The Serbian Competition Authority confirms the application of merger control rules to foreign-to-foreign transactions in a merger case concerning two banks (Sberbank / DenizBank)
August 2012 –The Serbian Competition Authority issued a decision approving a merger between Sberbank and DenizBank. Sberbank owns a subsidiary in Serbia but the target is not present on the Serbian market at all. Nevertheless, the transaction was notifiable in Serbia, because foreign-to-foreign transactions are subject to the merger notification obligation.
On 4 July 2012, the Serbian Competition Authority (the “Competition Authority”) issued a decision approving a merger between Sberbank of Russia, a company with its registered seat at Moscow, the Russian Federation (“Sberbank”), and DenizBank A.S., a company with its registered seat at Istanbul, Republic of Turkey (“DenizBank”). In this transaction, Sberbank acquired 99.85 per cent of shares in DenizBank from two Belgian companies, Dexia Participation Belgique SA and Dexia NV/SA. This acquisition is considered to be the biggest investment undertaken by Sberbank in the whole of its 170-year long history.
Parties and the transaction
Sberbank is one of the leading banking institutions in the Russian Federation, commanding a share of 30 per cent of the Russian banking market. It is also a banking and financial services provider in many other countries. Sberbank has been present on the Serbian banking market (the “Relevant Market”) since it acquired indirect control over Volksbank a.d. Beograd (the “Volksbank”). Volksbank has an approximately 3 per cent market share on the Serbian banking market, where it operates in 17 towns, with 26 branches and more than 500 employees.
DenizBank, the target, is amongst top ten banking groups in the Republic of Turkey, based on consolidated assets, deposits and loans, with 592 branch offices in home country and 15 branch offices abroad. DenizBank is currently not active in Serbia. Nevertheless, the transaction was notifiable in Serbia, for the reasons mentioned below.
Merger control rules in Serbia and their application to the present case
The merger control rules in Serbia stipulate that a concentration must be notified to the Competition Authority if one of the following two alternative thresholds is met:
(i) the combined aggregate worldwide turnover of the concentrating undertakings achieved in the year preceding the concentration exceeds EUR 100 million, provided that at least one of the undertakings generated turnover on the Serbian market exceeding EUR 10 million; or
(ii) the aggregate annual turnover of at least two of the concentrating undertakings on the Serbian market exceeds EUR 20 million in the year preceding the concentration, provided that at least two of the concentrating undertakings have an annual turnover of more than EUR 1 million each in the same period on the Serbian market.
This means that foreign-to-foreign transactions are subject to the merger notification obligation in Serbia, provided that at least one of the undertakings concerned generates turnover in Serbia. In the present case, it was the acquirer, Sberbank, whose subsidiary (even though it was not directly involved in the transaction) is active in Serbia. Therefore, the transaction was notifiable in Serbia.
Since the Competition Authority was satisfied with the level of detail and information presented in the merger notification and did not find any material issues regarding the impact of the transaction on the Relevant Market, it approved the concentration in summary proceedings. The Competition Authority in particular took into consideration the fact that upon the completion of the aforementioned merger, the market share of Sberbank on the Relevant Market would not change due to the fact that DenizBank is not directly or indirectly present on the Relevant Market.
Conclusion
The applicable Serbian merger control rules mean that a large number of foreign–to-foreign mergers are notifiable to the Competition Authority. According to some unofficial estimates, the Competition Authority expects that around 120 mergers in total are expected to be notified during the course of 2012. On the other hand, foreign-to-foreign transactions can obtain clearance decision in Serbia very easily, because they usually do not have any effect on the local relevant markets.
Unfortunately, the merger notification obligation in Serbia increases the costs associated with acquisitions concerning Serbia. It is worth noting that even in summary proceedings, the filing fee is significantly high (EUR 25,000). This constitutes an incentive for the Competition Authority to investigate as many concentrations as possible. Indeed, it should come as no surprise that the Competition Authority has indicated that it is planning to focus more on the enforcement of Serbian merger control rules.
The Competition Authority has a wide range of remedies available in the event of any non-compliance. These comprise both behavioural and structural measures (including divestment), as well as severe monetary penalties that may amount up to 10 per cent of the annual turnover achieved in the preceding financial year by the undertakings concerned . Procedural fines in an amount ranging from EUR 500 to EUR 5.000 may be imposed on an undertaking for each day of non-compliance with: (i) the relevant order of the Competition Authority to submit requested information; (ii) the preliminary measure; or (iii) the obligation to submit the relevant notification on concentration by the prescribed deadline. However, such procedural fines in any event may not exceed the amount of 10 per cent of the total turnover of the undertaking concerned.
In practice, foreign-to-foreign mergers may still be difficult to track and many parties refrain from notifying their transactions in Serbia. Nevertheless, it seems that the effective enforcement of the Serbian merger control rules is high on the agenda of the Competition Authority, and penalties and other sanctions imposed for any failure to notify a transaction may create serious obstacles to the merging parties future business dealings.
For further information contact Tijana Arsenijević, Associate, at .
Source: Mirko Lalatovic, Tijana Arsenijevic, The Serbian Competition Authority confirms the application of merger control rules to foreign-to-foreign transactions in a merger case concerning two banks (Sberbank and DenizBank), 4 July 2012, e-Competitions, N°48238, www.concurrences.com