I INTRODUCTION

The general authority for merger control in Croatia is the Croatian Competition Agency (the Agency). Contrary to popular public perception, the Agency is not a regulator, but rather a public entity vested with public authority powers to ensure the application of the competition law regulation.2

There are specific authorities in Croatia authorised to oversee a broad variety of issues arising in a specific market within their purview, including matters of market regulation and control over the undertakings acting in the specific market. Examples of these markets include the energy market, supervised by the Croatian Energy Regulatory Agency; the telecommunications sector, supervised by the Croatian Regulatory Agency for Network Industries; the financial sector, supervised by the Croatian Financial Services Supervisory Agency; and the electronic media sector, supervised by the Agency for Electronic Media.

However, the Agency is the sole entity authorised to ensure compliance with the relevant provisions of competition law in any sector.

This means that irrespective of the role each market regulator has within its respective field, the supervision of mergers and other competition issues remains firmly under the authority of the Agency.

The main legal provisions on merger control are set out in the Competition Act (Official Gazette No. 79/2009, 80/2013) (CA). This legislation provides very detailed procedural provisions, and the Act sets out for the subsidiary application of the General Administrative Proceedings Act (Official Gazette No. 47/2009).

The Amendments to the Regulation on the Criteria for Setting of Fines were passed by the Croatian government in February 2015. The main purpose of the amendments is to grant the Agency the authority to impose fines to the participants of the cartel, in a way that ensures the final amount of fines is proportional to the severity of the violation of the Competition Act, the consumer interests and the market strength of the undertaking involved in the breach.

The Croatian competition law regulations must be applied and interpreted in accordance with the legal provisions of the competition law of the European Union.

With regard to merger control, specific requirements may need to be fulfilled to gain approval by specific market regulators. Accordingly, relevant licences must be obtained by undertakings wishing to participate in the energy market, as stipulated by the provisions of the Energy Act.

In a similar fashion, undertakings must obtain adequate approvals to participate in the financial services sector. Hostile takeovers are particularly scrutinised by the Croatian Financial Services Supervisory Agency.

Pursuant to the provisions of the Electronic Media Act, any change in ownership in broadcasting companies must be notified to the Council for Electronic Media. Additionally, all concentrations in this sector must be notified to the Agency, whether the relevant thresholds are met or not.

In general terms, pre-merger notification is required whenever there is a change of control occurring on a lasting basis, and certain thresholds are met.

The Croatian Competition Act does not set out a specific definition of a concentration, but defines the various legal forms a concentration may take in practice.

A concentration occurs through:

  1. a merger of undertakings;
  2. an acquisition of undertakings; or
  3. an acquisition of direct or indirect control or prevailing influence of one or more undertakings over another undertaking or a part or several parts of an undertaking, in particular by:
    • acquisition of majority shares;
    • acquisition of majority voting rights; or
    • any other way pursuant to the provisions of the Companies Act and other regulations.

An acquisition of control occurs by the transfer of rights, contracts or other means through which one or more undertakings, whether acting separately or jointly, taking into account all the relevant legal and factual circumstances, acquire the possibility to exercise decisive influence over one or more undertakings on a lasting basis.

A joint venture may also fall within the scope of the merger control regime, provided it constitutes an independent economic entity, acting on a lasting basis. This legal concept corresponds to the idea of the 'full function merger', as understood by the EU Merger Regulation.

Not all concentrations are caught by the merger control provision. The obligation of pre-notification arises only in those instances where the required thresholds are met.

The aforesaid shall occur only when the following criteria are cumulatively met:

  1. the combined aggregate worldwide turnover of all the undertakings concerned, arising from the sales of goods or services, is at least 1 billion kuna in the financial year preceding the concentration, provided that at least one party to the concentration has a registered seat or a branch office in the Republic of Croatia; and
  2. when the aggregated turnover of each of at least two participants of the concentration arising from the sales of goods or services on the market of the Republic of Croatia is at least 100 million kuna.

The calculation of the turnover is fully compliant with the applicable provisions of the European Union and the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No. 139/2004.

Accordingly, the total turnover must be calculated, taking into account the aggregated turnovers of all the associated companies of the undertaking on the group level, other than the turnover arising out of the sale of goods and services of the companies forming part of the group.

In the event that the concentration consists of a merger or acquisition of part or several parts of one or more undertakings, irrespective of their legal status, only the turnover of the parts that are subject to the concentration is calculated.

Two or more transactions consisting of the acquisition of part or parts of an undertaking executed within a time period of one year shall be deemed to be a single concentration, executed on the day of the last acquisition.

As previously mentioned, notification of mergers in the broadcasting sector is mandatory, whether the thresholds are met or not.

As an exception, even if the applicable merger control thresholds are met, the concentration is not subject to the jurisdiction of the Agency, provided that notification to the European Commission is mandatory in the same instance.

The obligation of merger pre-notification to the Agency arises following the signing of the agreement acquiring the control or prevailing influence over an undertaking or parts of an undertaking, or the making of a takeover bid, but before the implementation of the concentration.

The merger pre-notification must be made immediately, and within a time period of eight days at the latest.

The aforementioned deadline does not prevent the parties to the concentration from approaching the Agency to pre-emptively discuss certain issues that may arise should a merger be executed. However, the opinions the Agency states during these informal consultations are not legally binding and the position of the Agency may differ from the official position the Agency will take following an official notification.3

II YEAR IN REVIEW

Following the marking of 20 years of the Croatian Competition Agency, the Agency continued to actively promote the importance of competition law policies. In their report for 2017, published in September 2018, the Agency actively participated in preparing amendments to the existing competition law regulatory framework. As a part of these activities, the Agency proposed amendments to the existing Competition Act, but the amendment are yet to be enacted by the Croatian parliament. The Agency was also active in participating the meetings of ECN and the preparations for the proposal of the Directive to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market.4

Pursuant to Article 49 of the Competition Act, a party to the proceedings may offer to undertake commitments such as implementation of certain measures and conditions, as well as deadlines for the respective implementation, so as to eliminate any negative impacts that its actions had on the competition. The Agency often accepts such offers for commitments significantly ease the entire procedure – there is no need to determine whether the breach of CA has occurred, and there are no sanctions for undertakings and no costs for the Agency. In the course of 2017 the Croatian government issued an amended Decision on the criteria for the release from or the decrease of the administrative penal fine (Official Gazette No. 96/2017) – through this amendment Croatia has now fully implemented the EU regulatory framework associated with the Damages Directive.

According to the publicly available documents on the scope of the activities undertaken by the Agency, the time period from mid 2016 demonstrates an increase in the number of merger and acquisition deals being notified and addressed by the Agency, with a majority of notified concentrations being cleared by the Agency. The decisions in merger control cases are made publicly available on the website of the Croatian Competition Agency.

Before addressing the merger control cases that had only come to the attention of the Agency in the course of 2018, it should be noted that throughout 2018 the Agency continued to deal with the consequences of the extraordinary administration proceedings initiated over one of the largest Croatian groups, Agrokor.

The merger of Croatian joint-stock retail company Agrokor d.d. and Slovenian joint-stock retail company Poslovni Sistemi Mercator d.d. originally approved in 2014, and the Agency continued with the monitoring of this transaction throughout 2017, as the Agency only approved these concentrations conditionally. All the parties concerned have committed to implement certain measures and meet certain conditions under the conditional approval of their respective concentrations.

Even though the Agency assessed the implications of these concentrations as negative for the competition, it deemed that they may be allowed after a thorough implementation of structural and behavioural measures that continued up to mid 2018 and the report of the trustee found that Agrokor complied with all divestment and other structural requirements, with the concentration having on overall beneficial effect to the market.5

A practical consequence of the opening of the extraordinary administration proceedings over Agrokor d.d. is the fact that on the basis of the Act on the Extraordinary Administration Proceedings in Companies with Systemic Importance for the Republic of Croatia (Official Gazette No. 32/2017) is that a proceedings in which Agrokor d.d. or an Agrokor affiliated company (any company in which Agrokor d.d. has at least 25 per cent share in) is legally required to be a party to, may not be brought before the Croatian Competition Authority. That effectively means that merger control proceedings may not be initiated in the case of any acquisition by Agrokor of another company or a merger in which an Agrokor-affiliated company should participate in as a party.

Therefore, the monitoring of the Agrokor/Mercator Poslovni Sistemi merger is currently suspended, as the Agency is currently unable to conduct administrative proceedings over Agrokor d.d.

In 2017, the Croatian Competition Agency handled 645 cases, with 18 cases continuing in 2018. Below is a brief outline of the most notable merger control cases in 2018.

i ADRIS Grupa/Expertus

The Agency approved the acquisition of the direct control over Expertus with respect to the 77.78 per cent of the share capital in that undertaking by Adris Grupa. With the implementation of this concentration, Adris Grupa would also acquire indirect control over the undertakings HUP-ZAGREB, Hoteli Dubrovačka rivijera and Astoria. Through the acquisition of the market leader, Adris Grupa would strengthen its position in the Dubrovnik-Neretva County and enter the regional market of the City of Zagreb. With the implementation of this concentration, Adris Grupa takes second position in the national market, following Valamar Riviera.

The Agency concluded that this might have a beneficial market effect as it would increase the competition between three major players, creating an overall positive effect for the consumers.

No reactions were received by the Agency upon their public invitation for interested parties to deliver their comments, and in the assessment of the Agency the acquisition would overall have positive effects on market competition and contribute to market diversification.

ii WKB 3 and Hystead/Manta

In March 2018 the Agency approved the acquisition of the indirect control over the construction, planning and real estate company Manta by Hystead Limited and WKB 3 GmbH.

No reactions had been received by the Agency upon their public invitation for the interested parties to deliver their comments and in the assessment of the Agency this acquisition would have overall positive effects on market competition.

iii Teramedia/Televizija Dalmacija

The Agency cleared in the first phase the concentration between the undertakings Teramedia and Televizija Dalmacija in the form of the acquisition, from Split, of a direct controlling interest over the undertaking Televizija Dalmacija d.o.o. (film, video, television) by Teramedia d.o.o. (production and broadcasting of television and radio programmes) on a permanent basis, in the form of acquisition of the majority interest within the meaning of Article 15(1)(2) of the Competition Act (Official Gazette, 79/09 and 80/13).

The Agency concluded that the concentration in question would produce no anticompetitive effects in the relevant market.

iv Daruno CEE Holding Ivan Parać/PAN-PEK, PAN PEK Đakovo

The Agency cleared the acquisition of joint control over the undertakings PAN-PEK Zagreb and PAN-PEK Đakovo by FARUNO from Luxemburg and Ivan Parać, Zagreb in the first phase of the proceedings.

The combined undertakings PAN-PEK Zagreb and PAN-PEK Đakovo are one of the most important bread producers in Croatia, and their fresh, frozen and packed bakery products are produced in Zagreb and Đakovo and distributed to final consumers in other retail chains, as well as in their own specialised store network.

After the assessment analysis of the relevant markets concerned, it was established that there would be no changes to their structure in the post-merger period.

v Slovenia Broadband/Nova TV

The Agency approved the acquisition of the direct control over the undertaking Nova TV Ltd from Zagreb by the undertaking Slovenia Broadband S.a r.l. with its seat in Luxembourg.

After the assessment of the structure of the relevant markets for (1) the wholesale and retail supply of TV channels, (2) the acquisition and use of individual audiovisual content, and (3) TV advertising, as well as the market power and the market shares of the participants to the concentration in these relevant markets, the Agency cleared this concentration in the first phase as it was assessed that the transaction at issue would not have significant effects on competition in the provision of the above-mentioned services and, even more importantly, that it would not create or strengthen a dominant market position.

The CCA took its decision only after the Electronic Media Agency on 26 March 2018 assessed the merger between Slovenia Broadband as 'admissible' in the sense of the special provisions of the Electronic Media Act.

vi Extra FM/HIT FM

The Agency approved the acquisition of direct control of HIT FM by Extra FM. The new undertaking has since changed its name to Extra FM Zagreb.

The Agency found that the concentration in question does not have significant effect on competition given the fact that it does not create or strengthen a dominant position of the parties to the concentration in the market concerned.

The Agency decision followed the decision of the Agency for Electronic Media of 19 April 2018, which cleared the concentration in question within the context of the Electronic Media Act.

vii TRIGLAV INT/Raiffeisen MOD

The Agency approved the acquisition of direct control over Raiffeisen MOD by the undertaking TRIGLAV INT.

The concentration between the undertakings concerned will produce effects in the pension insurance market. Namely, Raiffeisen MOD is currently the only pension insurance company that ensures payments from the mandatory and voluntary pension funds. Its activities have been regulated by a separate law – the Pension Insurance Companies Act –whereas its operation is under the supervision of the Croatian Financial Services Supervisory Agency.

In accordance with the data from the notification in question, significant changes in the pension insurance market are expected to occur after 2019, when the first generation of the members of the mandatory pension funds, who were born in 1962 or later, and cannot move back to the I Pillar,6 will have the right to early retirement pension. Therefore, there will be more users of the pensions from the mandatory pension insurance in the coming years, since more members of the mandatory pension funds will have the right to pension payments from the combined system.

The notification also reveals that from 2020 there will be more new entrants to the market in question. Potential competitors are presumably going to be the ones already active in the Croatian pension system market. For the members entitled to pensions it will mean more options for selecting a pension insurance company.

The Croatian Competition Agency cleared the concentration given the fact that it would not produce anticompetitive effects, or create or strengthen a dominant position in the market of any of the parties to the concentration.

viii RWE Hrvatska/i-energija

The Agency approved the concentration of the undertaking RWE Hrvatska, through its connected undertaking RWE Energija's takeover of i-energija, a special purpose entity founded by Hrvatski telekom (HT). Both RWE Energija and i-energija were present in the Croatian energy supply market.

The participants to the concentration were present in both the relevant product and relevant geographic markets. In 2017, RWE held a market share of 5–10 per cent, whereas HT's market share was zero to 5 per cent. Consequently, the post-merger market share of RWE Hrvatska would be some 5 to 10 per cent.

The implementation of this concentration will enable RWE Hrvatska to raise the existing RWE's Energija portfolio of electricity end users and offer better service and access to new value-added products and services under better terms.

Given the defined structure of the market and the market power and market shares of the participants to the concentration in the relevant market, the Agency approved the concentration concerned, noting that it will have no anticompetitive effects as it does not create or strengthen a dominant position in the market of its participants.

ix ARH CEE HOLDING/Studenac

Here the Agency approved the concentration of the two companies. It found that the concentration would produce effects in the groceries retail market in the territories of Split-Dalmatia County, Dubrovnik-Neretva County, Zadar County, Šibenik-Knin County and Lika-Senj County.

With the target company, Studenac, already present in the market, ARH CEE, the acquiring company, would enter the market causing no changes to the market structure.

In 2017, Studenac held a market share of between 0–5 per cent and 10–20 per cent, depending on the county. Its most important competitors were Konzum, Tommy, Plodine and Lidl, as well as other regional retailers. In the whole territory of Croatia its market share ranges from 0–5 per cent.

The groceries retail market is very dynamic, with a rising trend, so there are many competing undertakings at the national, regional and local levels.

Taking into account the market structure, the market power and the market shares of the undertakings, participants in the concentration the CCA found that the concentration concerned will not produce any anticompetitive effects as it does not create or strengthen a dominant position in the market.

x INA, PPD through Terra mineralna gnojiva/Petrokemija

The Agency approved the acquisition of Petrokemija by INA and PPD, through their Terra mineral fertiliser company (TMG).

Given the aggregate turnover worldwide and the EU dimension, the proposed concentration was subject to obligatory notification to the European Commission.

The European Commission complied with the request of the participants to the concentration for case referral and transmitted the submission to the Agency as the best-placed national competition authority to investigate the matter concerned.

The Agency decided to agree with the referral respecting the argument of the notifying party that in this concrete case the territory of Croatia presents all the characteristics of a distinct market.

In the course of the investigation procedure, the Agency found that the transaction involved joint investment of INA and PPD in the recapitalisation of Petrokemija through a SPV, in which each of the shareholders (INA and PPD) holds a 50 per cent share. After the implementation of the proposed transaction TMG will hold a minimum 50 per cent plus one share in Petrokemija, thereby ensuring the notification parties to jointly confer indirect control over Petrokemija.

At the same time, INA and PPD (through TMG) will not operate in the gas supply market to any big industrial customers buying natural gas in Croatia.

As acquirers and suppliers of Petrokemija, INA and PPD are vertically integrated undertakings that are engaged in several activities in the energy sector. Apart from that, they are important gas suppliers in both the aggregate gas supply retail market and the gas supply retail market for big industrial customers in Croatia.

On the other hand, the mineral fertiliser production market expands the national borders given that there are also manufacturers from other Member States who compete in this market and buy natural gas from different international suppliers.

Petrokemija is the biggest industrial gas buyer in Croatia. At the same time, the undertaking is the only Croatian manufacturer of mineral fertiliser. It sells approximately 30 per cent of the produced volume in Croatia and exports the rest. There is no other fertiliser manufacturer that would be excluded from the market after the implementation of the concentration concerned.

In this concrete case the proposed implementation of the vertical concentration internalises the existing relationship between the supplier and the buyer between the participants to the concentration.

In a broader sense, the gas market in Croatia is liberalised and open, and therefore there are no entry barriers. This is confirmed by the Croatian Energy Regulatory Agency (HERA) as the specific regulator in this sector that the CCA closely cooperated with in the course of the procedure in question. According to the data obtained from the HERA there are 54 gas suppliers that have been licensed to carry out the activities in the gas market.

The gas supply market is fragmented and dynamic. There are new competitors entering this market and there has been a significant number of buyers who have switched to other suppliers. This indicates that the market is still not mature, however, the effects of developing competition in this market is present.

The exit of Petrokemija from the market because of long-lasting financial difficulties could have adverse effects on consumers through the likely increase in the price of agricultural products and potential rise in the price of gas attributable to the increase in transportation tariffs that directly affect the final price of gas (as a result of the decrease in the total volumes of gas traded in the market).

Therefore, it can be reasonably assumed that the capital injection in Petrokemija would lower the price of products, improve production, shorten the trading and distribution process and enhance the performance of Petrokemija.

In the assessment of possible effects of the implementation of the concentration concerned the Agency took into account the economic analysis of potential effects of the concentration worked out by KPMG. The Agency concluded that the implementation of the concentration will not limit supply, in other words, it will not lead to the risk of vertical restriction in natural gas supply in Croatia. This was also confirmed by the finding of the HERA indicating the presence of other competitors in the market concerned and the absence of any formal barriers for other suppliers to take over the gas supply for big industrial buyers that are directly connected to the transmission system from the existing suppliers of these buyers.

There are no indicators that the concentration concerned would limit demand given the fact that in 2017 there was a total of 20 big industrial buyers that are directly connected to the transmission system. The market in gas supply to big industrial buyers rose in 2017 by 25 per cent, whereas the purchase of gas by Petrokemija made some 20 per cent in the total consumption of natural gas in Croatia in 2017.

Taking everything into account, it can be concluded that by the implementation of the concentration concerned the structure of all relevant markets will remain de facto the same; in other words, by the implementation of the concentration, the market position and the market shares of INA and PPD will not change in the gas supply markets in Croatia. They will continue to operate independently as competitors and will be encouraged to supply with gas other industrial buyers as they used to do it before the implementation of the concentration concerned.

There will also be no structural changes in the downstream market. This is because Petrokemija has no competitors in fertiliser production in Croatia, meaning that there is no competitor to Petrokemija that would be denied gas supply by INA and PPD. Petrokemija with its products will continue to participate in the international fertiliser production market.

INA and PPD replied that they intended to continue the trading with Petrokemija under market conditions and that Petrokemija would continue to publish invitation to tender for the supply of natural gas. All interested third-party natural gas suppliers could take part in the competitive bidding.

No replies to the request for information that was published on the website of the Agency with respect to the concentration concerned and its possible effects on competition have been received.

In adopting its decision, the Agency concluded that the concentration concerned will not have any anticompetitive effects given the fact that its implementation will not create or strengthen a dominant position of the participants to the concentration in the relevant market.

III THE MERGER CONTROL REGIME

As outlined above, a merger notification must be made within eight days of the day of the signing of the agreement acquiring a majority share or prevailing influence over an undertaking, or making a takeover bid. The parties to the concentration may, as an exception to the general rule, file a pre-notification before the signing of the agreement or the publication of a takeover bid if they, acting in good faith, prove a real intention to enter into an agreement or make a public offer.

The notification is given in a detailed form, set out by the Regulation on the manner of notification and the criteria on the assessment of the concentration of the undertakings (Official Gazette No. 38/2011). The following should be enclosed with the concentration notification:

  1. the original or a notarised copy; or if the original document is not drafted in the Croatian language, a certified translation of the document constituting the legal grounds for the concentration;
  2. annual financial statements of the parties to the concentration for the financial year preceding the concentration; and
  3. other legally mandatory documentation and data.

When filing the notification, it must be stated whether the concentration notification must also be filed to a competition authority in a jurisdiction other than the Republic of Croatia, and if any such body has previously made a decision regarding the concentration, the aforesaid decision must be sent to the Agency.

A simplified form of the notification may be submitted to the Agency, in the following instances in particular:

  1. no party to the concentration competes in the same relevant product market or the same geographical market, and no horizontal overlap occurs; and no party to the concentration is engaged in business activities in a product market that is upstream or downstream from a product market in which any other party to the concentration is engaged, resulting in a lack of vertical integration;
  2. two or more parties to the concentration are engaged in business activities in the same product and geographic market, but their combined market share is less than 15 per cent; or one or more parties to the concentration are engaged in business activities in a product market that is upstream or downstream from a product market in which any other party to the concentration is engaged, but their sole or combined market share in a single market is less than 25 per cent;
  3. a party to the concentration acquires independent control over an undertaking over which they had previously exercised joint control; or
  4. in the event that two or more undertakings acquire control over a joint venture, with no significant activities in the Republic of Croatia, or such significant activities are not planned in the foreseeable future.

The applicable thresholds for simplified merger notification are lower than those proposed by the Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No. 139/2004.

When submitting the notification, certain data may be designated as a trade secret.

The participants of the concentration jointly make the pre-notification. However, if a single undertaking acquires control over an undertaking or parts of an undertaking, the notification of the concentration must be made by that undertaking.

When the notification is filed to the Agency, a temporary prohibition of the concentration implementation enters into force.

The concentration may only be implemented either following the lapse of 30 days from the day of the receipt of the full merger notification or, in the event that a decision to initiate the concentration clearance proceedings was rendered, on the day of the delivery of the Agency decision granting the approval or conditional approval of the concentration.

The notification is considered filed on the day of the receipt of the required documentation in full. The Agency shall issue appropriate confirmation of the receipt of the complete documentation.

When the Agency receives the complete merger documentation, they publish a public invitation, asking all interested parties to submit their written remarks and opinions on the proposed concentration within eight to 15 days.

The merger will be assessed in respect to the effect of the potential concentration on the relevant market. The concentrations are prohibited when they may significantly restrict, impair or distort the competition, in particular if the concentration creates or strengthens the dominant position of one or more undertakings, whether individually or jointly.

The Agency may request any additional information from the parties to the concentration at all times, and the parties to the concentration are free to deliver to the Agency any data they may consider relevant to the assessment of the concentration, as the burden of proof of the existence of the positive market effects of the concentration is upon the parties to the concentration.

If, following a review of the submitted documents, the Agency finds that they may not reasonably assume that the concentration impairs, restricts or distorts the competition in the relevant market, then the concentration will be considered to be cleared after 30 days. The Agency will immediately issue the appropriate decision stating the concentration is allowed, and deliver it to the party that submitted the notification. The decision is also published on the Agency's website.

However, if the Agency finds that the concentration may have a significant effect on competition in the relevant market, then the Agency shall initiate Phase II proceedings on the assessment of the concentration, launching an in-depth review.

The in-depth assessment of the concentration may be concluded by a decision stating the concentration is prohibited, allowed or conditionally allowed. This decision must be rendered within three months following the day of receipt of the complete notification of the concentration. This three-month period may be extended for an addition three-month period if the Agency deems it necessary for determining the full facts of the case and the assessment of the submitted evidence. During the entire course of the proceedings, the parties may approach the Agency and suggest the implementation of measures and conditions to alleviate the negative effects the concentration may have on competition.

A hearing, which the general public is not permitted to attend, may be scheduled during Phase II of the proceedings should the Agency consider it to be useful.

Prior to the hearing, the parties to the concentration may request an insight into the Agency's case file. Drafts of the decisions, minutes from the meetings of the Competition Council, internal notes and instructions, correspondence between the Agency and the European Commission may not be reviewed.

A notice on the preliminary determined facts will be delivered to the parties to the concentration prior to the scheduling of the oral hearing. The parties may respond to the notice in writing, within one month from the day of receipt of the notice.

A stop-the-clock provision is in effect in this instance, and the three-month time period for the rendering of the decision of Agency is halted from the day the notice on the preliminary determined facts is delivered to the parties until the day the agency receives the written response from the parties proposing adequate measures and conditions.

The participation of third parties is limited, for example, to the submission of their opinions on the proposed concentration upon the Agency's invitation.

Even in instances where third parties have proven their legal interest, and have been granted certain procedural rights, they are not authorised to review the case file during the pending procedure, but only to receive a written notice on the preliminary determined facts in simplified form, upon request.

There is no appeal of an Agency's decision, but the parties may lodge an administrative claim against the decision before the High Administrative Court of the Republic of Croatia within 30 days of receipt of the decision.

Only parties to the proceedings, or persons the Agency granted the same rights as the party in the course of proceedings, are entitled to lodge an appeal against the Agency's decision.

Initiation of the judicial review proceedings does not have a suspensory effect, unless it pertains to imposed fines.

The Agency may annul a decision on the assessment of a concentration if the decision was made with inaccurate or false data, and such data were material to the decision; or if any participant to the concentration has failed to fulfil their obligations as set out in the Agency's decision.

Measures, conditions and deadlines for the parties to the concentration to restore competition in the relevant market will be outlined in the new decision, and the appropriate fines will be imposed.7

The statute of limitations for review of mergers is five years. Each procedural action of the Agency in this respect halts the statute of limitations, but in any case the period may not exceed 10 years.

The maximum fine for failure to notify a merger to the Agency is 1 per cent of the annual turnover of the undertaking, according to the last published financial statements.

The maximum fine for participation in the prohibited concentration is 10 per cent of the annual turnover of the undertaking, according to the last published financial statements.

IV OTHER STRATEGIC CONSIDERATIONS

It has been an ongoing goal of the Agency to align and equalise the practice of undertakings assuming obligations to repair the damage to competition, through acceptance of measures and conditions.

The measures and conditions to alleviate the negative effects to the competition are already rooted in the merger control regime, and have been successfully used in the past.

The Croatian legislator facilitates the use of these measures by encouraging the participants of the concentration to take a proactive approach and propose measures and conditions during the entire course of the proceedings.

This concept is further reinforced by the fact that the parties to the concentration are explicitly invited to submit their written proposals of the measures and conditions to the Agency within one month of the receipt of the notice on the preliminary determined facts.

The measures and conditions proposed to alleviate the negative impact of concentration may be divided in three groups: behavioural remedies, structural measures and quasi-structural measures.8

Behavioural remedies determine whether the participants comply with the set conditions in a designated time frame. The length of this time frame is determined on a case-by-case basis, usually depending on the state of the relevant market. In several prominent cases, the Agency has appointed an independent trustee to oversee participants' adherence to the conditions.

Structural measures are far more complicated, but are also considered to be more effective by the Agency. These measures may include sale of company assets (divestiture); sale of the overlapping assets of the concentration's participants (mix-and-match remedies); carve out; or sale of the most valuable assets of the participants of the concentration (crown jewels).9

Quasi-structural measures provide for a combination of structural or behavioural measures.

Increase in the adoption of these measures may prove to serve to the mutual benefit of both the undertakings involved in the concentration and the Agency, as the undertakings themselves, in cooperation with the Agency, assume the obligation to alleviate potentially harmful effects to the competition, which could also contribute to the reduction of the length and the associated costs of the concentration assessment proceedings.

V OUTLOOK and CONCLUSIONS

Throughout 2017, the Agency has continued its endeavours to improve competition in Croatia. This is done in particular through ongoing education, as well as following trends and new developments in the region and the European Union. The Croatian competition law aims to be fully harmonised with the acquis communautaire and any changes thereof should expect to be promptly reflected in the Croatian national legislation.

The increased dynamic of the merger control cases in Croatia continue to highlight the importance of the role of Agency in addressing and monitoring market competition issues. The fact that this will indeed continue to be in the focus of the Agency is highlighted by the statement of the Agency citing the market competitiveness as one of their main concern. The completion of the extraordinary administration will certainly bring about new challenges and developments and will increase the dynamics and activity in the merger control sector.


Footnotes

1 Goran Durmiš is a partner and Tea Ivančić, Izabela Beber and Ivana Ostojić are senior associates at Law Firm Bekina, Škurla, Durmiš and Spajić Ltd.

2 Annual Report of the Croatian Competition Agency for 2015, Zagreb, p. 10.

3 Instructions pertaining to the Concentration Assessment Proceedings, The Croatian Competition Agency, (Zagreb, 2004) p. 21, www.aztn.hr/uploads/documents/tn/zakonodavni_okvir/Naputak_1.pdf.

4 Annual Report of the Croatian Competition Agency for 2017, published July 2018, Zagreb, p. 7.

5 Annual Report of the Croatian Competition Agency for 2015, Zagreb, p. 10.

6 The pension insurance system in Croatia is based on three pillars of insurance – the first two are mandatory and the employer's contributions are deducted from the employee's salary and the third is voluntary. The first pillar of pension insurance is also the responsibility of the Croatian Pension Insurance Institute (HZMO). The employer calculates 15 per cent of the gross amount from a worker's salary and pays it to the State Treasury.

7 In the event of the implementation of the prohibited concentration, the Agency may order the sale or transfer of the acquired shares, or prohibit or restrict the use of voting rights associated with the acquired shares.

8 V Butorac Malnar, J Pecotić Kaufman and S Petrović, Pravo tržišnog natjecanja (University of Zagreb, 2013), p. 337.

9 ibid., p. 337.