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Component I

To strengthen the institutional capacity of the Commission for Protection of Competition

The first task to be carried out under component 1 consists in reviewing the current structure of the CPC and making concrete recommendations for its improvement. The word “structure” must be understood in a large sense. It relates, on the one hand, to the internal organization of the CPC. This item covers its subdivision in Council (as the decision-making body) and Technical Service (charged with the preparation of draft decisions), the composition and working methods of both, their mutual relations, but also the general conditions under which they assume their respective functions. As to the Council, the level of its autonomy and independence has been questioned. Potential conflicts of interest, in particular with regard to those Members, who are not employed full-time by the CPC, cannot be excluded.  As to the Technical Service, the need for sufficient human and financial resources is well to the fore.

As already stated in the Terms of Reference and confirmed by the CPC at a recent meeting, the Technical Service is understaffed. The current number of only 9 (actual or potential) case-handlers is not only disproportionate to the number of Council Members, but also totally insufficient to ensure an efficient operation of the CPC.  Moreover, the chosen internal structure of the Technical Service, which includes separate units for mergers, cartels, dominant positions, international cooperation and administration, is in fact superseded by a day-to-day allocation of work between the case handlers. The large number of merger notifications, caused by low thresholds, together with short legal deadlines for taking the final decision has led to a situation where each case handler is predominantly occupied with merger control. A well-balanced enforcement of the different provisions in the Law for the Protection of Competition (hereafter “the Law”) is currently excluded. Neither is there any room left for competition advocacy. This is one of the problems relating to the complex legal framework within which the CPC   deploys all of its activities.  The same question will therefore also have to be addressed under components 2 and 3.

A partial solution of the problems referred to above appears to be on its way. The amendments to the Law recently proposed by the Government provide amongst others that all Members of the Council must assume their functions full-time. Such a change could strengthen the autonomy of the Council and the independence of its Members, thereby also reducing the risk of conflicting interests. The application of the proposed provisions, should they become law, in particular the process of nomination of the Council Members, must, however, remain subject to review. Furthermore, the CPC has moved to  new premises located in a building, which it has not to share with other Institutions and which for the time being corresponds to the needs of the Council and the Technical Service in terms of office and conference rooms (ALSO in terms of INTERNET connections). Thus the basic conditions for the protection of confidential business information are now met. The Government has also promised to increase the staff of the Technical Service. It will have to be seen within what space of time and at what periods new posts are created. At any event the review of GPC’s internal structure will remain an ongoing task for the whole duration of the Project.

The term “structure” as to be understood in the present context comprises, on the other hand, the CPC’s external relations. Here the cooperation between the CPC and the Government, in particular the Ministry for Trade and Services - i. e. the Institution in charge of general competition policy, is of greatest importance. To evaluate the character of this relationship close contacts with the latter are indispensable. The - so far unknown -existence of strategic documents clearing the functions of the CPC compared to those of other Institutions or Services dealing with related matters (such as State aid and procurement) would considerably facilitate our  task. Contacts with other Ministries should be organized with a view to clearing the general legal framework for CPC’s activities (modes of financing and employment, accountability etc.).

Within the same context the relations between the CPC and the Sector regulators will have to be inquired. This task includes the clearing of the respective competences and powers and the definition of the extent of possible cooperation in matters of common interest. The first question to be answered, here too, is whether agreements or memoranda of understanding exist between the mentioned Institutions.

International cooperation constitutes an important means both to participate in the experience gained by other institutions and authorities in competition matters and to raise the reputation of the CPC inside and outside Serbia. Membership in international organizations, such as OECD, ICN and Global Competition Network is essential for this purpose, but close contacts with the Directorate General of Competition of the European Commission and the Competition Authorities of the EU Member States and the Candidate Countries are even more important. The functioning of these relationships must therefore also be examined and evaluated.

Training of Council Members, staff of the Technical Service as well as of Sector regulators and other relevant stakeholders in all competition matters will contribute to raise the all over competence of the interested persons in this area. It constitutes, moreover, a prerequisite for the desired effective participation in international conferences and negotiations and should therefore start as soon as possible. Study visits to different Institutions in charge of competition law and policy will complete the training programme.

In the area of international cooperation English has meanwhile become the almost exclusive means of communication. To master this language is hence indispensable for various purposes: following and communicating at conferences, seminars and workshops; drafting reports, summaries and other documents; participating in negotiations and other activities within the framework of the SAp;  analyzing documents from the EU and its Member States and First meetings with the CPC have shown, that the Members of the Council and several of the persons employed in the Technical Service already dispose of sufficient active and passive knowledge of the English language, while others will still have to make an effort in order to reach a higher than just the basic level of knowledge. Specialized English training courses will therefore be organized immediately after the inception period. They will be open to the current and the future staff of the CPC, with the possibility of extension to - interested persons from other State Institutions.

First meetings with the beneficiary have already allowed us to get an overview of CPC’s activities after it became operational in May 2006. Since then the CPC conducted merger control proceedings and, subsequently, took formal decisions in more than 100 cases. In three of these cases the proposed concentration were accepted only subject to specific conditions. In 13 cases, 6 of which are still pending, the CPC initiated proceedings for suspected abuses of a dominant position. In 2 of the 7 final decisions already taken it found an infringement of the Law, by the 5 others it rejected the complaints which had been introduced by third parties. In the area of restrictive agreements and concerted practices the CPC dealt with 8 cases and issued 5 exemption decisions on horizontal cooperation  (one case) and vertical agreements (4 cases). 3 cases are still pending. More details are contained in annex to this report. The CPC also drafted the texts of a whole series of Group Exemption Regulations which were transmitted to the Government for adoption.

Without taking a position on the appropriateness of the mentioned decisions and texts of regulations and on their compatibility with the EU Acquis (this being reserved to the review process) one can already say that under the given difficult circumstances a rather good output record has been achieved, which shows that the CPC can rely on a staff of capable and highly motivated persons. However, it is also clear that by strengthening the internal organization of the CPC including the latter’s human and financial resources, improving its external relations, and modernizing the legal frame for its work the current level of efficiency can be considerably raised.