Introduction 

Late last year, the Serbian Commission for Protection of Competition (hereinafter: the Commission) has presented official Guidelines for drafting competition compliance programs. To raise awareness about the need to become compliant, the Commission surprised us this year with the Model Program of Compliance with the regulations on the protection of competition that follows closely the previously published Guidelines. It is evident from the Commission’s practice so far that competition infringements happened mostly due to ignorance or insufficient compliance of market participants in the sphere of competition related regulations. The Guidelines stated that the creation of compliance programs should not amount to mere satisfaction of the form since a fully efficient program requires a certain level of understanding along with serious intent of the company’s management for the main purpose of neutralizing and reducing the risk of competition infringements. 

The Commission has defined the Compliance Program as an internal act of the company that aids the company in becoming compliant with relevant competition regulations in its business operations and market participation. It is essential to remark that regulations on the protection of competition apply to all legal entities operating on the Serbian market. Furthermore, the relevant legal framework consists of the Law on Protection of Competition and numerous bylaws such as regulations, instructions and guidelines. Infringements of competition law and overall non-compliance leads to severe consequences for companies operating on the market of the Republic of Serbia. The above-mentioned consequences have been prescribed by the Law on Protection of Competition and a relevant Regulation. Namely, the Law stipulates that a pecuniary fine up to 10% of annual income earned in the territory of the Republic of Serbia shall be imposed on an undertaking as a measure of protection of competition. 

Healthy competition as the presumption of an efficient economy 

The graveness of competition in the market is reflected in encouraging market participants to become more efficient; directly affecting the economic well-being and development. The very fact that it is significant as a market participant to monitor legislative changes and track down novelties in the field of competition law is reflected in the main features of the market, along with the surfacing and development of new market spaces and technology-related advancements. For example, in one of the following articles on this blog, we are going to address the topic of the protection of competition in times of rapid technological innovations (i.e., algorithmic collusion) in accordance with the 2022 OECD Handbook on competition policy in the digital age. As for the need to create a compliance program, it is important to point out that there are many upper hands of being compliant, as well as major risks in case of possible infringements of competition law and non-compliance in general.    

Before discussing compliance programs, it would be interesting to draw a few parallels and thus highlight the significance of understanding the value of competition in a multidisciplinary manner. One interesting approach is the blue ocean strategy that refers to, in layman’s terms, a strategic approach in finding new spaces in the existing market, along with firmly concentrating on the product and consumer welfare rather than solely seeking to beat the competition. The authors in question used as interesting metaphors the notion of a red ocean that is filled with relentless or cut-throat competition and traps many executives worldwide stepped onto, and the further metaphor of sailing into ports of the blue ocean filled with a number of positive changes such as a fair process, strategic planning and business success of the company disregarding market rivalry and competition infringements by laying down interesting best practice examples. As laymen in the economic sphere, we will not deal with such issues, yet it seemed as a fun fact and an interesting side-path to highlight the noteworthiness of having healthy competition in the market. As for the legislative sphere of competition protection and the company’s internal documents, the purpose of such legislative framework in the Republic of Serbia, at the EU and international level in general, is to maintain effective competition and spread corporate awareness because, according to the Commission, it is the public interest of a country’s economy. 

Creation of compliance programs. 

We can sum up the development of a compliance program in several steps or phases. All stages of creation are preceded by the so-called ‘step zero’, i.e.  defining the company’s business goals as market participants, emphasizing the undertaking’s core values and main objectives the compliance program should meet. In addition to the significance of creating a tailor-made compliance program suited for a particular undertaking instead of merely satisfying the form, it remains as a fact that the guidelines of many foreign competition watchdogs and international organizations dealing with competition-related matters stated a strict rejection of the ‘one-size-fits-all’ approach as being incomplete and erroneous.   

After step zero, we may approach the first step of creation, namely the undertaking’s risk assessment. When assessing possible risks, it is necessary to analyze the undertaking itself by taking into account the size, organizational form, management type, corporate culture and more. Furthermore, as analysis of factors such as market activity, the features of the competitive environment in the relevant market and similar specific factors come into consideration once this stage of creation is approached. The next step consists of taking on particular and plain managerial obligations in the form of an explicit statement by the undertaking’s management on compliance with competition norms as an important part of the undertaking’s business policy.  

In the wake of creating a firm theoretical base, we may approach more extensive and overall active phases for the undertaking itself. The third step seems particularly interesting since it requires the creation of a novel organizational structure for reporting perceived issues regarding the protection of competition, namely appointing within the company a compliance officer or a compliance team. Hence, this step is about establishing a novel organizational unit within the undertaking and defining certain obligations with the aim of ensuring a swift response in cases of competition infringements and the education of employees. Furthermore, the fourth step is concerned with the establishment of an internal mechanism for co-operation with the Commission during possible investigation procedures of the undertaking in question. Afterwards we are down to the fifth step that directs the management to provide an adequate and effective training method intended for employees that should meet the needs prescribed by the Commission’s Guidelines. Consequently, the management may choose a method of training at its free discretion, yet it is vital to satisfy and ensure the achievement of the objectives set out by the Commission. The final phase refers to monitoring and evaluation of program results and follow-up actions. According to the Commission itself, the success of a compliance program is measured by its results, i.e., the creation of a corporate culture of compliance with competition law in the ordinary daily operations of the company and its employees. 

Conclusion 

We may sum up these steps by laying down three basic requirements, i.e., risk identification, adoption of measures to eliminate or mitigate risks, and the introduction of internal procedures for problem-solving. When talking about competition infringements in accordance with the relevant legislation, it can be briefly mentioned that it frequently includes the notions of restrictive agreements, abuse of dominant position in the market, along with the notion of concentration control in respect of the notification requirement. As for the abuse of the dominant position, we have dealt with the topic in one of the previous blog posts. 

Understanding the forms of competition infringements, along with the identification and assessment of possible risks, requires a certain level of knowledge in the light of the relevant legislative framework and practices in the legal sphere of competition protection. As stated earlier in the article, a compliance program should be tailor-made in accordance with the prescribed needs and the structure of the specific undertaking to which the program refers. 

Literature: 

Commission for Protection of Competition- the Republic of Serbia, Guidelines for drafting Competition Compliance Programs (2021, Belgrade), 

Commission for Protection of Competition – the Republic of Serbia, Model Program of compliance with the regulations on protection of competition (2022, Belgrade). 

Joe Murphy, One Size Fits All: A Flawed Approach to Company Compliance Programs (2021, Competition Policy International Inc.) 

Law on protection of competition (Official Gazette of the Republic of Serbia Nos. 51/2009 and 95/2013). 

OECD, OECD Handbook on competition policy in the digital age (2022, OECD).

Chan Kim & Renée Mauborgne, Blue Ocean Strategy (2021, Harvard Business Review Press).