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On 29 February 2024, the Serbian Commission for Protection of Competition ("CPC") published its infringement decision against Atlantic Grupa d.d. and its Serbian subsidiaries, Atlantic Brands d.o.o. and Atlantic Grand d.o.o., ("Atlantic Group") and Strauss Adriatic d.o.o. ("Strauss") from 29 December 2023 ("Decision"). In the Decision, the CPC found that the parties illegally concerted on the prices of ground coffee in Serbia between 2014 and 2021 and fined Atlantic Group with a fine of EUR 1.6 million and Strauss with a fine of EUR 0.4 million.
The importance of the Decision lies in the fact that:
The Decision was followed by the CPC’ conditional clearance of Atlantic Group’s acquisition of Strauss from 28 February 2024. This overview analyses the Decision and the collusion aspect of the Atlantic Group-Strauss relationship only.
What triggered the CPC’s investigation?
During 2021, the CPC conducted an analysis of the conditions of competition in the retail market for certain food products in Serbia, including ground coffee. This analysis examined the movement of retail prices of ground coffee between 2015 to 2020 ("Relevant Period").
The price movement analysis of the most popular ground coffee brands – Grand Gold 200gr, produced by Atlantic Group, and Doncafe Moment 200gr, produced by Strauss ("Products"), showed that Atlantic Group and Strauss simultaneously increased the Products’ prices at the beginning of 2017 and did not lower those prices until the end of the Relevant Period despite the fact that the price of raw coffee, which according to public statements of a Strauss representative made at the time accounts for 90% of the ground coffee price, declined in that period. The CPC also noticed that there was a high degree of correlation between the Products’ prices.
The parties’ representatives also made frequent media statements between 2017 and 2021 with respect to the ground coffee prices, stating either that the prices would not be increased or that they must be increased. For example, in July 2021, a Strauss’ representative publicly announced that he believes the prices of coffee would increase in the next two months. Nine days later, Atlantic Group’s representative confirmed the prices would increase.
This was sufficient to trigger the CPC’s investigation in September 2021 which was kick-started by dawn raids at the premises of both parties.
From price war to cooperation and concerted practice
The CPC’s analysis categorized the parties’ relationship and their behaviour into eight phases:
(i) a price war between 2012 and 2014
(ii) coordination of price increases during 2013 and 2014
(iii) attempts to keep prices stable during 2015 and 2016
(iv) plans regarding a potential joint venture,
(v) agreed price increase in 2017
(vi) strategy continuity after 2017,
(vii) announced price increase in 2021, and
(viii) renewed conversations regarding the acquisition of Strauss by Atlantic Group.
E-mail correspondence seized by the CPC during the dawn raids shows that the Parties were not satisfied with the market conditions and their so-called “price war” between 2012 and 2014 and wanted to end the price war. For example, Strauss’ representatives wrote in their internal emails that they want to avoid the “price war”. On Atlantic Group’s side there was a desire to resolve the “undesirable market situation”' through direct contact with the representative of Strauss, or by consciously sending signals and messages to Strauss through the media. The CPC found that this “price war” apparently sparked the first signals between the parties and eventually led to their concerted behaviour.
As a result of the parties’ willingness to “end the market war”, they started communicating both directly (eg, at meetings) and indirectly (through public statements). This led to their first agreement on the price increase of February 2015. Even though the parties’ price alignment was put into jeopardy in the following months due to discounted prices offered by retailers (apparently in close cooperation with the parties), it can be noticed that the parties continued to communicate in order to solve that problem.
During their communication regarding a potential joint venture collaboration, but prior to the initiation of direct negotiations and before it had been certain the collaboration could materialize, the parties exchanged certain commercially sensitive information on the utilization of their production facilities, which was also deemed problematic in the view of the CPC.
Even though the joint venture idea did not materialize, the CPC found that the Parties came to a definite agreement regarding their pricing strategies as an alternative to the joint venture. This was supported by the fact that, during their communication regarding the potential joint venture, the parties also discussed their expectations with respect to future pricing.
Following 2017 and the simultaneous increase of the Products’ prices, the conditions on the market were “stable” (in the parties’ view) and the parties started to communicate through media statements more and less via direct means of communication.
Key characteristics of the “signalling” and of the infringement
The CPC found that the parties agreed and coordinated their business strategy through direct information exchange (eg, meetings, direct messages, e-mails) and indirect information exchange (eg, sending of signals and messages through the media) regarding pricing policies and future wholesale prices of ground coffee in Serbia, thereby concluding a restrictive agreement in the form of a concerted practice.
The CPC relied on standards developed in the EU, when establishing the following elements of a concerted practice legal test:
With respect to the first element of the test, the CPC proved that there were both direct contacts (for example, conversation between the parties’ representatives regarding the price increase in 2014, which was followed by a price increase in 2015) and indirect contacts (for example, Atlantic Group’s representative made public statement in 2018 that that the cost of the excise stamp will not be passed on to the consumers) between the parties.
With respect to the second element of the test, the CPC found that the last agreed price increase was performed in July 2021, when Strauss’ representative publicly stated that he believes the prices of coffee would increase in the next two months, whereby Atlantic Group’s representative confirmed several days later that the prices would indeed increase.
As to the third element of the test, the CPC found that the causal relationship arises from the established pattern of the parties’ behaviour that eliminated their mutual competition to such an extent that there was no need for direct communication between the parties because they already knew each other’s strategy.
The CPC’s also established a single and continuous infringement of the parties and, in line with the EU standards, the CPC noted that three elements need to exist for a single and continuous infringement to be found:
The CPC found that all of the above three conditions were present in this case. As for the first condition, the CPC was of opinion that the communication seized during the dawn raids undoubtedly shows that the parties communicated and agreed the price increases in 2014, 2017 and 2021. The second condition was, according to the CPC, fulfilled because the representatives of Atlantic Group and Strauss were engaged in an active communication regarding business and pricing policies. The fulfilment of the third condition arises from the fact that both the explicit agreement on business and pricing policies, as well as the alignment of business policies, were carried out with the aim of avoiding a "price war" and “stabilizing” the market.
Additional takeaways from the Decision are:
Penalties
The total amount of fines imposed on the parties is approx. EUR 2 million (EUR 1.6 million for Atlantic Group – approx. 0.9% of its relevant annual turnover, and EUR 400,000 for Strauss – approx. 1.2% of its relevant annual turnover).
When calculating the annual turnover of Atlantic Group, the CPC took into account also the annual turnovers of the Serbian subsidiaries of Atlantic Grupa d.d. which were not parties to the proceedings (Atlantic Štark d.o.o. and Unikomerc d.o.o.).
The CPC set the fines taking into account that:
The Decision does not elaborate on any potential mitigating circumstances the CPC took into account when setting the fines.
Procedural concerns brought by the Decision
During the dawn-raid of the parties, the CPC made a so-called forensic copy of all the emails and even WhatsApp messages of the parties’ selected employees. The CPC then, according to the Decision, without the parties’ consent and presence (apparently despite explicit requests of the parties), accessed the forensic copy, processed it based on search words to filter out the relevant documents, reviewed the filtered documents, extracted the documents it deemed relevant for the investigation and cited them in the Decision as evidence of infringement. The parties objected to the way the forensic copy was made, accessed and reviewed, viewing it as disproportionate and perilous to different aspects of due process. There are a couple of reasons why this CPC’s approach is indeed concerning.
In justifying the approach, the CPC appears to be arguing (and expecting) that the parties in proceedings, once they are dawn-raided and their emails copied by the CPC, should proactively specify to the CPC all the emails that should, for different reasons, not be reviewed by the CPC – for example emails that contain personal data, legal advice from external lawyers, business secrets or emails that otherwise have no relevance for the investigation. Apart from not being regulated, this approach would unfairly shift various aspects of the due process responsibility to the parties. As forensic copies usually contain exorbitant amounts of data (in this case it appears there were around 400,000 emails on the forensic copy), it seems questionable to request or expect that the parties review the collected data on their own and proactively, without knowing if the CPC would ultimately review and use the collected data as evidence, flag data that should not be reviewed.
When answering the parties’ objection of disproportionality, the CPC argued it reviewed only the emails previously filtered based on search words. However, by using search words, one is typically able to only narrow down the number of potentially relevant emails and then a more “manual” process begins, where the selected emails have to be reviewed (perhaps by prioritising emails with more “hits”) to identify those that are material. This process, especially its last stage, may take a significant amount of time (days and even weeks). During such process, the CPC’s case handlers are likely to review data that ends up being irrelevant for the subject matter of the investigation and that potentially also contains business secrets, personal data and maybe even privileged correspondence. In other words, the risk of the CPC’s case handlers reviewing irrelevant data cannot be excluded simply by the usage of search words. Hence, this approach does not seem to ensure proportionality or safeguard personal data, business secrets and privileged content. For these reasons, parties should be present during the review to be able to flag and/or request protection of confidential and/or privileged documents.
In general, the CPC’s approach in copying and reviewing the collected data seems unpredictable. According to the Decision, the CPC sent copies of the relevant documents extracted from the forensic copy to the parties before providing them with its Statement of Objections. This appears to be a somewhat novel procedural step of the CPC compared to some previous cases where this had not been done and where the parties first learned about the reviewed data in the Statement of Objections.
The Decision highlights once again the need for adjustments to and clarity of the CPC’s authorisations and the parties’ rights with respect to the review and usage of data collected during dawn raids. Parties under investigation must be aware of the scope and timeline of the CPC’s review, their right to participate in the review, the objections and remedies at their disposal etc., so they can effectively exercise their due process rights. The CPC’s guidelines and/or best practices in this respect are hence more than called for.
