In April 2021, the Serbian Competition Authority (“SCA“) issued an opinion on the basic concept of merger control of a” concentration “in cases involving interrelated transactions (the”Notice“) .1

The opinion is one of the most important interpretative documents released by the SCA in recent years, as it marks a turnaround in how the SCA will handle multiple transactions for merger control purposes and reaffirms the role of rules and regulations. EU precedents in the interpretation of the Serbian merger. control rules.

The SCA approach to date

As many companies and their advisers know, the SCA has taken a unique position compared to most European competition authorities with regard to the way it handles several interrelated transactions for merger control purposes. More specifically, the SCA had a strict position that several transactions, even if they were linked and linked legally and / or economically, could not be treated as a single unit concentration but as several separate concentrations. Because of the way Serbian merger review filing thresholds are set, this approach often meant that M&A transactions involving multiple steps and sequences required multiple separate merger notifications, review processes, and approvals.

This position was widely seen as inadequate, as it contrasted with the treatment of comparable M&A scenarios in the EU and in most European countries. While Serbian merger control rules are a transplant from EU law, they diverged markedly in this regard, as the SCA did not seem to recognize that in order to constitute a concentration, a transaction must lead to a lasting change of control and, hence, to a lasting change in the market structure.

In addition to this conceptual objection, the SCA’s position has had many undesirable consequences. For example, while a transaction would require a single merger review authorization in most jurisdictions, in some cases the same transaction might require at least two separate authorizations in Serbia. This has resulted in increased legal risks and costs, as well as extended waiting periods. In some cases, this has even led the merging parties to restructure their operations so as to reduce the number of approvals required for merger review.

The SCA’s approach for the future

Against this background, the opinion is a welcome clarification and change of position from the SCA, as it corrects the above concerns and further aligns Serbia’s merger control regime with that of the EU. The opinion clarifies in particular the following key points:

• EU merger control rules formulated in legal instruments and precedents are a source of interpretation for Serbian merger control rules. Although this is in line with the general ambitions of the EU of Serbia and the previous practice of the SCA on most matters related to merger control, a number of previous decisions have clearly diverged from this principle, calling into question the extent to which EU rules actually have an effect and can be invoked in Serbia. Therefore, the opinion is a welcome reaffirmation of the role of EU merger control rules in Serbian legal practice.
• The opinion makes explicit reference to recital 20 of the EU Merger Regulation2, to the EC’s Consolidated Judicial Notice3 and to the Cementbouw In doing so, the SCA introduces and confirms the requirement that an operation must lead to a lasting change of control, and therefore a lasting change in the structure of the market, for it to constitute a concentration, thus aligning the control rules Serbian and EU / Europe mergers on this fundamental aspect.
• The SCA further confirms that closely related transactions should be treated as a single concentration in that they are conditionally related. For this assessment, it is necessary to identify the economic reality underlying the transactions and therefore the economic goal pursued by the parties. To determine the unitary character of a transaction, it is necessary to verify in each case whether the transactions are interdependent, so that one transaction would not have been carried out without the other (and therefore constitutes a single transaction).
• Such conditionality is normally demonstrated if the transactions are linked de jure, that is, the agreements themselves are linked by mutual conditionality. However, if de facto conditionality can be demonstrated satisfactorily, it can also be sufficient to treat transactions as a single concentration. This requires an economic assessment of whether each of the transactions necessarily depends on the conclusion of the others. Important indications of the interdependence of several transactions may be the simultaneous conclusion of the relevant agreements. A conclusion of de facto the interconditionality of several transactions will be difficult to achieve in the absence of their simultaneity. A marked lack of simultaneity of legally interconditional transactions may also cast doubt on their true interdependence.
• The notice also clarifies that the above applies to parallel and serial takeovers. In a parallel takeover, company A acquires control of companies B and C in parallel from separate sellers, provided that A is not obligated to buy and no seller is obligated to sell, unless that the two transactions do not continue. In a serial takeover, company A acquires control of company B subject to the prior or simultaneous acquisition by B of company C.
• Serial takeovers can also lead to joint control, and these are scenarios in which a company agrees to first acquire sole control of a target company, with a view to directly selling part of the stake. acquired in the target from another company, ultimately resulting in joint control of the two acquirers over the target company. If the two acquisitions are conditional, the two transactions can constitute a single concentration resulting in the acquisition of joint control.

Although the position of the SCA as described in the opinion is well established within the EU, it is a long overdue addition to the Serbian merger control regime and is expected to bring a number of benefits to the EU. the merging parties as well as for the SCA. Specifically, it will give parties more freedom in structuring their transactions, as it removes the need to report on multiple merger control authorizations for what is essentially a single M&A transaction / concentration. It will also harmonize the procedural approach of the SCA with that of the EU competition authorities, which will suit the merging parties as it will streamline their filing strategies in the EU and Serbia. Finally, it will also free up valuable resources for the SCA, allowing it to apply them more effectively. Therefore, the opinion is a welcome development and the SCA should be commended for its efforts to present it.