What is a restrictive agreement? 

Our Law on Protection of Competition defines restrictive agreements as agreements between market participants that have as their object or effect a significant restriction, distortion, or prevention of competition in the territory of the Republic of Serbia.

Furthermore, it states that restrictive agreements may be contracts, individual provisions of contracts, agreements (explicit or tacit), concerted practices, or decisions of associations of market participants. Regardless of their form, it is essential that they result in one of the following actions:

• directly or indirectly determining purchase or selling prices or other trading conditions;
• limiting or controlling production, markets, technical development, or investment;
• applying unequal conditions to equivalent transactions with different market participants, thereby placing them at a disadvantage compared to competitors;
• conditioning the conclusion of a contract or agreement on the acceptance of additional obligations which, by their nature or according to commercial customs and practices, are not related to the subject of the agreement;
• sharing markets or sources of supply.

Restrictive agreements are prohibited and null and void, except in cases of exemption from prohibition in accordance with the Law on Protection of Competition.

For example, in the judgment of the Supreme Court of Cassation Uzp 319/2017, it was determined that an agreement between two business entities regarding individual participation in a public procurement procedure constitutes an agreement that has the object and effect of significantly restricting and distorting competition in the said public procurement, which is considered a prohibited restrictive agreement.

A violation of competition includes acts or actions of market participants that have or may have the object or effect of significantly restricting, distorting, or preventing competition.

Criminal Protection 

The conclusion of a restrictive agreement is also subject to criminal liability. Namely, Article 229 of the Criminal Code prescribes a prison sentence of 6 months to five years and a fine for a person who, within a business entity, concludes a restrictive agreement that is not exempted from prohibition under the law governing competition protection, and which determines prices, limits production or sales, or divides the market. The same article also prescribes a condition for exemption from punishment – if the said person meets the conditions for exemption from liability established by a competition protection measure.

What are the conditions for exemption from prohibition? 

Restrictive agreements may be exempted from prohibition. As an example, we can mention the decision of the Commission for Protection of Competition no. 4/0-02-21/2024-5 from March 2024, by which a restrictive agreement – a commercial contract with annex 18 dated 06.09.2022 and a draft annex 19 between the contracting parties Novo Nordisk Pharma doo Belgrade and Phoenix Pharma doo Belgrade – was conditionally exempted from prohibition for a certain period. Among other things, the Commission assessed the applicants’ claims that the establishment of exclusive distribution does not create negative consequences for technical and economic progress as acceptable and sufficient, considering the specificity of the product and the relevant market. The Commission also accepted the supplemented claims that the primary benefit for consumers in this case is supply security.

In accordance with Article 11 of the Law on Protection of Competition, restrictive agreements may be exempted from prohibition if they contribute to the improvement of production and trade or the promotion of technical or economic progress, while allowing consumers a fair share of the resulting benefit, provided that they do not impose restrictions on market participants that are not necessary to achieve the objective of the agreement (i.e., that they do not eliminate competition in the relevant market or a substantial part of it).

For a better understanding of the conditions and procedure, the Commission for Protection of Competition published Guidelines regarding the submission of requests for individual exemption of restrictive agreements from prohibition dated 11.02.2016.

What follows if the Law on Protection of Competition is not complied with? 

According to Article 68, paragraph 1, item 2 of the Law on Protection of Competition, a market participant who concludes or implements a restrictive agreement within the meaning of Article 10, i.e., a restrictive agreement that is not exempted from prohibition, shall be subject to a competition protection measure by a decision establishing the existence of a competition infringement, in the form of an obligation to pay a monetary amount of up to 10% of the total annual revenue generated in the territory of the Republic of Serbia, calculated in accordance with Article 7 of the law.

According to the aforementioned guidelines of the Commission, market participants should refrain from applying or implementing restrictive agreements for which they intend to submit a request for individual exemption, until the Commission issues a decision. It is also advisable to include a suspensive condition in the agreement.

What is an individual exemption from prohibition? 

An individual exemption from prohibition refers to a procedure initiated at the request of a participant in a restrictive agreement. The Commission for Protection of Competition issues a decision on the exemption of a restrictive agreement for a period not exceeding 8 years; of course, if the conditions are met.

What is a block exemption from prohibition by categories of agreements? 

An exemption from the prohibition of a restrictive agreement may apply to certain categories of agreements, provided that the basic conditions prescribed by law are met, as well as specific conditions relating to the type and content of the agreement and its duration. In this case, restrictive agreements that meet the prescribed conditions are not submitted to the Commission for exemption.

What are de minimis agreements? 

De minimis agreements are permitted, unless the object of a horizontal agreement is price fixing or limiting production or sales, or market sharing, or if the object of a vertical agreement is price fixing or market sharing.

The Law on Protection of Competition defines de minimis agreements as agreements between market participants whose total market share in the relevant market in the Republic of Serbia does not exceed:

• 10% market share, in the case of a horizontal agreement (participants operate at the same level of the production and distribution chain);
• 15% market share, in the case of a vertical agreement (participants operate at different levels of the production and distribution chain);
• 10% market share, if the agreement has characteristics of both horizontal and vertical agreements or it is difficult to determine whether the agreement is horizontal or vertical;
• 30% market share, in the case of agreements with a similar market impact concluded between different participants, provided that the individual market share of each does not exceed 5% in each individual market where the effects of the agreement are manifested.

Note: This text reflects the personal opinion of the author and does not constitute legal advice.