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The governing legislation in the Republic of Macedonia regarding competition matters is the Law on the Protection of Competition (Official Gazette of the Republic of Macedonia No. 145/2010 and No. 136/2011) and the Law on the Control of State Aid (Official Gazette of the Republic of Macedonia, No. 145/2010). The laws are based on the EU competition law and state aid law, encompassing standard competition law institutes such as restrictive agreements and practices, abuse of dominant position and control of concentrations, as well as the regulation of the state aid.
The mandate of the Commission for the Protection of Competition (the Commission) is also set out by the governing laws, which prescribe certain specific procedural rules beside the rules on general administrative procedure. However, the sector-specific legislation contains certain specific rules and regulations, such as:
- banking regulations (specific merger thresholds that concurrently have to be approved by the National Bank);
- telecommunication rules;
- public health norms (regulation of the drug prices);
- media laws (prohibited media concentrations); and
- other local regulations.
The applicable sector-specific laws are:
- the Law on Electronic Communications (Official Gazette of the Republic of Macedonia No. 13/2005, 14/2007, 55/2007, 98/2008, 56/2009, 83/2010, 171/2010, 13/2012, 59/2012, 123/2012, 23/2013) and the Law on Broadcasting Activity (Official Gazette of the Republic of Macedonia No. 100/2005, 19/2007, 103/2008, 152/2008, 6/2010, 51/2010, 145/2010, 97/2011, 13/2012, 72/2013);
- the Law on Energy (Official Gazette of the Republic of Macedonia No. 16/2011, 136/2011, 75/2013); and
- the Law on Banks (Official Gazette of the Republic of Macedonia No. 67/2007, 88/2008, 42/2009, 90/2009, 67/2010, 26/2013).
The decision-making authorities
The Commission for the Protection of Competition
The Commission is the main administrative body in charge for the protection of the competition by enforcement of the Law on the Protection of Competition and the Law on the Control of State Aid.
The legal framework provides that the Commission is the only competent body that handles these issues. The procedure before the Commission is a special administrative one which starts by filing a request to start a misdemeanour procedure. The procedure than moves to the next phases provided by the law, depending upon the filled request. It ends with a decision by the Misdemeanour Commission in which the Misdemeanour Commission determines the existence of a breach of the provisions of the Law or refuses the request. This decision can further be revoked by filing an action with the Administrative Court. The Administrative Court passes a judgment regarding the validity of the decision of the Misdemeanour Commission, which can be appealed in front of the Supreme Administrative Court. The decision of the Supreme Administrative Court is final and enforceable.
The Commission consists of the following bodies: a president (Blagoj Churlinov) and four other members; a general secretary; the Misdemeanour Commission; and several other sectors. The Misdemeanour Commission, which is in charge of the decision-making process, comprises a president and two members who decide as a council. However, we must note that unfortunately the enforcement capacity of the Commission for the Protection of Competition is not sufficient, which implies a lack of ex officio activities.
As regards the particular sectors, there are certain competition law-related competences reserved for state bodies in charge of regulating certain sector, including the National Bank, the Agency for Electronic Communications, the Broadcasting Council and so on. These regulators usually work in coordination with the Commission by cooperating and monitoring the conditions in a particular sector or deciding on related issues.
Restrictive agreements and practices
The Restrictive agreements and practices are defined in article 7 of the Law on Protection of Competition, which is in line with article 101 of the TFEU.
All agreements concluded between undertakings, decisions of associations of undertakings and concerted practices that have as their object or effect the distortion of competition shall be prohibited, particularly those which:
- directly or indirectly fix the purchase or selling prices or any other trading conditions;
- limit or control the production, market, technical development or investments;
- share the market or the sources of supply;
- apply dissimilar conditions to equivalent or similar transactions with other trading partners, thereby placing them in less favourable competitive position; or
- make the conclusion of the agreements subject to acceptance of supplementary obligations by the other contractual parties, which by their nature or according to the commercial customs are not connected with the subject of the agreement.
As regards restrictive agreements, in the Macedonian legal framework, the system of block exemption and individual exemption also apply. If a block exemption is not available to the parties, they may apply to the Commission for an individual exemption. Such exemption shall be granted if it fulfils the criteria prescribed in article 7 paragraph 3:
decisions of associations of undertakings and concerted practices that contribute to the improvement of the production or distribution of goods or services or to the promotion of technical or economic development, provided that the consumers have proportional benefit thereon, and which do not impose restrictions that are not necessary for the attainment of these objectives on the undertakings concerned and do not afford such undertakings the possibility of eliminating the competition in respect of a substantial part of the products or services concerned.
The law also contains a de minimis rule, which is applicable in situations where the total market share does not exceed 10 per cent for horizontal agreements or 15 per cent for vertical agreements. If it is not possible to determine whether the agreement is horizontal or vertical, a threshold of 10 per cent applies.
The most common cases handled by the Commission refer to restrictive agreements. The majority of the cases include price fixing in the pharmaceutical sector; concerted practice; and prohibited agreements in the electronic communications sector (particularly telecoms and media). Some of the aforementioned cases are final, but most are still in court and the outcome is yet to be seen.
Abuse of dominant position
The abuse of dominant position is regulated in articles 10 and 11 of the Law on the Protection of Competition. An undertaking is considered to have a dominant position if it it does not have competitors on the relevant market or if, compared to its competitors, it has a leading position on the relevant market, and especially in relation to:
- market share and position;
- financial power;
- access to sources of supply or the market;
- connection with other undertakings;
- legal or factual barriers for entry of other undertakings to the market;
- the ability to dictate the market conditions taking into consideration its supply or demand; or
- the ability to exclude the other competitors from the market by directing towards other undertakings.
The threshold required for the rebuttable presumption of a dominant company to kick in is a market share of at least 40 per cent on the relevant market.
As far as the law is concerned, the definition of abuse provided in article 11 of the Law is the same as in article 102 of the TFEU.
The Commission has been active in pursuing different kinds of dominance abuse infringements, such as exclusivity arrangements, margin squeeze, tying, pricing practice and so on. The sectors under particular observation were telecommunications, financial services, waste disposal and food and drink.
Control of concentrations
The Notification regarding the concentration shall be submitted to the Commission if:
- the joint aggregate turnover of all participating undertakings generated by selling goods or services on the world market exceeds €10 million according to the exchange rate valid on the day of preparing the annual account, gained in the business year preceding the concentration, and where at least one participant has to be registered in the Republic of Macedonia;
- the joint aggregate turnover of all participating undertakings, generated by selling goods or services in the Republic of Macedonia, exceeds €2.5 million according to the exchange rate valid on the day of preparing the annual account, gained in the business year preceding the concentration; or
- the market share of one of the participants is more than 40 per cent or the aggregate market share of the participants in the concentration on the market is more than 60 per cent in the year preceding the concentration.
The participants in the concentration shall be obliged to submit a notification to the Commission prior to its implementation and following the conclusion of the merger agreement; that is, the announcement of the public bid for purchase or acquisition of majority participation in the basic capital of the undertaking.
As previously mentioned, the additional rules apply for certain sectors (eg, banking, insurance, telecommunications and media).
The merger notification must be filed before the Commission by notification, letter of intent or any similar document showing both parties’ serious intent to enter into the transaction.
The Commission is then obliged to adopt a decision within 25 working days from the receipt of the notification. This period may be extended for up to 35 working days if the participants in the concentration assume commitments before the Commission in order to achieve the concentration that is in accordance with the provisions of the Law. The decisions referred to as decisions in case of initiated procedure shall be adopted within 90 working days from the initiation of the procedure. In coordination with the participants in the concentration, the Commission may extend the time periods referred to in paragraphs at any time following the initiation of the procedure. However, the total duration of each extension or extensions cannot exceed 20 working days.
If the Commission does not adopt a decision within the time periods determined above, the concentration shall be deemed to be in accordance with the provisions of the Law on the Protection of Competition.
Fees and penalties
The Misdemeanour Commission shall, by a decision, impose a fine of up to 10 per cent of the value of the aggregate turnover calculated in accordance with article 16 of the Law, expressed as an absolute and nominal amount, on the participants in the concentration, having an obligation to submit the notification referred to in the concentration appraisal if they:
- fail to submit a notification of the concentration;
- implement the contrary concentration;
- fail to act upon the decision adopted; or
- implement a concentration which, by an adopted decision, has been determined not to be in accordance with the provisions of the Law.
Furthermore, special sanctions might be applicable in particular sectors (ie, banking or telecommunications), such as additional fines or non-registration. However, until now, there has been no single case where the Commission has ruled against the mergers.
When setting the fine regarding a violation of the provision of the Law on the Protection of Competition, the Commission will consider:
- the gravity of the misdemeanour;
- the duration of the misdemeanour; and
- the degree of distortion of competition and the effects caused by the misdemeanour.
The Misdemeanour Commission shall first determine a basic amount of the fine and then adjust it taking into consideration mitigating or aggravating circumstances.
The basic amount of the fine shall, as a rule, amount to up to 30 per cent of the revenue of the perpetrator of the misdemeanour generated from the activity carried out at the relevant market where the misdemeanour was committed in the last complete business year in which the perpetrator of the misdemeanour participated therein. The amount determined in such a manner shall be multiplied by the number of years during which the misdemeanour lasted.
The Misdemeanour Commission shall, by a decision, impose on the undertaking or association of undertakings a fine of up to 10 per cent of the value of the aggregate turnover generated in the last business year, expressed in absolute and nominal amount for which the undertaking or the association of undertakings has prepared an annual account, if it:
- concludes a prohibited agreement or otherwise participates in an agreement, decision or concerted practices which distorts the competition in terms of article 7 of the Law;
- abuses the dominant position in terms of article 11 of the Law;
- fails to act upon a decision of the Commission for the Protection of Competition referred to in article 51 of the Law; and
- fails to act upon a decision of the Commission for the Protection of Competition referred to in article 52 of this Law.
Furthermore, if the misdemeanour is committed by an association of undertakings and refers to the activities of its members, the fine shall not exceed 1 per cent expressed in absolute and nominal amount for minor misdemeanours; that is, 10 per cent expressed in absolute and nominal amount for more serious misdemeanours from the sum of the aggregate turnover for each member of the association acting on the relevant market. If a fine is imposed on an association of undertakings for the activities of its members, and the association is insolvent, it shall be obliged to collect funds for payment of the fine from its members.
In addition to the fine, the Misdemeanour Commission may impose a temporary ban on carrying out a specific activity of between three and 30 days on the legal entity.
Granting immunity (leniency)
With the aim of detecting cartels, in the sense of the Law on the Protection of Competition, a company is automatically granted leniency if it first presents evidence enabling the Misdemeanour Commission to initiate a misdemeanour procedure or first presents evidence enabling the Misdemeanour Commission to complete the already initiated misdemeanour procedure with a decision establishing the existence of a misdemeanour if the existence of the misdemeanour could not be established without such evidence. If an undertaking does not fulfil the requirements for leniency, the fine may be reduced if it provides evidence that was not available to the Commission and that contributes to the closure of the case.
The Misdemeanour Commission shall not grant full immunity from a fine to the undertaking referred throughout the duration if the cartel has taken measures by which it has forced the other undertakings to participate or remain therein.
Recent developments and case law practice
The Commission aims to be considered the most efficient regulatory body in the field of competition. In its relatively brief history, the Commission passed many important decisions, mainly on request of third parties but also ex officio. These decisions are aimed at sanctioning the infringement of the rules for the protection of competition. However, we must emphasise that most of the decisions that are appealed in front of the Administrative Court are confirmed at a later date, underlining the fact that the Commission is an independent body which passes decisions based on the experience and expertise of its decision-makers.
The main principles taken into consideration when determining sanctions are the principles of instruction in order not to repeat the activities in question and punishment for the unlawful activities. However, the main purpose of the sanctions of the Commission is in its educative nature, especially considering that the sanctions adjudicated for the infringement of the Law on the Protection of Competition are still among the lower limits provided by the law. In our opinion, the main reason for this is that the Commission for the Protection of Competition did not establish a severe infringement of the Law on the Protection of Competition to be ultimately sanctioned and, furthermore, the goal of the Commission is to maintain the market condition without causing further distortions for the market players by imposing severe sanctions.
We must note that the recent case law practice of the Commission is in line with global trends. It recently dealt with licensing agreements in the field of intellectual property. In relation to this, there are two very important decisions that created case law practice regarding the ‘semi-exclusivity’ of copyright. In both cases, the Commission ruled that semi-exclusivity is forbidden, especially when the main players on the media market are not equally treated.
The Commission also deals with the regulation of prices of internet services in the telecommunications sector. In one decision, the Commission found an abuse of dominant position of a telecommunications operator in a case where the offer for a wholesale given to internet service providers was almost the same as the retail prices for the end users. Put simply, it ruled that it is not allowed to offer wholesale prices that are higher than retail prices.
There is an ongoing case relating to price fixing in the pharmaceutical sector in the procedure for public procurement of a generic drug. The case was decided by the Commission, and the unsatisfied parties (the pharmaceutical companies) started a court procedure in front of the Administrative Court. The court annulled the Commission’s decision and returned the case to the Commission for re-deciding, with an instruction to correct the procedural errors and the wrong application of the substantive law in the determination of the fines. The Commission appealed the judgment before the Supreme Administrative Court unsuccessfully. Upon the given instructions, the Commission passed a decision which did not satisfy the parties and the case is in front of the Administrative court once again, which this time should rule in meritum.
Finally, it is important to note that the number of cases before the Commission is constantly increasing, since the Republic of Macedonia is moving forward in the area of telecommunications, media, energy and pharmaceuticals.
The Commission’s role is ‘creating the rules’ for the protection of competition in the fastest developing sectors in the Republic of Macedonia. This mission has a beneficial role for all of the market players and for the welfare of the consumers.
Law Office Pepeljugoski
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Law Office Pepeljugoski was established in 1999 by Valentin Pepeljugoski, and in a short period of time has become one of the most famous and successful law offices in the Republic of Macedonia.
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