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Greece has suffered six years of deep recession, which has led to a significant decrease of the GDP by approximately 25% and to unprecedented unemployment rates exceeding 27%. The political situation has been tenuous for a long time, while the banking system has been unable to finance companies and individuals. 

Because of these factors, the surrounding financial environment has heavily affected M&A activity, and there have been only a few recent deals, mainly in the category of ‘rescue mergers’ (i.e., to ensure the viability of the involved enterprises).

Needless to say, periods of crisis are periods of opportunity. The current crisis will function to a great extent as a corrective measure to the past ‘evils’ of the Greek economy. Measures and changes that appeared inconceivable in the past due to their political cost will become inevitable. The structural inefficiencies of the Greek economy, even if not entirely cured, will improve; the unproductive cost of labour will be reduced; inflationary trends will be harnessed, and a lot of other disincentives, including the negative climate for enterprises and entrepreneurs, should improve. The new conditions will necessarily improve the country’s poor productivity ranking. 

At last, it seems that a turnaround in M&A activity is now starting, taking advantage of the above opportunities.

1. Banking sector. In the banking sector, consolidation through M&A activity has been long awaited, and this year there have been significant movements due to the deteriorating circumstances of the Greek economy and the Greek banks.  

Following several previous attempts and schemes (Alpha Bank and EFG Eurobank, NBG and Eurobank Ergasias SA), which were finally abandoned and/or not completed, the final combinations for the four “systemic” banks of the Greek banking system have progressed as follows:

• NBG acquired Probank (Hellenic Competition Commission decision no. 576/VII/2013) and FBB Bank (HCC 568/VII/2013),
• Alpha Bank acquired Emporiki Bank from Credit Agricole (HCC 556/VII/2012),
• Piraeus Bank acquired state-owned Agricultural Bank of Greece (its “healthy” part), Geniki Bank (a member of Societe General Group), Millenium Bank and Cyprus Popular Bank (the Greek business).  All the above acquisitions by Piraeus Bank have been already cleared by the HCC (decisions no. 549/VII/2012, 553/VII/2012, 566/VII/2013 and 574/VII/2013 accordingly).
• Eurobank acquired New Proton Bank (HCC 578/VII/2013) and New Hellenic Postbank (HCC 584/VII/2013).

2. Aviation sector. One of last year’s highlights for M&A deals in Greece would certainly be the second attempt for the concentration between Aegean Airlines and Olympic Air (Aegean/Olympic II).  Following the 2011 prohibition by the European Commission, Aegean Airlines announced on October 2012 a new agreement with Marfin Investment Group SA for the purchase of 100% of the share capital of Olympic Air SA.  The significance of this deal was again the intended formation of one consolidated Greek air carrier, following the international tendency for consolidation in the aviation industry.  The deal had a different structure, i.e., it led to acquisition of sole control by Aegean Airlines over Olympic Air, while previously there was to have been joint control of three groups of shareholders over the merged entity. Therefore, there was no European dimension this time and, as far as the EU is concerned, the transaction was only to be notified in Greece and Cyprus. However, the European Commission requested upwards referral, and the case was examined in depth by the competent Directorate General (DG Comp).  In October 2013, the European Commission finally cleared the deal on a failing-firm basis and, therefore, without remedies. Interestingly, this seems to be the first case to be unconditionally cleared by the Commission following a previous blocking decision.

3. Energy sector. One of the few privatization deals which moved ahead this year relates to the acquisition of 66% of DESFA SA (a natural gas Transmission System Operator in Greece) by SOCAR. It is actually the first case within the EU where a third-country undertaking seeks to acquire control over an EU member state TSO. The merger control of the deal is under examination by the European Commission and still in progress.  

Other than that, the Hellenic Competition Commission recently cleared (HCC 587/VII/2014) a joint venture in the energy sector (PPC Solar Solutions), established between Public Power Company (incumbent in the Greek electricity market) and Copelouzos Group (a major private investor), which is expected to offer integrated solutions for household photovoltaic installations and energy saving products in Greece.     

By Cleomenis Yannikas, Partner, Dryllerakis & Associates

This Article was originally published in Issue 2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Interview with Andras Mohacsi, Assistant Regional General Counsel at British American Tobacco. Based in Holland, Mohacsi is currently the Assistant Regional General Counsel responsible for Western Europe at British American Tobacco (BAT) and the Head of Competition for the region. He is soon to move to London to take on the same role for BAT globally. Mohacsi agreed to talk to CEE Legal Matters about the competition challenges faced by a company as large as BAT and best practices in building a compliance system and culture within such an organization.

   

Andras Mohacsi, Assistant Regional General Counsel at British American Tobacco

 CEELM: To start, please tell our readers a bit about you and your background. 

A.M.: I am a Hungarian lawyer. I first worked 6 years in banking following which I started working for British American Tobacco (BAT) in 1998. I first worked as a generalist senior lawyer and leader of legal teams. As part of the executive legal team within BAT, I worked and supervised teams in Hungary and later in the Netherlands, after which I focused on the area or cluster of legal teams in Central Europe and Northern Europe. More recently I specialized in Competition law, and obtained a post-gradual diploma in EU Competition Law at Kings College London. Currently I live in Amsterdam and expect to move to London soon with my family. My daughter is 14 and my son is 21 and studies in London, so I am looking forward to the family reunion and playing golf together. That, by the way, is my dearest hobby. I picked it up 2 years ago and now I ask myself how I could live before without golf?

 CEELM: At BAT, you are responsible for competition matters for a wide range of jurisdictions. Which aspects of your role are most challenging and why?

A.M.: In the last 3 years I have been coordinating competition legal matters, including putting in place a robust compliance program in our Western Europe Region, which includes the EU and EFTA. In the next few months I expect to start a new role in which I will essentially be doing the same but with a global responsibility. 

Arguably the most challenging topic is competitive information. Our industry is quite oligopolistic with a few global players competing with each other for a long time in most markets of the world. In order to be successful in the market, we cannot operate in isolation. We need information from the market on what our competitors are up to and how they are performing. At the same time, we do business with common trading partners, wholesalers, key accounts, distributors, etc. As a result, we need to counsel other business units very carefully as to how far we can go in collecting and relying on information related to our competitors and how we can communicate our own price decisions to the market while staying on the right side of the law. 

The law governing competitive information is not always clear and, in some jurisdictions, there are definitely a lot of nuances of grey in interpreting it. For example, it is far from clear whether the legal test in the so-called “hub and spoke” exchange of information situations that has been elaborated by UK courts in the “Replica T-shirt” cases and reinforced later in the Tesco case could serve as a guidance in the rest of the EU and beyond, or whether the Commission or other anti-trust authorities would use a different legal test to establish the existence of a 3-party agreement between retailers and their common supplier. 

At the same time, it is unclear whether this legal test would be applied if the triangle is up-side down, i.e. among two suppliers and their common distributor. Arguably, a supplier like us needs to be able to discuss a broad set of commercial issues with our distributors. In certain cases there is a strong commercial interest for the distributor to share some of the information with another supplier. It is very challenging to put in place and operate a compliance program that allows a business to maximize opportunities and stay on the right side of the law in this area.  

 CEELM: Competition-related fines have become an increasingly expensive burden. What are the best practices a company of BAT’s size can employ to avoid them? 

A.M.: Before I specialized in competition law, I was a generalist business lawyer counseling different business functions at various levels. My number one objective was, together with all other executive team members, to enable the company to win in the market place. 

As lawyers, we are risk managers and our role is to find solutions in our counseling and with the controls we put in place whereby we maximize our business opportunities while ensuring that the various kinds of risk we take are at an acceptable level. As you say, the consequences of breaching competition law are very severe. 

It is not just about the fines – the levels of which are increasing in many jurisdictions around the world – but also criminal liability in some jurisdictions, or being sued by victims of the antitrust infringement, reputation, time-management, legal cost, etc. The challenge is, on the one hand, that the law is not always terribly clear, as we discussed already, while on the other hand,  in a company employing more than 55,000 people worldwide, you have at least several thousand who could potentially be in the position to breach or contribute to the breach of Competition law at any given time. 

Our compliance program rests on the assumption that infringements occur either because of lack of knowledge or lack of control. Therefore, through our compliance machine, we need to mobilize knowledge and operate control processes where it matters. Some companies believe that printing a nice booklet containing some dos and don’ts or a generic description of the main prohibitions of competition law, and maybe a few presentations to staff once in a while, is enough. I have seen such booklets actually titled “Competition Law Compliance Program.” This is a very static approach and I cannot imagine that such an approach can work in a big and complex organization. 

An effective compliance program is dynamic, much more of a comprehensive approach consistently implemented in regular cycles. The program that we have already implemented in our Western Europe Region and that I am planning to roll out in our other regions has 7 building blocks: 

The first is “The Organization.” In a global consumer business like ours, business is conducted mainly via end market subsidiaries. For example, BAT Germany is managing our business in Germany and so on. Our lawyers sit in the end markets and counsel their respective businesses. These lawyers are generalists with varying level of Competition law knowledge. In the last 3 years I used to be the competition expert coordinator for Western Europe, and in the future I will be the global such coordinator. We have formed what we call the “Competition Law Community” and the members are all lawyers who are involved in competition law matters. 

The second is “Defining focus areas on an annual basis.” Under my supervision, the members of the Community do a risk assessment in their respective markets on an annual basis and do a compliance plan defining the most relevant and important focus areas. We also group markets with similar characteristic features together and where we find a group of markets with similar risk areas we seek and implement coordinated compliance solutions. One example of this has been the Self-Assessment Guidelines that we developed with our regional external antitrust law firm, which addressed several aspects of exchange of information in groups of European countries. 

The third pillar is “The How.” We have developed and rolled out within the legal function a set of Guidelines on how to counsel the other business functions on antitrust matters. This field of law requires a special counseling approach because of unique procedural issues (such as legal privilege, leniency, etc.), the high level of fines, and the critical role of documents. Neutralization of potential competition concerns requires special skills and we had to make sure we build them within our team. 

In the forth, we “Connect the Community.” Specifically, we provided access to our entire legal community involved in antitrust matters to a dynamic electronic library to share knowledge and best practices. Along the same lines, in the fifth, we “Connect the Business” with knowledge tools, appropriate controls, guidelines, trainings, awareness programs and deep-dive sessions for senior top teams. The sixth block is “Connecting the Counsel.” We have identified one global law firm with a very broad footprint as our regional strategic firm in competition law matters. This approach gives us better knowledge management, and a lot of other synergies. The seventh, and final block, we call “Connect the Word.” It contains our coordinated activities to keep up with developments in competition law globally, representing ourselves in various associations for competition lawyers, such as ICLA, and contributing through various bodies to the shaping of key regulations in this field of law. 

 CEELM: As the competition expert in your company, how do you disseminate best practices throughout the organization in other business functions? 

A.M.: Knowledge management is absolutely central in our compliance approach. In fact, our European Compliance program (the 7 building blocks described above) was born in the context of knowledge management, when our Global Legal Board mandated 4 pilot programs in 4 different areas of law with the aim of seeing how we, as a global function, can be better in knowledge management. 

We found that a mixture of a formal and informal, actual and virtual organization is needed. You need a dedicated expert with formal authority to lead the coordination. You need the Community, essentially all lawyers who are involved in antitrust matters. You need to encourage the creation of sub-groups with similar issues. You need to promote the use of technology, virtual meetings, webexes, tele-presence, and libraries. You need to have an annual training plan, which is linked to the strategic priorities of the various markets identified through the risk assessment exercise. 

Between the community, which consists of all the lawyers, and the regional or global coordinator, sits a smaller informal virtual team, that we call “the Competition Law Practice Group (CLPG).” We select 5-6 lawyers from each region to the CLPG and we change the CLPG every 1.5 – 2 years. They have a more intensive learning plan, they review and comment on regional compliance initiatives, and they drive the implementation of new compliance initiatives for better buy-in. In terms of disseminating knowledge to the business, we try to be very targeted, instead of overloading everyone with irrelevant information. We focus on key risk groups. The most important element is the deep-dive sessions that we have for top teams, where we talk about the business of a particular subsidiary in a market, what are the key objectives, risks, and we try to conclude with very practical suggestions and measures to help to achieve the business objectives with acceptable risk. 

 CEELM: When your company hires country heads of legal, do you look for individuals with specific competition matter experience or do you train them in-house in that direction?

A.M.: It depends on the market position of our subsidiary. For example, when I hired the future legal director for BAT Denmark, experience in competition law was key, since in Denmark BAT has around 80% market share. Otherwise, we do a lot of training in-house in the strategic context.  

 CEELM: From a regulatory standpoint, what do you perceive as the biggest challenges companies in CEE will have to face in the near/mid future?

A.M.: I think that the key challenge for CEE is economic growth. We still do not seem to be out from the negative consequences of the financial crisis. There is a lot of frustration in societies and governments around the EU with protectionism in certain places seeming to win votes. I am a big fan of the single market. Governments need to be careful with the re-creation of national monopolies and protecting existing ones. I am personally in favor of more Europe rather than less Europe, though, Brussels needs to listen to valid claims of member state governments and societies for serenity where the single market is not really an issue. Companies can grow and flourish in a stable legal environment. There is a lot to be done in that area in CEE.

 CEELM: How transparent do you find CEE competition regulators relative to those in Western Europe? Has there been development in this regard in recent years?

A.M.: Some are easier to predict than others. It is understandable to a certain extent that the enforcement priorities of NCAs are often politically driven. The European Competition Network is a very important forum and contributes to the transparency of NCAs and the dissemination of best practices. The Commission still has a lot to do to promote the concept of the single market though. 

Interview with Andras Mohacsi, Assistant Regional General Counsel at British American Tobacco. Based in Holland, Mohacsi is currently the Assistant Regional General Counsel responsible for Western Europe at British American Tobacco (BAT) and the Head of Competition for the region. He is soon to move to London to take on the same role for BAT globally. Mohacsi agreed to talk to CEE Legal Matters about the competition challenges faced by a company as large as BAT and best practices in building a compliance system and culture within such an organization.

   

Andras Mohacsi, Assistant Regional General Counsel at British American Tobacco

 CEELM: To start, please tell our readers a bit about you and your background. 

A.M.: I am a Hungarian lawyer. I first worked 6 years in banking following which I started working for British American Tobacco (BAT) in 1998. I first worked as a generalist senior lawyer and leader of legal teams. As part of the executive legal team within BAT, I worked and supervised teams in Hungary and later in the Netherlands, after which I focused on the area or cluster of legal teams in Central Europe and Northern Europe. More recently I specialized in Competition law, and obtained a post-gradual diploma in EU Competition Law at Kings College London. Currently I live in Amsterdam and expect to move to London soon with my family. My daughter is 14 and my son is 21 and studies in London, so I am looking forward to the family reunion and playing golf together. That, by the way, is my dearest hobby. I picked it up 2 years ago and now I ask myself how I could live before without golf?

 CEELM: At BAT, you are responsible for competition matters for a wide range of jurisdictions. Which aspects of your role are most challenging and why?

A.M.: In the last 3 years I have been coordinating competition legal matters, including putting in place a robust compliance program in our Western Europe Region, which includes the EU and EFTA. In the next few months I expect to start a new role in which I will essentially be doing the same but with a global responsibility. 

Arguably the most challenging topic is competitive information. Our industry is quite oligopolistic with a few global players competing with each other for a long time in most markets of the world. In order to be successful in the market, we cannot operate in isolation. We need information from the market on what our competitors are up to and how they are performing. At the same time, we do business with common trading partners, wholesalers, key accounts, distributors, etc. As a result, we need to counsel other business units very carefully as to how far we can go in collecting and relying on information related to our competitors and how we can communicate our own price decisions to the market while staying on the right side of the law. 

The law governing competitive information is not always clear and, in some jurisdictions, there are definitely a lot of nuances of grey in interpreting it. For example, it is far from clear whether the legal test in the so-called “hub and spoke” exchange of information situations that has been elaborated by UK courts in the “Replica T-shirt” cases and reinforced later in the Tesco case could serve as a guidance in the rest of the EU and beyond, or whether the Commission or other anti-trust authorities would use a different legal test to establish the existence of a 3-party agreement between retailers and their common supplier. 

At the same time, it is unclear whether this legal test would be applied if the triangle is up-side down, i.e. among two suppliers and their common distributor. Arguably, a supplier like us needs to be able to discuss a broad set of commercial issues with our distributors. In certain cases there is a strong commercial interest for the distributor to share some of the information with another supplier. It is very challenging to put in place and operate a compliance program that allows a business to maximize opportunities and stay on the right side of the law in this area.  

 CEELM: Competition-related fines have become an increasingly expensive burden. What are the best practices a company of BAT’s size can employ to avoid them? 

A.M.: Before I specialized in competition law, I was a generalist business lawyer counseling different business functions at various levels. My number one objective was, together with all other executive team members, to enable the company to win in the market place. 

As lawyers, we are risk managers and our role is to find solutions in our counseling and with the controls we put in place whereby we maximize our business opportunities while ensuring that the various kinds of risk we take are at an acceptable level. As you say, the consequences of breaching competition law are very severe. 

It is not just about the fines – the levels of which are increasing in many jurisdictions around the world – but also criminal liability in some jurisdictions, or being sued by victims of the antitrust infringement, reputation, time-management, legal cost, etc. The challenge is, on the one hand, that the law is not always terribly clear, as we discussed already, while on the other hand,  in a company employing more than 55,000 people worldwide, you have at least several thousand who could potentially be in the position to breach or contribute to the breach of Competition law at any given time. 

Our compliance program rests on the assumption that infringements occur either because of lack of knowledge or lack of control. Therefore, through our compliance machine, we need to mobilize knowledge and operate control processes where it matters. Some companies believe that printing a nice booklet containing some dos and don’ts or a generic description of the main prohibitions of competition law, and maybe a few presentations to staff once in a while, is enough. I have seen such booklets actually titled “Competition Law Compliance Program.” This is a very static approach and I cannot imagine that such an approach can work in a big and complex organization. 

An effective compliance program is dynamic, much more of a comprehensive approach consistently implemented in regular cycles. The program that we have already implemented in our Western Europe Region and that I am planning to roll out in our other regions has 7 building blocks: 

The first is “The Organization.” In a global consumer business like ours, business is conducted mainly via end market subsidiaries. For example, BAT Germany is managing our business in Germany and so on. Our lawyers sit in the end markets and counsel their respective businesses. These lawyers are generalists with varying level of Competition law knowledge. In the last 3 years I used to be the competition expert coordinator for Western Europe, and in the future I will be the global such coordinator. We have formed what we call the “Competition Law Community” and the members are all lawyers who are involved in competition law matters. 

The second is “Defining focus areas on an annual basis.” Under my supervision, the members of the Community do a risk assessment in their respective markets on an annual basis and do a compliance plan defining the most relevant and important focus areas. We also group markets with similar characteristic features together and where we find a group of markets with similar risk areas we seek and implement coordinated compliance solutions. One example of this has been the Self-Assessment Guidelines that we developed with our regional external antitrust law firm, which addressed several aspects of exchange of information in groups of European countries. 

The third pillar is “The How.” We have developed and rolled out within the legal function a set of Guidelines on how to counsel the other business functions on antitrust matters. This field of law requires a special counseling approach because of unique procedural issues (such as legal privilege, leniency, etc.), the high level of fines, and the critical role of documents. Neutralization of potential competition concerns requires special skills and we had to make sure we build them within our team. 

In the forth, we “Connect the Community.” Specifically, we provided access to our entire legal community involved in antitrust matters to a dynamic electronic library to share knowledge and best practices. Along the same lines, in the fifth, we “Connect the Business” with knowledge tools, appropriate controls, guidelines, trainings, awareness programs and deep-dive sessions for senior top teams. The sixth block is “Connecting the Counsel.” We have identified one global law firm with a very broad footprint as our regional strategic firm in competition law matters. This approach gives us better knowledge management, and a lot of other synergies. The seventh, and final block, we call “Connect the Word.” It contains our coordinated activities to keep up with developments in competition law globally, representing ourselves in various associations for competition lawyers, such as ICLA, and contributing through various bodies to the shaping of key regulations in this field of law. 

 CEELM: As the competition expert in your company, how do you disseminate best practices throughout the organization in other business functions? 

A.M.: Knowledge management is absolutely central in our compliance approach. In fact, our European Compliance program (the 7 building blocks described above) was born in the context of knowledge management, when our Global Legal Board mandated 4 pilot programs in 4 different areas of law with the aim of seeing how we, as a global function, can be better in knowledge management. 

We found that a mixture of a formal and informal, actual and virtual organization is needed. You need a dedicated expert with formal authority to lead the coordination. You need the Community, essentially all lawyers who are involved in antitrust matters. You need to encourage the creation of sub-groups with similar issues. You need to promote the use of technology, virtual meetings, webexes, tele-presence, and libraries. You need to have an annual training plan, which is linked to the strategic priorities of the various markets identified through the risk assessment exercise. 

Between the community, which consists of all the lawyers, and the regional or global coordinator, sits a smaller informal virtual team, that we call “the Competition Law Practice Group (CLPG).” We select 5-6 lawyers from each region to the CLPG and we change the CLPG every 1.5 – 2 years. They have a more intensive learning plan, they review and comment on regional compliance initiatives, and they drive the implementation of new compliance initiatives for better buy-in. In terms of disseminating knowledge to the business, we try to be very targeted, instead of overloading everyone with irrelevant information. We focus on key risk groups. The most important element is the deep-dive sessions that we have for top teams, where we talk about the business of a particular subsidiary in a market, what are the key objectives, risks, and we try to conclude with very practical suggestions and measures to help to achieve the business objectives with acceptable risk. 

 CEELM: When your company hires country heads of legal, do you look for individuals with specific competition matter experience or do you train them in-house in that direction?

A.M.: It depends on the market position of our subsidiary. For example, when I hired the future legal director for BAT Denmark, experience in competition law was key, since in Denmark BAT has around 80% market share. Otherwise, we do a lot of training in-house in the strategic context.  

 CEELM: From a regulatory standpoint, what do you perceive as the biggest challenges companies in CEE will have to face in the near/mid future?

A.M.: I think that the key challenge for CEE is economic growth. We still do not seem to be out from the negative consequences of the financial crisis. There is a lot of frustration in societies and governments around the EU with protectionism in certain places seeming to win votes. I am a big fan of the single market. Governments need to be careful with the re-creation of national monopolies and protecting existing ones. I am personally in favor of more Europe rather than less Europe, though, Brussels needs to listen to valid claims of member state governments and societies for serenity where the single market is not really an issue. Companies can grow and flourish in a stable legal environment. There is a lot to be done in that area in CEE.

 CEELM: How transparent do you find CEE competition regulators relative to those in Western Europe? Has there been development in this regard in recent years?

A.M.: Some are easier to predict than others. It is understandable to a certain extent that the enforcement priorities of NCAs are often politically driven. The European Competition Network is a very important forum and contributes to the transparency of NCAs and the dissemination of best practices. The Commission still has a lot to do to promote the concept of the single market though. 

Interview with Andras Mohacsi, Assistant Regional General Counsel at British American Tobacco. Based in Holland, Mohacsi is currently the Assistant Regional General Counsel responsible for Western Europe at British American Tobacco (BAT) and the Head of Competition for the region. He is soon to move to London to take on the same role for BAT globally. Mohacsi agreed to talk to CEE Legal Matters about the competition challenges faced by a company as large as BAT and best practices in building a compliance system and culture within such an organization.

   

Andras Mohacsi, Assistant Regional General Counsel at British American Tobacco

 CEELM: To start, please tell our readers a bit about you and your background. 

A.M.: I am a Hungarian lawyer. I first worked 6 years in banking following which I started working for British American Tobacco (BAT) in 1998. I first worked as a generalist senior lawyer and leader of legal teams. As part of the executive legal team within BAT, I worked and supervised teams in Hungary and later in the Netherlands, after which I focused on the area or cluster of legal teams in Central Europe and Northern Europe. More recently I specialized in Competition law, and obtained a post-gradual diploma in EU Competition Law at Kings College London. Currently I live in Amsterdam and expect to move to London soon with my family. My daughter is 14 and my son is 21 and studies in London, so I am looking forward to the family reunion and playing golf together. That, by the way, is my dearest hobby. I picked it up 2 years ago and now I ask myself how I could live before without golf?

 CEELM: At BAT, you are responsible for competition matters for a wide range of jurisdictions. Which aspects of your role are most challenging and why?

A.M.: In the last 3 years I have been coordinating competition legal matters, including putting in place a robust compliance program in our Western Europe Region, which includes the EU and EFTA. In the next few months I expect to start a new role in which I will essentially be doing the same but with a global responsibility. 

Arguably the most challenging topic is competitive information. Our industry is quite oligopolistic with a few global players competing with each other for a long time in most markets of the world. In order to be successful in the market, we cannot operate in isolation. We need information from the market on what our competitors are up to and how they are performing. At the same time, we do business with common trading partners, wholesalers, key accounts, distributors, etc. As a result, we need to counsel other business units very carefully as to how far we can go in collecting and relying on information related to our competitors and how we can communicate our own price decisions to the market while staying on the right side of the law. 

The law governing competitive information is not always clear and, in some jurisdictions, there are definitely a lot of nuances of grey in interpreting it. For example, it is far from clear whether the legal test in the so-called “hub and spoke” exchange of information situations that has been elaborated by UK courts in the “Replica T-shirt” cases and reinforced later in the Tesco case could serve as a guidance in the rest of the EU and beyond, or whether the Commission or other anti-trust authorities would use a different legal test to establish the existence of a 3-party agreement between retailers and their common supplier. 

At the same time, it is unclear whether this legal test would be applied if the triangle is up-side down, i.e. among two suppliers and their common distributor. Arguably, a supplier like us needs to be able to discuss a broad set of commercial issues with our distributors. In certain cases there is a strong commercial interest for the distributor to share some of the information with another supplier. It is very challenging to put in place and operate a compliance program that allows a business to maximize opportunities and stay on the right side of the law in this area.  

 CEELM: Competition-related fines have become an increasingly expensive burden. What are the best practices a company of BAT’s size can employ to avoid them? 

A.M.: Before I specialized in competition law, I was a generalist business lawyer counseling different business functions at various levels. My number one objective was, together with all other executive team members, to enable the company to win in the market place. 

As lawyers, we are risk managers and our role is to find solutions in our counseling and with the controls we put in place whereby we maximize our business opportunities while ensuring that the various kinds of risk we take are at an acceptable level. As you say, the consequences of breaching competition law are very severe. 

It is not just about the fines – the levels of which are increasing in many jurisdictions around the world – but also criminal liability in some jurisdictions, or being sued by victims of the antitrust infringement, reputation, time-management, legal cost, etc. The challenge is, on the one hand, that the law is not always terribly clear, as we discussed already, while on the other hand,  in a company employing more than 55,000 people worldwide, you have at least several thousand who could potentially be in the position to breach or contribute to the breach of Competition law at any given time. 

Our compliance program rests on the assumption that infringements occur either because of lack of knowledge or lack of control. Therefore, through our compliance machine, we need to mobilize knowledge and operate control processes where it matters. Some companies believe that printing a nice booklet containing some dos and don’ts or a generic description of the main prohibitions of competition law, and maybe a few presentations to staff once in a while, is enough. I have seen such booklets actually titled “Competition Law Compliance Program.” This is a very static approach and I cannot imagine that such an approach can work in a big and complex organization. 

An effective compliance program is dynamic, much more of a comprehensive approach consistently implemented in regular cycles. The program that we have already implemented in our Western Europe Region and that I am planning to roll out in our other regions has 7 building blocks: 

The first is “The Organization.” In a global consumer business like ours, business is conducted mainly via end market subsidiaries. For example, BAT Germany is managing our business in Germany and so on. Our lawyers sit in the end markets and counsel their respective businesses. These lawyers are generalists with varying level of Competition law knowledge. In the last 3 years I used to be the competition expert coordinator for Western Europe, and in the future I will be the global such coordinator. We have formed what we call the “Competition Law Community” and the members are all lawyers who are involved in competition law matters. 

The second is “Defining focus areas on an annual basis.” Under my supervision, the members of the Community do a risk assessment in their respective markets on an annual basis and do a compliance plan defining the most relevant and important focus areas. We also group markets with similar characteristic features together and where we find a group of markets with similar risk areas we seek and implement coordinated compliance solutions. One example of this has been the Self-Assessment Guidelines that we developed with our regional external antitrust law firm, which addressed several aspects of exchange of information in groups of European countries. 

The third pillar is “The How.” We have developed and rolled out within the legal function a set of Guidelines on how to counsel the other business functions on antitrust matters. This field of law requires a special counseling approach because of unique procedural issues (such as legal privilege, leniency, etc.), the high level of fines, and the critical role of documents. Neutralization of potential competition concerns requires special skills and we had to make sure we build them within our team. 

In the forth, we “Connect the Community.” Specifically, we provided access to our entire legal community involved in antitrust matters to a dynamic electronic library to share knowledge and best practices. Along the same lines, in the fifth, we “Connect the Business” with knowledge tools, appropriate controls, guidelines, trainings, awareness programs and deep-dive sessions for senior top teams. The sixth block is “Connecting the Counsel.” We have identified one global law firm with a very broad footprint as our regional strategic firm in competition law matters. This approach gives us better knowledge management, and a lot of other synergies. The seventh, and final block, we call “Connect the Word.” It contains our coordinated activities to keep up with developments in competition law globally, representing ourselves in various associations for competition lawyers, such as ICLA, and contributing through various bodies to the shaping of key regulations in this field of law. 

 CEELM: As the competition expert in your company, how do you disseminate best practices throughout the organization in other business functions? 

A.M.: Knowledge management is absolutely central in our compliance approach. In fact, our European Compliance program (the 7 building blocks described above) was born in the context of knowledge management, when our Global Legal Board mandated 4 pilot programs in 4 different areas of law with the aim of seeing how we, as a global function, can be better in knowledge management. 

We found that a mixture of a formal and informal, actual and virtual organization is needed. You need a dedicated expert with formal authority to lead the coordination. You need the Community, essentially all lawyers who are involved in antitrust matters. You need to encourage the creation of sub-groups with similar issues. You need to promote the use of technology, virtual meetings, webexes, tele-presence, and libraries. You need to have an annual training plan, which is linked to the strategic priorities of the various markets identified through the risk assessment exercise. 

Between the community, which consists of all the lawyers, and the regional or global coordinator, sits a smaller informal virtual team, that we call “the Competition Law Practice Group (CLPG).” We select 5-6 lawyers from each region to the CLPG and we change the CLPG every 1.5 – 2 years. They have a more intensive learning plan, they review and comment on regional compliance initiatives, and they drive the implementation of new compliance initiatives for better buy-in. In terms of disseminating knowledge to the business, we try to be very targeted, instead of overloading everyone with irrelevant information. We focus on key risk groups. The most important element is the deep-dive sessions that we have for top teams, where we talk about the business of a particular subsidiary in a market, what are the key objectives, risks, and we try to conclude with very practical suggestions and measures to help to achieve the business objectives with acceptable risk. 

 CEELM: When your company hires country heads of legal, do you look for individuals with specific competition matter experience or do you train them in-house in that direction?

A.M.: It depends on the market position of our subsidiary. For example, when I hired the future legal director for BAT Denmark, experience in competition law was key, since in Denmark BAT has around 80% market share. Otherwise, we do a lot of training in-house in the strategic context.  

 CEELM: From a regulatory standpoint, what do you perceive as the biggest challenges companies in CEE will have to face in the near/mid future?

A.M.: I think that the key challenge for CEE is economic growth. We still do not seem to be out from the negative consequences of the financial crisis. There is a lot of frustration in societies and governments around the EU with protectionism in certain places seeming to win votes. I am a big fan of the single market. Governments need to be careful with the re-creation of national monopolies and protecting existing ones. I am personally in favor of more Europe rather than less Europe, though, Brussels needs to listen to valid claims of member state governments and societies for serenity where the single market is not really an issue. Companies can grow and flourish in a stable legal environment. There is a lot to be done in that area in CEE.

 CEELM: How transparent do you find CEE competition regulators relative to those in Western Europe? Has there been development in this regard in recent years?

A.M.: Some are easier to predict than others. It is understandable to a certain extent that the enforcement priorities of NCAs are often politically driven. The European Competition Network is a very important forum and contributes to the transparency of NCAs and the dissemination of best practices. The Commission still has a lot to do to promote the concept of the single market though. 

The scope of Slovenian Competition Law has undergone several changes since the country’s independence, especially following Slovenia’s accession to the EU and the approximation of its Competition Law to EU legislation. The basis of Competition Law is found in the Slovenian Constitution, which provides for a free economic initiative while prohibiting unfair competition practices. 

Slovenian Competition Law takes two forms. The suppression of unfair competition, which is regulated by the Protection of Competition Act (ZVK), and the prevention of restrictions on competition, which is regulated by the Prevention of Restriction of Competition Act (ZPOmK-1).

Unfair competition consists of actions on the market which are contrary to good business practices and which cause or may cause damage to other market participants (e.g. false advertising, error concealment, unauthorized use of trade names or trademarks). The second form of Competition Law prohibits certain practices that prevent, hinder, or distort  competition on the market. Thus, ZPOmK-1 prohibits the restricting of competition through agreements, decisions by associations of undertakings and concerted practices, abuse of dominant position, and the concentration of undertakings. It should be mentioned that due to Slovenia`s EU membership, its Competition Law is also subject to EU Competition Law. Therefore, the regulations of ZPOmK-1 are with minimal differences the same as the EU counterparts.

The relevant decision-making bodies of Competition Law issues in Slovenia are the Slovenian Competition Protection Agency (the “Agency”) and judicial authorities. The Agency exercises control over the application of the provisions of ZPOmK-1, monitors and analyses market conditions, conducts procedures and issues decisions in accordance with the law, and gives opinions to the National Assembly and the Government on issues within its competence. The Agency also reviews alleged restrictive agreements and alleged abuses of dominant positions. Based on its conclusions it then approves or prohibits them in accordance with applicable competition rules. It also applies the leniency program. 

The Agency leads two procedures regarding the protection of competition in Slovenia. One is an administrative procedure, affecting the decision-making of the management of companies and the impacts of those decisions on competition, while the other is an offensive procedure in which the Agency decides on sanctions for infringements of Competition Law. In order to ensure greater transparency and publicity the amendment of ZPOmK-1 in 2009 called for the publication of the Agency’s final decisions. As a result, the Agency now publishes its final decisions regarding administrative and other minor offense procedures on its website, as well as final orders that result from the procedures, without confidential information. As a result, Slovenia has joined the other competition authorities around the world which publish their decisions. 

The Slovenian judicial authorities review the Agency’s decisions in civil claims of invalidity and claims for damages resulting from intentional or negligent violations of the provisions of ZPOmK-1 and Articles 101 and 102 of the Treaty on the Functioning of the EU.

Civil claims for damages due to violations of competition rules in Slovenia are very rare, primarily because of the length of the procedures, the costs of litigation, difficulties in collecting evidence, and the inexperience of  judges in the field. This last phenomenon derives from the fact that in the few cases that have been heard in court (especially in conjunction with Telekom d.d., which allegedly was a main offender of the provisions of Competition Law, particularly regarding the abuse of dominant position) the judges avoided trials. For example, in the  T-2 vs. Telekom case that was initiated in the year 2007 and ended in January 2013, three judges were replaced. The same happened in the  ABM vs. Telekom case. And – with regard to the long duration of civil proceedings – it should be noted that the ABM vs. Telekom case lasted for 10 and half years. ABM filed the lawsuit for damages in 2002 and the final decision was adopted in 2013 when the Higher Court in Ljubljana awarded damages to ABM in the amount of EUR 62,000 – a substantial decrease from the EUR 2.3 million award made by the District Court in Ljubljana. Therefore it is not surprising that in this area the jurisprudence is very sparse.

Restriction of competition is defined in Slovenian Law as a criminal offense. The Criminal Code (KZ-1) determines a penalty for imprisonment from six months to five years for whoever, in pursuing an economic activity contrary to regulations governing the protection of competition, violates the prohibition of restricting agreements between companies, abuses the dominant position of one or more companies, or creates a forbidden concentration of companies, and thus prevents or significantly impedes or distorts competition in Slovenia or the EU,or significantly influences trade between Member States, which results in a large property benefit for such a company or companies, or significant damage to another company. 

By Andrej Kirm, Managing Partner, Sana Koudila, Associate, KIRM PERPAR

This Article was originally published in Issue 2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.