Contributed by Babic & Partners.
1. What are the main competition-related pieces of legislation in Croatia?
The main legislative source of competition law in Croatia is the Croatian Competition Act (Official gazette nos. 79/2009, 80/2013, 41/2021, 155/2023 – the Competition Act), in addition to the directly applicable rules of EU competition law. Competition Act sets out general rules on anti-competitive agreements (closely following the wording of Article 101 of the Treaty on the Functioning of the European Union – TFEU), abuse of dominance (closely following the wording of Article 102 TFEU) and merger control, as well as the rules governing the status and powers of the Croatian Competition Agency (CCA), procedural rules governing investigations and proceedings conducted by the CCA and the conditions for imposition of fines for violations of Croatian and EU competition laws (including the immunity from fines within a leniency program).
There is also a number of implementing regulations governing specific types of agreements, block exemptions, and merger control procedures before the CCA, as well as calculation of fines and leniency, including (i) Horizontal Agreements Block Exemption Regulation (Official gazette no. 72/2011); (ii) Vertical Agreements Block Exemption Regulation (Official gazette no. 37/2011); (iii) Technology Transfer Block Exemption Regulation (Official gazette no. 9/2011); (iv) Transport Sector Block Exemption Regulation (Official gazette no. 78/2011); (v) Motor Vehicle Block Exemption Regulation (Official gazette no. 37/2011); (vi) Regulation on Agreements of Minor Importance (Official gazette no. 9/2011); (vii) Relevant Market Regulation (Official gazette no. 9/2011); (viii) Regulation on the criteria for setting fines (Official gazette nos. 129/2010, 23/2015); and (ix) Regulation on the Criteria for Granting Immunity from Fines (Official gazette nos. 129/2010, 96/2017 – the Leniency Regulation).
Finally, Article 74 of the Competition Act expressly provides that when applying the Competition Act, and in particular in case of any ambiguities or lacunae in its interpretation, CCA is required to apply the criteria developed in EU competition law (including the criteria developed in case law of the Court of Justice of the European Union, as well as soft law documents such as notices and guidelines adopted by the European Commission).
2. Have there been any notable recent (last 24 months) updates of Croatian competition legislation?
There have been no notable updates of Croatian competition legislation within the last 24 months.
3. What are the main concerns of the national competition authority in terms of agreements between undertakings? How is the sanctioning record of the authority?
Based on information published by the CCA, the CCA is primarily focused on investigating and sanctioning horizontal agreements (cartels), which are generally considered by the CCA as causing the highest financial damage to consumers, the market, and society as a whole. In particular, the CCA has announced its intention to further investigate and sanction bid-rigging cartels (the most serious type of cartels), and for this purpose, the CCA has obtained access to the Croatian electronic registry of public tenders. In this context, the CCA has also initiated the development of a digital tool that could help the CCA discover bid rigging cartels in public tender procedures.
Furthermore, the CCA announced that it intends to continue monitoring the developments in the digital markets after having conducted several sector inquiries which warranted further procedural steps against undertakings active in these markets.
In the past two years, the CCA adopted only two decisions on the imposition of fines against undertakings participating in prohibited agreements, while the CCA ended one infringement proceeding with a commitment decision. In one of the above-mentioned infringement proceedings, the CCA imposed a record-breaking EUR 281,836.88 fine for resale price maintenance on a Croatian bike supplier.
The fine imposed by the CCA’s decision against the local bike supplier is the highest fine imposed to date in a vertical agreements case in Croatia. Based on evidence collected during the proceedings (including in a dawn raid), the CCA established that the supplier agreed to fix the minimum resale prices of bicycles with 15 Croatian distributors during the period from September 2013 to June 2018. The CCA’s infringement decision defines the relevant product and geographic market as a Croatian market for the sale of Cube bicycles. The CCA established in the infringement decision that distributors’ tacit acceptance of the implementation of the supplier’s anti-competitive unilateral business policy aimed at resale price maintenance constituted an agreement within the meaning of Article 8 of the Croatian Competition Act. The supplier proposed commitments to address CCA’s competition concerns during the proceedings. However, since the CCA found that the investigated practice constituted a hardcore restriction of competition, the CCA rejected the supplier’s proposal as not sufficient to eliminate the negative effects and restore effective competition in the market. The CCA decided to conduct the infringement proceedings and impose the fine solely against the supplier as the organizer of the controversial anti-competitive business policy. On the other hand, the CCA decided not to conduct proceedings against individual distributors parties to the agreement, particularly taking into account the supplier’s market position and market power, as well as the fact that the supplier was evaluating its distributors on an annual basis and was able to decide on further (termination of) supply of the relevant bicycles to the distributors. With regard to the level of fine, when determining the basic amount of the fine (which, depending on the gravity of the infringement, may typically be determined in the amount of up to 30% of the value of sales in the relevant market during the last year of the infringement or the last year for which there are complete financial statements), the CCA used 5% as the appropriate percentage of the value of sales.
On the other hand, the fines imposed by the CCA to date in horizontal cases were typically larger than fines for prohibited vertical agreements. The highest fine imposed by the CCA on a single undertaking in cartel proceedings amounted to EUR 861,901.91 on a member of a betting shop cartel (while the total fine imposed on all cartel members amounted to EUR 1,287,411.24, noting that this decision was subsequently annulled by the Croatian High Administrative Court for failure to adduce sufficient evidence on the existence of the cartel.
4. Which competition law requirements should companies consider when entering into agreements concerning their activities in Croatia?
Croatian competition laws generally follow EU competition law, and CCA regularly applies principles and criteria developed in the jurisprudence of the Court of Justice of the EU as well as in decisions and soft law documents adopted by the European Commission.
The Competition Act prohibits all agreements between two or more independent undertakings, decisions of associations of undertakings and concerted practices which have as their object or effect the restriction of competition, and in particular those which: (1) directly or indirectly fix purchase or selling prices or any other trading conditions; (2) limit or control production, markets, technical development, or investment; (3) share markets or sources of supply; (4) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (5) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. Under the Competition Act, an agreement refers to contracts, specific contractual clauses, oral or written agreements between undertakings and concerted practices resulting from such agreements, decisions of undertakings or associations of undertakings, general terms of business, and other documents which are or may form a part of an agreement.
The rules on restrictive agreements apply to both horizontal agreements (i.e., agreements between undertakings active at the same level of supply and distribution) and vertical agreements (i.e., agreements between undertakings active at different levels of supply and distribution). The Competition Act requires that an agreement is made between two or more independent undertakings, and in this context, agency agreements in which the agent does not act as an independent economic operator will typically fall outside the scope of Article 8(1) of the Competition Act (closely following the wording of Article 101(1) of the TFEU).
When entering into vertical agreements concerning their activities in Croatia, companies should be aware that the Croatian vertical block exemption rules have not (yet) been aligned with Regulation (EU) 2022/720 (EU Vertical Block Exemption Regulation) and that there are specific differences between EU and Croatian competition law in this area. The Croatian Vertical Agreements Block Exemption Regulation establishes a safe harbor for vertical agreements provided that the market shares of both the supplier and buyer parties to the agreement on the relevant markets do not exceed 30% and that the vertical agreement does not include any of the hardcore restrictions of competition within the meaning of Article 9 of the regulation. The fact that a vertical agreement does not meet the criteria for block exemption does not mean that the agreement concerned falls within the scope of Article 8(1) of the Competition Act, or that it does not fulfill the conditions for individual exemption under Article 8(3) of the Competition Act. In such cases, the agreement must be individually assessed and companies are required to perform their own self-assessment of agreements. If the agreement does not restrict competition within the meaning of Article 8(1) of the Competition Act, or if a restrictive agreement meets the conditions for individual exemption under Article 8(3) of the Competition Act, such an agreement would be valid. On the other hand, an agreement restrictive of competition within the meaning of Article 8(1) of the Competition Act that does not meet the conditions for individual exemption under Article 8(3) of the Competition Act would constitute a competition law infringement and would be null and void (please see the below section regarding consequences of competition law infringements).
5. Does a leniency policy apply in Croatia?
Yes. The leniency policy is governed by the rules of the Competition Act and Regulation on the Criteria for Immunity from Administrative Fines (Official gazette nos. 129/2010, 96/2017 – the Leniency Regulation) and is available only in cartel cases.
Under the Competition Act, the CCA is authorized to grant full immunity from a fine to a cartel member who is first to report the cartel to the CCA and deliver information, facts, and evidence enabling the CCA to initiate proceedings and conduct a dawn raid or to establish the infringement. Full immunity from fines is not available to cartel ringleaders. Partial immunity from fines is available for cartel members who do not satisfy conditions for full immunity but provide to the CCA additional evidence with significant added value. The CCA is typically required to grant a reduction of fine in the following amounts for undertakings that are eligible for partial immunity: (a) a reduction between 30% and 50% for the undertaking that is first to provide evidence with significant added value to the CCA; (b) a reduction between 20% and 30% for the undertaking that is second to provide evidence with significant added value; and (c) a reduction of up to 20% for any subsequent undertaking eligible for reduction of fine.
In addition, regardless of whether the undertaking applies for full or partial immunity, the leniency applicant must (i) provide continuous, full and prompt cooperation to the CCA from the moment of filing the leniency application; (ii) cease any participation in the cartel, unless the CCA considers that such participation is necessary for successful conduct of a dawn raid; and (iii) refrain from destroying, tampering, or concealing evidence of the cartel, as well as from disclosing its leniency application to third parties.
The immunity from fines that may be granted by the CCA within a leniency program does not affect the criminal liability of the person or entity responsible for a competition law violation that is also a criminal offense (such as bid rigging).
6. How is unilateral conduct treated under Croatian competition rules?
In Croatia, unilateral conduct is typically assessed in the context of the rules governing abuse of dominance which closely follow the wording of Article 102 of the TFEU. Article 13 of the Competition Act prohibits any abuse of dominant position by one or more undertakings on the relevant market, in particular consisting in: (1) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (2) limiting production, markets or technical development to the prejudice of consumers; (3) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (4) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
The Competition Act provides for a definition of a dominant position. Under Article 12 of the Competition Act, it is presumed that an undertaking holds a dominant position if due to its market power such undertaking is able to behave on the relevant market to an appreciable extent independently of its actual or potential competitors, consumers, buyers, or suppliers, in particular if: (a) there are no significant competitors on the relevant market, and/or (b) the undertaking has significant market power in relation to its actual or potential competitors, particularly taking into account its market share and the time during which such market share is held; financial power; advantage in access to the market or sources of supply; association with other undertakings; barriers to entry or expansion; the undertaking’s ability to impose market conditions; and the undertaking’s ability to exclude competitors from the market. Furthermore, the Competition Act contains a rebuttable presumption that an undertaking whose market share in the relevant market exceeds 40% may be in a dominant position. This being said, holding or acquiring a dominant position is not unlawful in itself, but only conduct that constitutes an abuse of a dominant position would infringe Croatian competition laws.
If the CCA’s investigation results in a finding that one or more undertaking(s) have abused their dominant position, the CCA is authorized to adopt an infringement decision that would contain (i) a finding to the effect that the conduct in question is a violation of Article 13 of the Competition Act and/or Article 102 of the TFEU, (ii) an order for the undertaking(s) concerned to bring the infringement to an end, (iii) order to the undertaking(s) concerned to take specific action to eliminate the harmful effects of the infringement (including both behavioral and structural measures that are proportionate to the infringement and necessary to bring the infringement to an end), and (iv) an order to pay the fine.
7. Are there any recent local abuse cases of relevance?
There are no relevant recent local cases related to abuse of a dominant position.
8. What are the consequences of a competition law infringement?
Consequences of competition law infringements include (i) fines; (ii) preliminary measures; (iii) structural or behavioral remedies imposed by CCA; and (iv) nullity of the restrictive agreements.
Specifically, if the CCA finds that the undertaking(s) have either entered into a prohibited agreement, or abused their dominant position, or have implemented a prohibited concentration, or failed to comply with the CCA’s decision on measures to restore effective competition or preliminary measures, the CCA is authorized to impose a fine in the amount of up to 10% of the relevant undertaking’s total annual worldwide turnover for the last financial year for which there are completed financial statements.
The fine is calculated based on a two-step methodology which typically includes (i) determination of the basic amount of fine and (ii) adjustments to the basic amount. The basic amount is determined by CCA against an appropriate percentage (up to 30%) of the undertaking’s turnover on the relevant market (value of sales) on which CCA established infringement, exclusive of VAT and other taxes directly related to sales. The CCA is required to determine in each individual case whether the appropriate percentage of the value of sales should be determined in the lower (up to 15%) or upper part of the range (between 15% and 30%). In deciding what percentage of the value of sales should be used, the CCA will consider the gravity of infringement (and in the assessment of gravity will rely on a number of factors, such as the market share of the infringing party or the geographic scope of the infringement). The determined percentage of the value of sales is then multiplied by the number of years of the undertaking’s infringement (where the periods of less than six months are counted as half a year and periods longer than six months but shorter than one year as a full year). The so-calculated basic amount may then be reduced or increased depending on whether there are mitigating circumstances (e.g., substantially limited role in infringement, or effective cooperation with the CCA outside undertaking’s statutory obligations to do so) or aggravating circumstances (e.g., recidivism, continued infringement, refusal to cooperate, obstruction of the CCA’s investigation, actions taken with a view to ensuring participation of other undertakings in the infringement). Croatian competition laws provide an illustrative but not exhaustive list of these adjustment factors. In case of repeated or continued infringement, the basic amount of the fine is increased by an additional 100% for each instance of repeated infringement, subject always to the statutory cap for the fine of 10% of the worldwide turnover.
On the other hand, certain less serious infringements of Croatian competition laws (for example, failure to notify a concentration to the CCA, providing inaccurate or untruthful information to the CCA, failure to comply with the CCA’s request for information, gun-jumping) are subject to a fine of up to 1% of undertaking’s total annual worldwide turnover achieved in the last financial year for which there are complete financial statements.
As of April 2021 (and the implementation of the ECN+ Directive into Croatian laws), the CCA is also authorized to impose periodic penalty payments (daily fines) for an undertaking or an association of undertakings that does not comply with the CCA’s request (e.g., request for information), or that does not appear for an interview, or that obstructs the conduct of a dawn raid, or that does not comply with the CCA’s decision on interim measures or order to bring the infringement to an end, or commitment decision. The maximum daily fine cannot exceed 5% of the undertaking’s average daily turnover for each day of non-compliance with the CCA’s decision/order.
In addition to the CCA’s authority to impose a fine, if a competition law violation consists of the conclusion of a prohibited (horizontal or vertical) agreement, such agreement is automatically by operation of law null and void.
Furthermore, the CCA is authorized to impose interim (preliminary) measures in cases of emergency related to infringements of the Competition Act and/or Articles 101 and 102 TFEU, where there are sufficient indicia and danger from significant and irreparable damage for competition. In its decision on the imposition of interim measures, the CCA may order the undertaking to bring specific conduct to an end, to satisfy certain conditions, or it may impose other proportionate measures that are necessary to eliminate harmful effects of restrictive practices (which typically cannot last longer than 12 months).
9. Is there any competition law requirement in case of mergers & acquisitions occurring or impacting the Croatian market?
The Croatian merger control regime is primarily governed by the Competition Act and the Regulation on the Manner and Criteria for Assessment of Concentrations of Undertakings (Croatian Merger Regulation). The merger control regime applies to concentrations. The Competition Act defines a concentration of undertakings as a change of control on a lasting basis by: (a) merger by acquisition or merger by forming a new company; or (b) acquisition of direct/indirect control or the controlling influence of one or more undertakings over one or more other undertakings or parts thereof by way of acquisition of a majority shareholding or a majority of the voting rights, or by other means in accordance with the provisions of the Croatian Companies Act and other laws. The creation of a full-function joint venture is also considered to be a concentration within the meaning of the Competition Act.
The parties to the concentration are required to file a merger notification to the CCA in case the following thresholds are cumulatively met: (a) the combined worldwide annual turnover of all the undertakings concerned is at least EUR 132,722,808 in the financial year preceding the concentration, provided that at least one undertaking participating in the concentration has a seat or a branch office in Croatia; and (b) the aggregate national turnover in Croatia of each of at least two undertakings concerned is at least EUR 13,272,280 in the preceding financial year. When calculating the turnover, the following shall be taken into account: (i) turnover of the undertakings concerned; (ii) turnover of undertaking in which the undertaking concerned directly or indirectly holds more than half shares or stock, or owns more than half of the capital business assets, or has the power to exercise more than half of the voting rights, or has the power to appoint more than half of the members of the management board, supervisory board or appropriate managing body, or has the right to manage the undertaking’s affairs in another way; (iii) turnover of the undertaking which has in the undertaking concerned the rights or powers listed in (ii); (iv) turnover of undertakings in which the undertaking referred to in (iii) has the rights or powers listed in (ii); and (v) turnover of undertakings in which two or more undertakings referred to in (i)-(iv) jointly have the rights or powers listed in (ii).
In the case where control is acquired by one undertaking over the whole or part of another undertaking, the merger notification must be submitted by the acquirer. In all other cases, all parties to the concentration are responsible for submitting the notification to the CCA. The merger notification is filed with the CCA before the concentration is implemented, after the conclusion of the agreement on the acquisition of control or decisive influence, or after the announcement of a public bid which is the basis for the acquisition of control. Exceptionally, the notifying parties are allowed to file the notification with the CCA even before the signing of the agreement or announcement of the public bid if they show actual good faith intention to conclude the agreement or announce the public bid.
10. What is the normal merger review period?
Once the CCA receives a merger notification, the CCA publishes a notice on its website, inviting all interested parties to provide written opinions and objections about the notified concentration within a deadline set out by the CCA (which cannot be shorter than eight or longer than 15 days). CCA must conclude its Phase I investigation within 30 days from the date of receipt of the complete notification. The CCA will provide a written confirmation of complete notification and the Phase I review period will start running from the date of such confirmation. If the CCA does not adopt a decision on the commencement of Phase II investigation, the notified concentration will be presumed approved. In such case, the CCA will deliver a confirmation of the cleared concentration to the notifying party and will publish such confirmation on the CCA’s website. On the other hand, if the CCA finds that the concentration may give rise to an appreciable effect on competition in the relevant market, the CCA will take a decision on the commencement of Phase II investigation. Phase II process must generally be completed within three months from the CCA’s decision on the commencement of Phase II proceedings, with a possibility for the CCA to extend this deadline for an additional three months.
11. Are there any fees applicable where transactions are subject to local competition review?
There are no administrative fees charged in merger control proceedings conducted by the CCA.
12. Is there any possibility for companies to obtain State Aid in Croatia?
State Aid may be obtained in Croatia in accordance with the EU state aid rules, i.e., the conditions provided under Articles 107 - 109 of the TFEU.
What were the major changes brought by the COVID-19 pandemic? Have any of them stuck and how likely is it for these changes to continue to do so in the foreseeable future?
There were no major changes in Croatia brought about by the COVID-19 pandemic in the area of competition law. However, it appears that certain procedural novelties introduced by 2021 amendments to the Competition Act (which are still in force today) were motivated by the extraordinary circumstances caused by the COVID-19 pandemic. Specifically, the amended rules governing the oral hearing and the party’s right to defense in proceedings conducted by the CCA now provide that in extraordinary circumstances (for example, in case of an epidemic or natural disaster), the oral hearing may be held by means of electronic communications. In such cases, the minutes of the oral hearing drafted by CCA’s officials must be delivered to the parties within 24 hours from the date of the hearing.
