel" conduct only apply to the entire territory of Bosnia and Herzegovina or to a significant part of BiH market.
2.7 What is the statute of limitations to prosecute cartel offences in your jurisdiction?
The statute of limitations for imposing a fine for serious violations of the Law runs after the expiry of the five-year period, while the statute of limitations for imposing fines for minor violations runs after the expiry of three-year period.
The statute of limitations will be counted from the day when violation is made. In case of continuation or reinfringement of the Law, the deadline will be counted from the date of termination of the violation.
Any action taken by the Council of Competition with the purpose of conducting a
proceeding shall discontinue the statute of limitations for the imposition of fines or periodic fines.
Statute of limitations for enforcement of fines runs after the expiry of five years. The statute of limitations shall be counted once the decision becomes final.
3 Investigations – general
3.1 On what grounds may the enforcement authorities commence an investigation?
An investigation may be initiated ex officio or at the request of a Party.
The competent authority shall initiate the proceedings ex officio if there is a reasonable suspicion that market competition is significantly prevented, restricted and distorted. Any legal or natural person having a legal or economic interest, chambers of commerce, associations of employers and entrepreneurs, consumer associations as well as executive power bodies in Bosnia and Herzegovina may request for initiation of the proceedings before the Council of Competition. If any person considers that specific companies have concluded an agreement that distorts or limits market competition, he/she may request from the Council of Competition to bring a decision in order to prohibit such agreement.
Each request for initiation of the proceedings must contain accurate information about the applicant, information on the entity against which it is lodged, a description of the facts and evidence supporting such allegations. Some of the evidence and documents submitted in support of the application are: evaluation of the applicant's market share and market share of the competitors in the relevant market, work permit and other relevant documents of registration of the company, annual reports and other financial and accounting documents.
3.2 What investigatory powers do the enforcement authorities have in conducting their investigation?
In carrying out the investigation, an official appointed by the Council of Competition holds considerable powers. The Law stipulates that each party, as well as any other legal or natural person, must, at the request of the Council of Competition, submit the required information and documentation, enable direct insight into all business premises and all immovable and movable property, business records, databases and other documentation and cannot be precluded by any business, state or technical secret.
3.3 To what extent may the enforcement authorities cooperate with their counterparts in other jurisdictions during their investigation? How common is such cooperation in practice?
The Law on Competition stipulates the possibility of very close cooperation between the Council and other bodies, in particular judicial authorities. Possibility of the Council to request the competent court to issue a search warrant for apartments, premises or any persons and to confiscate the objects and documents of the parties is prescribed accordingly, if undoable without court approval.
3.4 Is there an opportunity for third parties to participate in the investigation?
Except from the official persons, the law does not prescribe the possibility of active participation of any third parties. The third parties shall participate in the proceedings only in a way that they are obliged to provide the data and the information requested from them by the investigating authority.
3.5 What are the general rights and obligations of the enforcement authorities during the investigation?
As mentioned earlier, their general rights are to be able to request from any person such information which may be relevant in establishing whether the cartel conduct, restrictions and distortions of competition have occured.
The obligations of the national authorities in the proceedings of this kind are to give a party against whom the proceeding was initiated an opportunity of submitting his/her defence. The authority shall also be obliged to provide the parties to the proceedings with inspection of the case file. All members of the Council of Competition, officials and any other staff are obliged to protect the trade secrets too, no matter how they learned them, and the obligation of professional secrecy shall continue even after the termination of work within the authority.
3.6 What are the general rights and obligations of the target company during the investigation?
General right of an enterprise, as well as of any natural person, is the right of defence meaning that they have the following rights: right to submit a response to the application, right to see the documentation, right to participate in the hearing, etc. In exercising these rights, both the enterprise and the natural person may also be represented by a lawyer. Their main obligations relate to the fact that authorised persons in proceedings are obliged to provide access to all required documents, premises, as well as immovable and movable property, all for the purpose of establishing the facts in the proceedings.
3.7 What principles of attorney-client privilege apply during a cartel investigation?
Attorney, being a person who protects the interests of his/her client – a company, is obliged to act according to the rules of the profession and the Code of conduct for attorneys, and to ensure maximum dedication to the work, presentation of the defence and confidentiality of the information he/she learns during the proceeding.
3.8 Are details of the investigation publicly announced? If so, what principles of confidentiality apply?
Decisions of the Council of Competition in the proceedings are published in the BiH Official Gazette and official gazettes of FBiH and RS entities. Published decisions which are publicly available, provide the names of the parties to the proceedings, the main content of the decision, including the pronounced sentences. Accordingly, the obligation of the Council of Competition is to take into account the legitimate interests of economic entities in terms of protecting their business secrets, and in that sense everything being laid down either by law, by some other provision or by general act is deemed to be professional secret.
4 Investigations – step by step
4.1 What initial steps do the enforcement authorities take to commence a cartel investigation?
The initial phase is the submission of a conclusion and a request to initiate the proceeding on response of both, the party against whom the process is running and the persons with the capacity of a party, except for the information deemed to be business secret. Response shall be given within a period specified by the Council of Competition which may not be shorter than 8 days nor longer than 30 days.
4.2 Are dawn raids commonly conducted in your jurisdiction? If so, what are the pre-conditions for conducting a dawn raid? When, where and by whom are they conducted? Do the enforcement authorities have the power to search private as well as company premises?
Yes, they are.
If so, what are the pre-conditions for conducting a dawn raid? The Law on Competition stipulates the possibility of conducting searches of an apartment, a room or the persons in case the parties or any other persons possess the documents or some other means of importance in the proceeding.
When, where and by whom are they conducted? The raid is carried out by the police officers on the basis of a court order and it is focused on those persons indicated on such warrant.
Do the enforcement authorities have the power to search private as well as company premises? They have. As we mentioned before, although the Law on Competition stipulates the possibility of raids, the search is the most common in criminal proceedings being persued against companies for economic crimes.
4.3 What powers do officers have during the dawn raid? Are there any limitations on these powers?
The officers have common powers for the purpose of gathering the data and evidence relevant to the investigation. The restriction consists of the obligation to act explicitly upon the order and to search only those premises and objects identified in the order thereby respecting the integrity of the suspect and his/her associated rights.
4.4 What are the rights and obligations of the target company and any individuals targeted during a dawn raid?
The fundamental right is that they may be present during the search and that they are entitled to defense, while their obligation is to actively participate in the proceedings, for example to provide any data and documents requested by authorised persons.
4.5 What evidence can be seized during a dawn raid? Do the enforcement authorities have the power to interview witnesses and take statements during a dawn raid?
For the purposes of the proceeding, all the documents relevant for establishing the substantive truth in the proceeding may be seized. Yes, the executive bodies have such powers. Only the information which may jeopardise the course of proceedings may not be disclosed.
4.6 How can a company best prepare itself for dawn raids? What best practices should it follow in the event of a dawn raid?
The company can best prepare itself by actively participating and cooperating with investigative bodies. It means that within the prescribed deadline, the company will provide all the information requested regardless of its form, it will allow the insight into any of the business premises, business records and databases. Companies are strongly recommended to hire external legal and financial experts in order to eliminate harmful consequences as smooth as possible.
4.7 What are the next steps in the cartel investigation following a dawn raid? What timeframe do these typically follow?
As a rule, it is an oral discussion. It is obligatory in all cases when it comes to parties with opposite interests. Exceptionally, if it is found that there is no contentious factual situation among the opposing parties and that there are no other obstacles to the decision-making, a solution may be reached even without the oral hearing being scheduled. In case an oral hearing is held, it shall be public. As regards the time duration of the procedure itself, after the procedure launched, competent body shall be obliged to make a decision within 6 months, depending upon the violation of the Law.
4.8 What factors will the enforcement authorities consider in assessing whether cartel activity has taken place?
When estimating whether a cartel activity has taken place or not, the competent authority shall take into account all evidence collected during the proceedings, including any material documents, testimonies of witnesses and of the responsible persons of the company. If the enforcement authority determines that an infringement has been committed, the extent of the infringement and the damage to other participants will be taken into account. The type and level of the sanction will depend on all above mentioned factors.
4.9 In case of a finding of cartel activity, can the company seek to negotiate a settlement, plea bargain or similar resolution? If so, what is the process for doing so?
The Law provides for the possibility for the Council of Competition to reduce or revoke a fine imposed on economic entity if it has voluntarily provided important evidence for determining a violation and if it has stopped the prohibited activity at the time of submission of evidence. On the other hand, if the economic entity is willing to voluntary cooperate within the case, exemption from fines is even possible.
5 Leniency
5.1 Is a leniency programme in place in your jurisdiction? If so, how does this function?
Yes, there is a prescribed procedure for punishment mitigation. The Decision on the exemption and mitigation procedure– leniency policy has been in force as of January 2006. The Council of Competition may, in percentage terms, reduce or revoke a fine imposed on the economic entity for violation if an economic entity voluntarily cooperates with the Council and has provided evidence relevant to the Decision and has stopped the prohibited activity.
5.2 What are the benefits of applying for leniency, both for the first mover and for subsequent applicants?
The most important benefit for each company in the proceeding is that by applying the deduction, the company will not be financially impacted and negative reputation of a greater extent will be avoided.
5.3 What steps does a leniency application involve? What timeframe do these typically follow?
The Law on Competition does not prescribe a time frame for deciding on the request for leniency, but the indicative time limit should be 30 days starting from the date of submission of the application in accordance with the rules of the administrative procedure. Request for mitigation or exemption from punishment may be filed orally, in writing or electronically.
5.4 What are the rights and obligations of the applicant during the leniency application and over the course of its cooperation with the enforcement authorities?
In order to obtain a mitigated punishment or even to be exempted from punishment, economic entity must actively and effectively cooperate throughout the process and provide the complete and true evidence and information it owns. In addition, it must suspend all actions relating to a cartel agreement which violate market competition and must not inform any other participants of such agreement on the application it has submitted.
5.5 Is the leniency programme open to individuals? Can employees or former employees benefit from a leniency application filed by their employer? Do the authorities operate a programme for individual whistleblowers separate to the leniency programme?
It is clear from the Decision on the immunity and lenciency that it exclusively applies to the economic entities.
5.6 Can leniency be denied or revoked? If so, on what grounds?
Yes, the leniency application will be rejected if the economic entity cannot meet the conditions laid down for the immunity or lenciency. This will be the case if the Council of Competition finds that the economic entity has failed to provide valid evidence of the cartel, or where, despite the initiated proceeding, such entity continues to infringe market competition.
6 Penalties and sanctions
6.1 What penalties may be imposed in criminal proceedings on companies? What penalties may be imposed on individuals?
The Criminal Code applicable in the territory of the Federation of Bosnia and Herzegovina stipulates the criminal liability of those persons who have concluded agreements that restrict the free movement of goods or services, or that create monopolistic power of specific legal or natural persons on the market. For such acts, responsible persons may be punished with imprisonment in the duration from 6 months to 5 years.
6.2 What penalties may be imposed in civil proceedings on companies? What penalties may be imposed on individuals?
When it comes to the civil liability of economic entities and individuals within them, their responsibility is to be obliged to compensate other entities, of course if such damage is identified in the appropriate proceeding. The amount of compensation will depend on the extent of damage.
6.3 How are penalties in cartel cases determined? In deciding on the applicable penalties, will the enforcement authorities consider penalties imposed in other jurisdictions?
When determining penalties, several factors will be taken into account. First of all, as we have already mentioned, it is the extent of the damage, then whether the company has already been sentenced for similar actions and whether it cooperated during the proceeding or whether there has been a recognition for the actions charged against it.
6.4 Can a defendant company pay the legal costs incurred by and/or penalties imposed on its employees?
Yes, such a possibility exists.
7 Appeal
7.1 Can the defendant company appeal the enforcement authorities' decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and to which reviewing authority? What is the standard of review applied by the reviewing authority (eg, limited to errors of law or a full review of all facts and evidence)?
The decision brought by the Council of Competition shall be final. However, a dissatisfied economic entity may initiate an administrative dispute before the Court of BiH within 30 days from the date of receipt of the decision (in certain cases from the date of publication of the Decision). Such decisions shall be binding throughout the entire territory of Bosnia and Herzegovina and shall apply from the date of publication.
7.2 Can third parties appeal the enforcement authorities' decision, and if so, in what circumstances?
The law clearly stipulates that the right to appeal is exercised by the "dissatisfied party", i.e. the person against whom the proceeding is being conducted, from the foregoing it follows that those third parties not being involved in the proceeding have no right to appeal.
8 Private enforcement
8.1 Are private enforcement actions against cartels available in your jurisdiction? If so, where can they be brought?
No, such possibility is not stipulated by the Law.
8.2 Can private enforcement actions be brought against both companies and individuals?
No, such possibility is not stipulated by the Law.
8.3 Are class actions or other forms of collective action available in your jurisdiction?
If collective action refers to the activities of economic or consumer associations, the answer is yes. The importance of their activities lies primarily in the fact that they may submit a request to initiate proceedings before the Council of Competition against cartel action, with a clear description of the facts and any other circumstances which are the reason for the application.
8.4 What process do private enforcement actions follow?
The law does not prescribe the possibility of any private enforcement actions in the proceedings against cartel activities.
8.5 What types of relief may be sought and what types of relief are most commonly awarded? How is the relief awarded determined?
The main relief is that an economic entity may be able to pay a fine in instalments. It is exceptionally possible for an economic operator to be granted immunity from fines, but this will only be the case when such entities actively cooperate with the Council. The method of implementing the reliefs for entities is laid down by special acts adopted by the Council of Competition.
8.6 Can the decision in a private enforcement action be appealed? If so, to which reviewing authority?
As already mentioned above, the law does not prescribe the possibility of any private enforcement actions; therefore, the answer is "no".
9 Trends and predictions
9.1 How would you describe the current cartel enforcement landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
It can be said that the current legislative framework governing the issue is well-organised and any situation violating cartel conduct is regulated by it. On the official website of the Council of Competition it is possible to stay informed about any current events such as proceedings initiated against violators, etc.
However, we underline that the implementation policy must be better addressed. In order to improve legislation, amendments by competent ministries are announced for the next year. Since Bosnia and Herzegovina aspires to become a member of the European Union, first and foremost it will have to strengthen its own economy and improve the conditions for the development of the economy, which implies alignment of rules with EU standards and better application in practice.
10 Tips and traps
10.1 What would be your recommendations to companies faced with a cartel investigation and what potential pitfalls would you highlight?
When a cartel investigation has already taken place, a recommendation to all entities would be to actively cooperate with the competent authorities and in any case to hire legal professionals with the experience in this specific field of law.
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.
