Ahead of Croatia’s EU Accession – a Snapshot of Competition Law Enforcement and Anticipated Changes
→ Christoph Haid
→ Mislav Bradvica
Croatia’s EU accession is imminent. What will it bring for competition law enforcement in Croatia? What legislative loopholes must still be bridged? This article gives an overview of noteworthy amendments expected in the next months.
Expanded jurisdiction and strengthened cooperation with other competition authorities
In accordance with Article 374 of the Credit Institutions Act, upon Croatia’s accession to the EU, the Croatian Competition Agency (Agency) will expand its jurisdiction to the assessment of concentrations in the banking sector. This will change the more than decade old and often criticised concurrent jurisdiction system, where the role of the Agency in this sector was merely advisory. Until accession, the ultimate assessment remains within the jurisdiction of the Croatian National Bank.
Moreover, with becoming an EU member, Croatia will fall within the scope of the EU merger control regulation, pursuant to which all mergers meeting certain turnover thresholds must be assessed exclusively by the European Commission. In such cases, the Agency will be deprived of its jurisdiction.1
Competition law enforcement – still some way to go
The Croatian competition regime is fully harmonised with substantive EU competition rules. Differences between EU and Croatian rules are negligible and mainly relate to procedural issues. These differences have, however, been increasingly noticed among the legal professionals in Croatia.
For instance, before conducting a dawn raid, the Agency must ask the Administrative Court to issue a warrant in line with the rules for securing evidence applicable in extrajudicial procedure. It is questionable whether this procedure is apt for obtaining a warrant, as it is based on the concept of equality of both procedural sides (ie, also the undertaking being searched), which gives the implicated undertaking the right to be heard before the search. This jeopardises any surprise effect of the planned dawn raid (which is the last resort of investigative tools and will be called upon if the authority believes that it can gather contemporaneous evidence only with an unannounced raid). We should not be surprised by an amendment to the Competition Act to the end that – while respecting the principle of equality and the right to be heard: the implicated undertaking need not be heard beforehand as otherwise the success of the inspection would be jeopardised.
Competition law enforcement still lacks teeth
No dawn raids
Against the background of the above, it comes as no surprise that the Agency has not once made use of the instrument of a dawn raid since October 2010 – when it became authorised to do so.
No big fines; quarrels over competences
The second major amendment to the 2010 Competition Act excepted to propel competition law enforcement in Croatia was the authority’s new power to impose fines for anti-trust infringements directly – as opposed to having to apply to misdemeanour courts to apply fines. As this fining power may not be applied retroactively, it is confined to infringement proceedings instigated after the entry into force of the new competition act. Why then does enforcement still lack teeth?
The Agency began imposing fines rather inconspicuously. This likely goes hand in hand with the lack of dawn raids, as most modern authorities levy fines for severe infringements, which are unearthed in dawn raids rather than being solely supported by evidence supplied by complainants.
Secondly, and interestingly, misdemeanour courts have regularly declared themselves incompetent to continue proceedings. They claim the Agency has the power to impose fines directly and that with the entry of force of the Competition Act, anti-trust infringements are no longer misdemeanours. Three solutions to this competence stalemate seem possible: (i) the Agency can demand the resolution of a negative conflict of competence before the Constitutional Court, which will probably be time consuming; (ii) the Agency can resort to the doubtful option of autonomous fining of past misconduct, ie, for the time when it had no power to impose fines directly or (iii) these infringements can simply be lost in legal translation.
Other looming changes to the Competition Act
Given the above, some changes to the Competition Act that are currently debated behind closed doors seem obvious. The loopholes regarding dawn raids must be done away with. This would likely spark a significantly more serious enforcement of competition rules in Croatia.
Another expected amendment will likely concern merger notification thresholds. Legal professionals stress that they are set too high for the Croatian market.
Misdemeanour courts have regularly declared themselves incompetent to continue proceedings. They claim the Agency has the power to impose fines directly and that with the entry of force of the Competition Act, anti-trust infringements are no longer misdemeanours.
- The European Merger Control Regulation provides for a referral system pursuant to which those concentrations with an EU dimension likely to be limited to a national (eg, Croatian) market can be referred to the respective national competition authority (eg, the Agency).