On 10th 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
