Category: Serbia

Moravcevic Vojnovic and Partners in cooperation with Schoenherr has advised InPharm Co on its acquisition of Casa Spadijer Bioclinica.

InPharm Co is a Serbian producer and distributor of dietary supplements, medical products, and cosmetics. In 2023, it joined the Luxembourg-based Sun Wave Group which is also present in Moldova, Romania, Bulgaria, Bosnia and Herzegovina, Montenegro, and Albania.

Founded in Belgrade in 1999, Casa Spadijer Bioclinica is a dietary supplements company.

The Schoenherr team included Partners Vojimir Kurtic and Matija Vojnovic, Attorney at Law Bojan Rajic, and Associates Luka Milosevic, Zeljko Loci, and Stefan Dobras.

Schoenherr did not respond to our inquiry on the matter.

Harrisons has advised the EBRD on a EUR 5 million loan to NLB Komercijalna Banka under the SME Go Green program.

According to Harrisons, “EBRD, with the support of the EU, has launched a new credit line for on-lending to small and medium-sized enterprises under the SME Go Green program. In its initial phase, this program will provide EUR 120 million of targeted SME financing in the Western Balkans region, including Serbia, and it is expected that the program will reach EUR 400 million in overall size over the next few years. This is a regional program supported by grants from the EU via the Instrument for Pre-accession Assistance under the Western Balkans Investment Framework. It will encourage the competitiveness of SMEs by helping eligible Serbian businesses access finance for investments that meet EU and international standards. It will also help the agribusiness sector in Serbia reduce its environmental impact and become more sustainable and resilient to the risks of climate change.” 

Earlier in 2024, Harrisons advised EBRD on the financing for Alter Modus (as reported by CEE Legal Matters on September 24, 2024), on three financing facilities for Banca Intesa Beograd (as reported by CEE Legal Matters on July 17, 2024) as well as on its inaugural EUR 50 million loan to AIK Banka in Serbia (as reported by CEE Legal Matters on February 8, 2024). In 2023 Harrisons advised on EBRD’s EUR 27.6 million loan to District Center and PKS-LATEX-HLC (as reported by CEE Legal Matters on November 20, 2023), on EBRD’s EUR 5 million loan to Banca Intesa Belgrade (as reported by CEE Legal Matters on June 29, 2023), and on its EUR 4 million loan to Montenegrin retail chain Voli (as reported by CEE Legal Matters on June 15, 2023).

The Harrisons team included Head of Banking and Finance Ines Matijevic-Papulin and Associate Mina Zeljkovic.

The proposed Draft Law on Amendments and Supplements to the Law on Games of Chance brings several important changes, certain new legal solutions as a result of the needs of practice and market development, harmonization of the text of the law with technological development in this area, but also introduces new obligations to organizers and significantly increase in fees for obtaining approval and for organizing of games of chance.

The current Law on Games of Chance was adopted in 2020 and is harmonized with international standards and EU directives in the field of games of chance and prevention of money laundering and financing of terrorism. The Draft Law on Amendments to the Law on Games of Chance has now been published, which, in addition to language and technical corrections and harmonization, brings several important changes, new legal solutions, introduces new obligations and restrictions, as well as a significant increase in fees (hereinafter: Draft Law).

In accordance with the explanatory notes to the Draft Law, the current provisions of the Law on Games of Chance are simplified and more precise, some new obligations and restrictions are established for organizers with the aim of improving control and social responsibility, and new terms are introduced. For the first time, the transfer of the right to organize games in the case of status changes with the organizer and the issuance of approval and conditions for legal entities that provide services of receiving top-ups at the registration account of players registered for online games of chance have been regulated.

At the same time, the amount of fees for obtaining approval and for organizing games of chance is increasing significantly. The proposed changes will lead to an increase in the organizer’s costs, and on the other hand, a significantly higher inflow of funds into the budget of the Republic is expected.

As life is always faster and more inventive than the law, and in accordance with the rapid growth of the games of chance industry and technology, there was a need to introduce new terms and define new concepts already established in the practice of games of chance, so that the Draft Law defines for the first time the following: bonus, betting machine, ticket, tournament, registration account, promotional account, player verification, stake confirmation, QR code, jackpot and jackpot system, multi-slot machine and determines new measures of responsible organization of games in the form of self-exclusion or self-limitation.

When participating in games via means of electronic communication (online games of chance), self-exclusion allows the player to voluntarily disconnect, permanently or for a certain period (not shorter than 24 hours) or to limit the maximum amount of payment or loss or to activate a ban on access to his user account. On the other hand, the obligation of the organizers shall be established to provide the Games of Chance Administration with data on players who have self-excluded, and bylaws will be adopted that will prescribe the technical procedure and method of data exchange with the Games of Chance Administration (hereinafter: the Administration).

In order to improve the control system, raise the level of social responsibility towards participants and stimulate cashless payment, the new restrictions that are prescribed are prohibitions on receiving payments and making payments in cash except at the registered pay-in-pay-out desk,  in the slot club, as well as at the payment facility for top-ups of registration account of players.

Direct transfers between registration accounts of players and the transfer of funds from someone else’s bank account to a registration account or from a registration account to another’s registration account or to another’s bank account are also prohibited. Until now, there was no limit for cash payments, and now a maximum amount of cash payments from players of up to 100,000 dinars is being introduced, i.e. 100,000 dinars for pay-out to a player for online games, and that is per one player per month in all betting shops of the organizer who has approval for online games of chance. The transfer of funds from betting machines to the player’s registration account in the organizer’s betting shops is also forbidden. 

A ban on organizing online games of chance in which players play against each other (Texas hol’dem poker, etc.), organizing tournaments outside the casino, and organizing jackpots contrary to the law has been introduced. The prior consent of the Administration will be required for the organization of the jackpot, and the procedure, documentation, conditions, and manner of organizing the jackpot must be regulated by a new by-law.

The Draft Law introduces the consent of the Administration for organizing tournaments in casinos and defines the procedure for obtaining consent. A novelty is also the opportunity for the Administration to in real-time monitor video surveillance in the casino through a link, which the organizer is obliged to provide.

Fees for obtaining permits and approvals have been significantly increased. There is a double increase in license fees for casinos, as well as licensing fees for slot machines and betting.

The fee for organizing games in the casino is determined in relation to the type of games, especially for the tournament, and when it comes to the fee when participants play against the casino, a minimum monthly amount has been introduced that is not less than the product of the amount of 2,000 EUR and the largest number of registered tables for games during the month.

The fee for organizing games on slot machines, instead of 10%, is now 15% on the basis, and shall not be less than the product of the amount of 100 euros and the highest number of registered machines during the month. The fee for betting cannot be less than the product of the amount of 1,000 euros and the largest number of registered betting shops.

In the case of online games, the amount of the deposit to ensure the payment of winnings has been increased from 300,000 to 500,000 euros, while the amount of the risk deposit in the cashier has not been changed. The approval fee will be 10,000 euros per month instead of 2,500 euros. The fee for organizing is 15% of the base, or 25% for games in which players play against the organizer, while the minimum total amount of the fee cannot be less than 20,000 euros per month.

The article related to the ban on the use of the word casino has been amended. In the current Law on Games of Chance, it was clear that the root of the word casino can in any case only be used by organizers of games in casinos. It is now specified that the word casino, synonyms, translations, and derived words can be used in the name of the organizer, inside the building, and outside the building only by those organizers who have a valid casino license. It is unclear whether this ban now applies i.e. does not apply to the use on the websites of the organizer of online games of chance.

Regarding the organization of games on slot machines and betting, restrictions are introduced for serving food and alcoholic beverages in slot clubs and betting shops, and only low-alcohol beverages with less than 5% volume are allowed. It is forbidden to have a direct connection between the gaming facility with the area where food and drinks are served.

New legal solutions are being introduced here as well in terms of video surveillance of slot machines or pay-in-pay-out desks, entrances to the facility, and the cash register, which the Administration will be able to monitor in real-time via the provided link.

The Draft Law also specifies which educational institutions are subject to the minimum distance from slot clubs or betting shops and specifies all institutions attended by children, minors, and young adults up to the age of 19. As proof of that distance, in addition to the certificate of the Republic Geodetic Institute, it will now be necessary to provide the opinion of traffic experts.

For the first time, the draft Law introduces the obtaining of prior consent for a legal entity that provides services of receiving top-ups of the registration account of a player registered for online games and prescribes the conditions that such a legal entity or entrepreneur should fulfill (certificates about the distance of the facility at least 200 meters from educational institutions, certificates of the authorized laboratory for the information system, evidence of the ownership structure, etc.) It will be necessary to adopt new by-laws that will regulate the conditions, the manner of fulfillment of the requirements, and the manner of data exchange with the Administration. Payment institutions licensed by the National Bank are exempt from these provisions because they are considered to be already bound by the Anti-Money Laundering Act, and these changes will affect mostly business units such as gas stations or tobacco stands when they provide such services.

A change in the capital structure of the organizer of special games on slot machines, betting, and online games is subject to the prior approval of the Administration. Along with the request for approval, it will be necessary to submit proof of compliance with tax obligations and a certificate of criminal record for the intended purchaser of the shares

Also for the first time (if we exclude certain prohibitions that had already been prescribed by the Law on Games of Chance, but without effects or real measures), the Draft Law has now addressed the perennial problem of organizing games of chance by foreign organizers and participation in foreign games of chance.  It is introduced, as a measure that the Administration can take in the case when an unregistered entity (foreign person) organizes online games, the authority of the inspector to make a decision banning those foreign games and to deliver it to the competent authority in order to prevent payment transactions by banks and access to the Internet address by blocking the IP address by the operator of electronic communications. In addition, the Draft Law completely changes the article related to the measures of inspection supervision and tightens the measures in case of established irregularities, failure to remove them, as well as in the case of underage gambling.

Penal provisions have been expanded, i.e. new offenses are foreseen for the violation of newly established obligations, i.e. new provisions envisaged by the Draft Law.

If the Draft Law is adopted, the changes will begin to be applied after 30 days from the date of its entry into force. By-laws should be adopted within 120 days from the date of entry into force, and the organizers will have a period of 180 days from the date of implementation to adjust their business to the new obligations, except for the ban on serving alcoholic beverages, where the deadline is the first January 2026. The increased fees are due as early as the first day of the following month from the day of the start of implementation.

The proposed Draft Law is not a mere harmonization of regulations but introduces serious novelties, new obligations for organizers, and several new legal solutions arising from the needs of practice and market development and harmonizes the text of the law with technological development in this area. It significantly increases the fees that organizers will pay, contributes to a significant increase in budget revenue, improves control and supervision over the organizer, and establishes a greater degree of social responsibility. It remains to be seen, after the public hearing that lasted until September 30, 2024, whether there will be any further changes to the Draft Law, as well as during the procedure of its enactment in the National Assembly.

By Jelena Stankovic Lukic, Partner, JPM & Partners

The European Commission recently launched the consultation phase on two essential draft regulations to strengthen the EU Carbon Border Adjustment Mechanism (CBAM) regulation’s operational structure. These include the draft Implementing Regulation for Authorized Declarants and creating a comprehensive CBAM registry. Stakeholders can submit feedback until November 28, 2024. These regulations clarify key aspects of the definitive CBAM implementation, set to begin on January 1, 2026.

Draft Implementing Regulation for Authorized Declarants

Starting January 1, 2026, all importers of goods within the CBAM scope must qualify as Authorized CBAM Declarants.  This therefore includes importers of cement, iron and steel, aluminum, fertilizers, electricity, hydrogen, and certain downstream products.  Importers who do not obtain Authorized CBAM Declarant status will indeed be prohibited from importing CBAM products into the EU.

The draft Implementing Regulation basically introduces a structured framework for applying to become an Authorized CBAM Declarant. Key highlights include:

• Application and Authorization Criteria: Importers must meet conditions that demonstrate financial stability, a positive compliance history, and also an adequate administrative structure to manage CBAM obligations.
• Ongoing Compliance and Monitoring: National CBAM authorities will further regularly reassess authorized declarants to confirm their adherence to CBAM rules.
• Revocation of Authorization: Conditions under which national CBAM authorities may revoke authorization, particularly in cases of non-compliance or business cessation.
• Data Protection and Confidentiality: The draft regulation concurrently mandates strict data protection measures to safeguard sensitive information within the CBAM system.

Establishing the CBAM Registry

The draft implementing regulation on the CBAM Registry proposes a centralized, secure electronic system to support CBAM reporting and verification processes. Key features include:

• Integration with Customs Systems: The CBAM registry will seamlessly connect with EU customs systems and utilize the Economic Operator Registration and Identification (EORI) system for entity verification.
• Risk Analysis and Circumvention Monitoring: Equipped with risk analysis tools, the registry will enhance surveillance and detect potential circumvention effectively.
• Data Exchange and Compliance: The registry’s digital infrastructure will facilitate efficient data sharing among national authorities, customs, and the Commission, adhering to personal data protection rules, thereby ensuring robust compliance tracking.

These developments will have substantial implications for EU importers and exporters within the CBAM framework. EU importers must secure Authorized Declarant status and comply with strict regulatory standards to continue to import CBAM-scope products.  For exporters, understanding and aligning with CBAM requirements will be essential to maintain access to the EU market.  Compliance with these new mechanisms will be crucial for businesses looking to trade within the EU’s evolving regulatory landscape.

By Nikola Ivkovic and Vasilije Boškovic, Associates, Gecic Law

The Court of Justice of the European Union (“CJEU”) has recently rendered a significant judgement regarding the interpretation of legitimate interest as a legal basis for personal data processing. Deciding on a case involving the fine imposed by the Dutch data protection authority (“AP”) on the Royal Dutch Tennis Association (“KNLTB”) for sharing its members’ personal data for commercial purposes, the CJEU confirmed that legitimate interest can cover purely commercial interests. This decision is important for both EU member states and Serbia, where there is still no clear practice or opinion from the competent authorities on the lawful application of data processing based on legitimate interest.

What is legitimate interest and why is it important?

Legitimate interest is one of the six legal bases for processing personal data stipulated by the General Data Protection Regulation (“GDPR”), as well as Serbian Law on Personal Data Protection (Official Gazette of the RS no. 87/2018) (“LPDP”). This basis allows personal data processing on the grounds of data controller’s legitimate interest, provided that this interest does not override the fundamental rights and freedoms of individuals.

The significance of legitimate interest lies in its flexibility, as it allows data controllers to process personal data in situations where there is no explicitly prescribed legal basis or individual consent. However, in practice, questions often arise as to which data controller interests can truly be deemed legitimate, and when processing may constitute unlawful processing that controllers “justify” under legitimate interest in cases where no other basis for processing exists. This creates a risk that the rights of data subjects may be overlooked or inadequately protected, while data controllers may feel uncertain about when they can apply this basis due to inconsistent practices.

A turning point in the application of legitimate interest: What does the KNLTB case judgement bring?

In the Netherlands, debate has long centered on whether legitimate interest can cover solely commercial interests. The AP had consistently held that a commercial interest alone is insufficient to justify legitimate interest as a legal basis for processing. This strict interpretation made it more difficult for companies to rely on legitimate interest as a lawful basis for personal data processing, creating uncertainty regarding the legality of such practices.

In its ruling of October 4, 2024, the CJEU brought an end to the AP’s previous stance. The Royal Dutch Tennis Association had been fined by the AP for sharing its members’ personal data with commercial partners, with the AP arguing that KNLTB could not rely on legitimate interests since these were exclusively commercial in nature. This interpretation was also confirmed by Dutch courts. However, the CJEU ruled in this case that commercial interests can indeed constitute legitimate interests without needing any additional legal basis, thereby indicating that a broad spectrum of interests may qualify as legitimate.

Impact of the judgment on the practice of other EU member states and Serbia

This judgment will significantly impact practice in the Netherlands, as well as interpretations of legitimate interest in other EU countries, which may now reconsider their views on processing data based solely on commercial interests. The CJEU’s judgment provides clear guidance that will facilitate many data controllers’ reliance on legitimate interest as a legal basis for processing data.

As for Serbia, although it is not yet an EU member, domestic regulations in the field of personal data protection follow European standards, and it is likely that this ruling will influence future interpretations of legitimate interest in the local context.

Whether the CJEU’s ruling will achieve the expected effect in data protection practice and truly harmonize the interpretation of legitimate interest across Europe remains to be seen.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.

By Sonja Stojcic, Senior Associate, PR Legal

King & Spalding has advised the syndicate of joint lead managers on Telekom Srbija Beograd’s USD 900 million senior notes offering. Gecic Law, working with Clifford Chance, advised Telekom Srbija.

Telekom Srbija is the state-owned telecommunications company of Serbia.

According to King & Spalding, “this offering also marks the largest inaugural single-tranche issuance from a Central and Eastern Europe corporate since 2011 and is the first Serbian corporate to issue a benchmark Eurobond in the international debt capital markets” and is also “the largest inaugural high-yield bond transaction in the technology, media, and telecommunications sector in Central and Eastern Europe, the Middle East, and Africa since 2014.”

According to Gecic Law, “listed on the Dublin Euronext Exchange, Telekom Srbija’s bond offering was met with overwhelming global investor interest, signaling deep trust in the company’s innovative corporate strategy. This groundbreaking deal empowers Telekom Srbija to reinforce its investment capabilities and expand its infrastructure, demonstrating the solid confidence prominent international investors place in the Group’s visionary growth under its dynamic leadership.”

The King & Spalding team included Partner Peter Schwartz, Counsel Andro Atlaga, Associates Riccardo Maggi Novaretti and Valmir Merkaj, and Paralegal Gozde Berkil.

The Clifford Chance team was led by London-based Partners Drew Rundus and Paul Deakins and Included Brussels-based Partner Anastasios Tomtsis.

The Gecic Law team included Partners Bogdan Gecic, Ognjen Colic, and Miodrag Jevtic, Counsels Milos Petakovic and Nemanja Sladakovic, Senior Associates Vuk Lekovic and Zarko Popovic, and Associates Vasilije Boskovic, Nikola Ivkovic, and Marko Jovic.

Editor’s Note: After this article was published, CMS announced that it advised the banks alongside King & Spalding, including Bank of America, BNP Paribas, Deutsche Bank, Erste Group, MUFG Bank, Raiffeisen Bank International, and UniCredit. The firm’s team included Partners Milica Popovic, Radivoje Petrikic, and Marija Tesic, Senior Lawyers Ksenija Boreta and Jovana Bingulac, and Lawyer Milica Tomic.

Additionally, Karanovic & Partners announced it advised the joint lead managers on the legal framework guiding derivative transactions with corporates in Serbia, including the negotiation and execution of ISDA Master Agreements with Telekom Srbija Beograd. The firm’s team included Partner Katarina Guduric and Senior Associate Marija Vicic Simic.

In Montenegro the Law on Amendments to the Law on Copyright and Related Rights came into force and it aims to harmonize Montenegrin legislation with EU legislative, particularly in the part that facilitates broad access to copyrighted works by enabling the sharing of online content through various platforms.

In addition, it regulates the use of copyright and related rights for research, education, and the preservation of cultural heritage, and addresses text and data mining as a research method. We present to you a brief overview of the most significant changes:

I. Amendments to the Law on Copyright and Related Rights stipulate that the author has the exclusive right to permit or prohibit the first retransmission of their work conducted by wire or over the air, including via satellite, while subsequent retransmissions, unless the first retransmission was conducted over the internet, are more flexible, requiring authorization from the holder of the exclusive public communication right. The holder of this right may, but does not have to be, the author themself. In the case of direct streaming of copyrighted works for content broadcast in real-time via different platforms (e.g. live streaming), both the broadcaster and the signal distributor must obtain permission from the rights holders.

II. From our standpoint, the new provision that introduces the right of authors whose works are reproduced by photocopying or other similar techniques to compensation from any legal or natural person providing photocopying services for a fee, is particularly interesting, having in mind that this was not previously the case.

III. A new section, 4a, introduces specific provisions concerning online content-sharing service providers, aimed at protecting copyright holders in the digital environment. Online content-sharing service providers must obtain authorization from rights holders, which is done through collective licensing with extended effect. They are obligated to promptly act on a reasoned request from the rights holder to either disable access to or remove the work in question.

1. Given the significance of text and data mining (TDM) and the fact that the content being “mined” may be protected by copyright, research organizations and cultural heritage institutions are granted the right to reproduce works to which they have lawful access for the purpose of text and data mining solely for scientific research, without acquiring economic rights or paying a fee. This right is also recognized for other subjects only if the rights holder has not expressly reserved it.
2. Furthermore, the amended Law on Copyright and Related Rights introduces a set of provisions aimed at protecting works that are unavailable to the public, which refers to works that cannot be acquired through regular distribution channels. These works may be used under special circumstances to enable public access to culturally significant works.
3. A significant innovation is the introduction of collective licensing with extended effect, which allows a collective rights management organization to represent not only authors who have authorized it, but also those who have not, provided that individual rights management is impractical. In addition to the aforementioned condition, the organization must be representative and ensure equal treatment for all rights holders, with the possibility for rights holders to exclude their works from the system at any time.

VII. Regarding the author’s economic rights, the Law introduces an obligation for the acquirer of the copyright or their successor to provide the author with relevant and comprehensive information at least once a year, particularly concerning how the work is used, all revenues generated, and due fees. Furthermore, the contract for the assignment of copyright must include a guarantee for the author to receive appropriate and proportional remuneration for the use of their works. The law prevents situations where the author is unable to exercise their right to compensation, to adjust it, to be transparently informed by the acquirer, or to terminate or amend the contract to revoke the assigned right, as it defines these as inalienable rights. Any contractual provisions that prevent the author from exercising these rights are null and void.

VIII. A special section regulates the rights of publishers of printed publications, granting them the exclusive right to permit or prohibit the reproduction and online availability of their publications. These rights do not include personal use, hyperlinks, or short excerpts. The author of a work included in a printed publication is entitled to an equal share with the print publisher in any compensation, and the rights of publishers of printed publications expire after a period of two years from the publication date.

The Amendments to the Law on Copyright and Related Rights represent a significant step towards enhancing the protection of copyright and related rights by expanding their application, particularly in the context of digital environment protection. The newly introduced mechanisms will serve as a solid foundation for providing transparency and more flexible enforcement of copyright, allowing authors greater control over the use of their works.

By Marija Zivkovic, Partner, and Mina Coguric, Associate, JPM & Partners

Wolf Theiss has advised GreyLion Partners on its equity investment in Birdseye Security Solutions. Lazarevic & Prsic advised Birdseye Security Solutions.

GreyLion Partners is a private equity firm based in New York.

Birdseye Security Solutions is a Canada-based provider of tech-enabled logistics security services.

The Wolf Theiss team included Partner Natasa Lalovic Maric, Counsels Katarina Stojakovic, Marijana Zejakovic, and Vidak Kovacevic, Senior Associates Milan Novakov and Jovan Micovic, and Associates Milos Rubezis, Vjera Vlahovic, and Stefan Silobad.

The Lazarevic & Prsic team included Managing Partners Ana Lazarevic and Igor Prsic, Partner Radojko Pavlovic, and Attorneys at Law Mihajlo Jovicic and Milica Vranjes.

On October 16, the Ministry of Finance published draft amendments of, as many as, 7 laws in the field of taxation, with an invitation to interested parties to submit comments, suggestions and objections to the published drafts by October 23. In addition to tax laws, drafts and amendments to the Law on Public Property and the Law on Republic Administrative Fees were published.

The practice of giving such a large number of legislative proposals a deadline of practically 5 working days is something that must be criticized, especially with regard to the amendments to the Law on Tax Procedure and Tax Administration, which are the largest in scope.

Summarized, the changes concern the following issues:

1. The Law on Corporate Income Tax – additionally specifies the obligations of liquidators and bankruptcy administrators with regard to filing tax returns in the case of liquidation or bankruptcy, as well as in the case of status changes;
2. The Law on Individuals income Tax and the Law on Contributions for Mandatory Social Insurance – rules are introduced on the taxation of the income of persons working as auxiliary staff on ships; the validity of incentives for newly employed persons is also extended for the year 2025, and the Law on Citizens’ Income Tax adjusts the non-taxable amount of earnings, which increases from RSD 25,000 to RSD 28,432;
3. Law on VAT – it is possible to contract the calculation of VAT in the case of the transfer of all or part of the property, the rules regarding the change of the base as well as the deduction of previous VAT are further specified, and the obligation to prepare internal accounts as well as to submit preliminary tax returns is introduced;
4. Law on property taxes – specification of the rules on determining the value of immovable property for the purposes of calculating property taxes;
5. Law on electronic invoices – changes concerning value added tax and the obligations of taxpayers in this regard;
6. Excise Law – changes concerning QR and other codes, taxation of compressed natural gas and herbal products for smoking;
7. Law on tax procedure and tax administration – methods of termination of tax liability are additionally specified, including the introduction of termination due to the occurrence of permanent non-payment of taxes, as well as prescribing the adoption of a decision on the termination of liability and, in transitional provisions, rules for writing off old tax debts; records of natural persons are also introduced and the basis and actions of personal data processing in connection with these records are prescribed; certain rules on delivery in the tax procedure are additionally specified; the conditions for international administrative cooperation and international exchange of information are prescribed; certain tax offenses are changed.

By Nikola Djordjevic, Tax Partner, JPM & Partners

On 10^th October 2024, the Commission for the Protection of Competition (“Commission”) initiated an ex officio investigation proceedings for potential antitrust violation involving DELHAIZE SERBIA DRUŠTVO SA OGRANIČENOM ODGOVORNOŠĆU BEOGRAD (NOVI BEOGRAD), Mercator-S DOO BEOGRAD, UNIVEREXPORT EXPORT-IMPORT DOO, and DIS DOO KRNJEVO (“Companies”).

According to publicly available data, including sales revenue from financial reports published by the Serbian Business Registers Agency, Companies account for over 50% of the retail market in the Republic of Serbia.

The Commission noted a continuous increase in gross margin rates based on procurement value, which averaged 19% in 2016, rising to 38% in 2023. Additionally, an analysis of the business profits of the involved parties shows a growth trend from 2016 to 2023 – the total business profit was RSD 3.7 billion in 2016 and has reached RSD 18.6 billion in 2023, indicating increased profitability.

Besides financial indicators, the Commission examined changes in the retail market following the entry of a new competitor in 2018, as it was expected that increased competitive pressure would lead to lower prices and margins for existing retail chains, thereby reducing their profitability. However, prices rose above inflation, and revenues increased faster than costs, resulting in margin growth, while business profits continued to rise.

The aforementioned analysis suggested to the Commission that there is a need for a more detailed monitoring of the retail market on the territory of the Republic of Serbia.

From April to September 2024, the Commission monitored the prices of eight key products that significantly impact consumer budgets: yogurt, milk, oil, flour, sugar, eggs, coffee, and bananas. During the monitoring period, the Commission found that both regular and promotional prices among the listed products were either the same or similar. Prices during this period were compared among the Companies, as well as an additional retailer – Cash&Carry PLUS.

The survey revealed that the consumer basket was significantly cheaper at Cash&Carry PLUS, which had the least favourable commercial conditions for sourcing the products.

Based on these findings, the Commission noted that the retail market in Serbia experienced a value increase from April 2023 to March 2024, alongside a slight quantitative decline. During said period, the increase in retail prices was nearly double the inflationary pressures. From 2016 to 2023, there was a significant rise in revenues and gross margins, confirming increased profitability for the parties involved. Between April and September 2024, regular prices for the eight listed products among all observed retailers were the same or similar, despite differing purchasing conditions. In contrast, prices were significantly lower at the retail outlet of a participant not involved in the proceedings, which had the least favourable commercial conditions for sourcing.

The Commission concluded that the observed indicators in the retail market likely resulted from a lack of mutual competitive pressure among the examined retailers, leading to the assumption that the Companies have entered into a restrictive agreement. This conclusion is based on the finding that, for the observed products, price competition was the only form of competition, which was effectively absent given the identical regular and promotional prices.

In accordance with the Law, restrictive agreements are those that aim to significantly limit, disrupt, or prevent competition in the Republic of Serbia, and such agreements are prohibited and considered null. The Commission initiates proceedings to examine competition violations ex officio when it reasonably suspects the existence of such a violation based on submitted initiatives, information, and other available data.

In this case, from the Commission’s point of view, there is a presumption of an antitrust violation. The Commission has decided to undertake all necessary evidentiary actions during the investigative proceedings to accurately determine the factual situation, assess the existence of the potential antitrust violation, and, upon conclusion, issue a final decision regarding the potential violation in hand.

Furthermore and in addition to the proceedings initiated by the Commission, the Special Department for Suppression of Corruption of the Higher Public Prosecutor’s Office in Belgrade (“Prosecutor’s Office”) initiated proceedings to determine the existence of the criminal offense of execution of a restrictive agreement from Article 229 of the Criminal Code of the Republic of Serbia, which stipulates that a person who executes a restrictive agreement, that is not exempted from the ban, can be punished with a prison sentence of six months to five years and a pecuniary fine.

This practice of the Commission, together with previously initiated investigations, can be interpreted as a conduct pattern as well as a new trend of the Commission as well as of the Prosecutor’s Office which are stepping up in their enforcement activity within all areas of antitrust and competition.

By Nikola Poznanovic, Partner, Luka Hajdukovic, Senior Associate, and Andjela Sever, Associate, JPM & Partners, JPM & Partners