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.

1

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).