Competition Act of Bosnia and Herzegovina (Bosnian: Zakon o konkurenciji) (“Official Gazette of BiH“, No. 48/2005, 76/2007, and 80/2009.) (“Competition Act”) is the main legislation regulating merger controls.  Given that merger control is an administrative procedure in its nature, procedure rules of the Administrative Proceedings Act may be applied subsidiarily.  The Competition Act came into force on 27 July 2005, and so far, has been amended in 2007 and in 2009.

By-laws go into further detail and specify the provisions of the Competition Act.  For example:

The Notice of the Form of a Merger Notification and the Criteria for evaluating a Concentration (Bosnian : Odluka o načinu podnošenja prijave i kriteriji za ocjenu koncetracija gospodarskih subjekata) (“Official Gazette of BiH, no. 34/2010), regulates the form and information needed in merger notifications, while specifying the Competition Act in procedural matters.

Other notable by-laws include Notices which regulate the procedure for determining the relevant market such as the Notice on the Definition of a Relevant Market  (Bosnian : Odluka o utvrđivanju relevantnog tržišta) (“Official Gazette of BiH” nos 18/2006 and 34/2010), notices which define penalties and administrative fees which can be imposed by the competition authority such as the Notice on the Setting of Periodic Fines (Bosnian: Odluka o bližem definiranju načina periodičnog plaćanja kazne) (“Official Gazette of BiH” no. 31/2006) (“Official Gazette of BiH” no. 31/2006) and the Notice on the Amount of Administrative Fees for Proceedings before the Council (Bosnian: Odluka o visini administrativnih taksi u vezi sa procesnim radnjama pred Konkurencijskim vijećem) (“Official Gazette of BiH”, nos 30/2006, 18/2011 and 75/2018).

Foreign mergers are not regulated separately, and so general merger control regulations are applicable to them.  That being said, there are certain regulations that apply only to mergers in specific sectors such as banking, insurance, telecommunications, energy, leasing etc.

Merger control is conducted by the Competition Council (“Council”) (Bosnian: Konkurencijsko vijeće), which is established by the Competition Act.  Council is an independent administrative body, which became operational in 2005, and it is financed from the budget of Bosnia and Herzegovina.

Merger notifications are always compulsory when the thresholds set by the Competition Act are fulfilled.

When the merger filing thresholds are exceeded, the parties must comply with a standstill obligation, refraining from implementing the transaction until the clearance decision is obtained. Under the Competition Act, companies involved in a notifiable concentration are prohibited from exercising any rights or obligations arising from the transaction until the Council has determined its compatibility with the competition rules.  Concentration can be considered cleared if the Council fails to deliver a decision within 30 days following receipt of a complete merger notification. In cases of the investigative proceedings the Council renders its decision within three months, or the merger is cleared.

Sanctions for violating the standstill obligation include fines of up to 10% of the total annual turnover. While the Competition Act does not automatically invalidate the transaction or the underlying agreements if a transaction is closed before receiving clearance, the Council has the authority to impose de-concentration measures. These measures can include ordering the parties to split a company, divest shares, terminate contracts, or take any other steps necessary to restore or safeguard competition in the market.

There is one exception from this rule, which stipulates that obligation to suspend the implementation is not imposed in the case of the implementation of a public offer that is duly notified to the competent authorities in accordance with the law.  That being said, practical use of this exemption is not often.

Same could be said for the carve-out mechanisms, as such cases have not yet been tested by the Council.  Furthermore, the Competition Act does not recognize the carve-out arrangements.  Given that such arrangements are not recognized by the law, and that Council ‘s practice thus far has not given its stance on this question, a conservative approach to carve out mechanisms is to be expected.

Competition Act categorically stipulates what transactions are notifiable, such as:

1. mergers and acquisitions of two or more independent undertakings or parts thereof;
2. any acquisition of direct or indirect control over another undertaking, or parts thereof, by one (sole control) or more (joint control) undertakings; and
3. establishments of joint ventures performing on a lasting basis all functions of an autonomous undertaking.

Acquisition of direct or indirect control over another undertaking can be realized:

1. Acquisition of the majority of shares or equity stakes in the basic capital, or
2. Acquisition of the majority of voting rights, or
3. In another manner, in accordance with the provisions of the law regulating the establishment and management of business entities.

In other words, undertaking is considered to have control over another undertaking if it has a decisive influence on latter’s activities, whether through voting rights, agreements or any other legal or factual basis.

Competition Act also stipulates which transactions are not notifiable or reviewable by Merger control, regardless of the revenue of the undertakings concerned:

1. a temporary acquisition of shares by a bank, other financial institution or an insurance company for resale within 12 months (extendable for an additional period under certain circumstances), provided that during this period, the shareholders’ rights are not exercised to influence business decisions of the respective undertaking in a manner that would affect market competitiveness of the undertaking concerned or prevent competition on the relevant market;
2. the acquisition of control by persons acting as a bankruptcy or liquidation receiver (Bosnian: stečajni ili likvidacioni upravnik); and
3. a joint venture that purports to coordinate the market activities of two or more independent undertakings and cannot be considered a full-function joint venture, as it shall be assessed under rules regulating restrictive agreements.

Council has also rendered opinions and conclusions which specify that intra-group acquisitions and restructuring proceedings are not notifiable by the Merger control.

Acquisition of a minority interest can be notifiable if such acquisition leads to a (sole or joint) control over the undertaking as explained in Question 4.  There are couple of cases where Council determined that even acquisition of 5% of the shareholding of the undertaking can lead to change of the control in the undertaking.

Jurisdictional threshold for notification are following:

1. the aggregate worldwide turnover of all the undertakings concerned, achieved by selling goods and/or services in the business year preceding the concentration, is at least BAM 100 million (approximately EUR 51 million); and
2. the aggregate turnover of each of at least two undertakings concerned, achieved by selling goods and/or services in the market of Bosnia & Herzegovina in the business year preceding the concentration, is at least BAM 8 million (approximately EUR 4 million) or their joint market share on the relevant market(s) exceeds 40%.

Competition Act applies to all mergers regardless of business sectors that undertakings participate in.  On the other hand, there are specific regulations that apply only to certain sectors, and they apply regardless of whether the turnover thresholds specified in the Competition Act are met.  Acquiring direct or indirect qualified shareholdings in specific sectors typically requires approval from the relevant regulator, independent of the parties’ combined turnovers.  However, if the jurisdictional thresholds are surpassed, obtaining merger clearance is also mandatory alongside the sector specific regulator’s approval.

Additionally, there are different thresholds that apply in the following sectors:

1. Banking – In the banking sector, regulatory approval is required for both direct and indirect acquisitions of at least a 10% stake in banks by agencies in Republika Srpska and the Federation of Bosnia & Herzegovina. Further acquisitions of 20%, 30%, or 50% by the same entity also need regulatory consent.  Additionally, banks must obtain prior approval from these agencies before acquiring control over another company.
2. Insurance – Direct or indirect acquisitions of at least a 10% share in insurance or reinsurance companies must be reported to the relevant regulatory bodies in both Republika Srpska and the Federation of Bosnia & Herzegovina. Subsequent acquisitions leading to shareholdings of 20%, 33%, or 50% (in Republika Srpska) or 20%, 30%, or 50% (in the Federation of Bosnia & Herzegovina), or turning the company into a subsidiary, also require notification to these agencies.
3. Leasing – In the leasing sector, any acquisition or increase of a substantial shareholding (10%, 20%, 33%, or 50%) in a leasing company must be approved by the Banking Agency of the Federation of Bosnia & Herzegovina.
4. Media – Media sector acquisitions of 5% or more of shares in a licensed media operator may need prior approval from the Communications Regulatory Agency of Bosnia & Herzegovina.
5. Telecommunications – The Communications Regulatory Agency of Bosnia & Herzegovina, under the Communications Act, sets conditions to prevent abuses of significant market power. Some sector licenses may also include provisions requiring regulatory approval for acquiring substantial shareholdings.
6. Energy sector – Regulatory agencies at each administrative level (Bosnia & Herzegovina, Republika Srpska, and the Federation of Bosnia & Herzegovina) may require approval for acquiring a qualified shareholding in licensed energy operators, depending on the administrative level.
7. For concessions, different concession authorities and regimes exist at each administrative level. Acquisitions of significant shares in certain concessionaires might need prior approval from the relevant concession authority.
8. Investment fund managers in Republika Srpska and the Federation of Bosnia & Herzegovina require regulatory commission approval for direct or indirect acquisitions that result in shareholdings of at least 10%, 20%, 33%, or 50%.
9. Voluntary pensions funds – Any acquisition or increase leading to a shareholding of at least 10%, 20%, 30%, or 50% in a managing company in the Federation of Bosnia & Herzegovina, or making it a subsidiary, requires approval from the Securities Commission of the Federation of Bosnia & Herzegovina. In Republika Srpska, such transactions require prior approval from the Insurance Agency of Republika Srpska.

Turnovers are determined based on all revenues generated from the sale of products or the provision of services during the year prior to the year in which the concentrations were notified, with taxes and rebates deducted.  When calculating the turnover of an undertaking, the total turnover of its group is considered, excluding intra-group sales, which are not included in the calculation.

To calculate the local (national) turnover, it is necessary to subtract the value of exports in addition to the previously mentioned factors.  When control is obtained over a portion of a business, only the turnover related to that segment should be considered.  For joint ventures, the total group turnovers of both participating entities must be included.  Nevertheless, there is a lack of guidelines or well-defined practices to clearly identify which businesses are involved and how revenues should be allocated.  This situation often leads to practical uncertainties.

Banks, insurance companies, and other financial institutions are subject to specific rules for calculating revenue.  The relevant revenues for these institutions include the net aggregate income from (i) interest, (ii) commissions, (iii) net profits from financial transactions, (iv) income from equity securities and share capital, and (v) income from other business activities.  For insurance companies specifically, the thresholds are determined based on the value of written gross premiums.

Regarding the 40% relevant market share, the Competition Act refers to a joint market share.  However, there were cases where one undertaking had no presence on the relevant market, while the other undertaking had more than 40% of the market share, and Council determined that Merger control notification obligation should be imposed in those kinds of cases.

There is no prescribed specific exchange rate.  That being said, all amounts stated in the Competition Act are in Bosnia-Herzegovina Convertible Marka (“BAM”).

Joint ventures are subject to merger control, but only under specific conditions:

1. When two or more independent undertakings create a new entity; or
2. When they acquire joint control over an existing undertaking that operates on a long-term basis and performs all functions of an independent business — full-function joint venture.

A joint venture is deemed “full-function” if it operates on a long-term basis and performs all the functions of an independent economic entity. If a joint venture does not meet these criteria and does not act as a fully autonomous entity, it is not subject to merger control. However, such ventures may still be examined under general competition laws if they facilitate market coordination and restrictive agreements between the parent companies.

Whether a joint venture is “full-function” or merely “cooperative” hinges on the venture’s level of dependence on its parent companies and its degree of market independence. In the absence of specific local guidelines for what constitutes a “full-function” joint venture, EU regulations and definitions are applied by analogy.

In multi-staged transactions, the moment of acquisition of the share that enables the undertaking to exercise decisive influence over another undertaking is what triggers merger notification obligation. Similarly to other jurisdictions, when two or more transactions involving the same undertakings occur within a period of less than two years, they will be treated as a single merger, with the date of the last concentration being considered the effective date.

There is no different regime that applies to foreign-to-foreign mergers nor for the cases where target /joint venture does not have a nexus to the jurisdiction.  Therefore, if jurisdictional thresholds are fulfilled, they are obligated to file a merger control notification.

N/A

According to the Competition Act conducts a strategic analysis to determine if a notified merger would significantly restrict competition, particularly by creating or strengthening a dominant market position. In its evaluation, the Council considers various factors which Competition Act explicitly states such as structure of the relevant market, the impact of the merger on current and potential competitors. Also, Council evaluates market positions, shares and economic and financial power of the involved undertakings.  Additionally, the Council assesses the freedom of choice for suppliers and consumers, as well as any economic, legal, or other barriers to market entry. As well as competitiveness of the involved undertakings at both domestic and international level. Trends in supply and demand for the relevant goods and/or services, as well as trends of technical and economic development are also reviewed.  Finally, the interests of consumers are taken into account.  Mentioned factors are general and apply to all sectors.

In principle no.  According to the Competition Act they are not considered in the merger analysis.

Ancillary restraints are not explicitly regulated in Bosnia and Herzegovina. In the absence of explicit regulation, the Council can clear ancillary restraints in its decisions, if it decides to. Namely, Bosnia and Herzegovina has entered into a Stabilization and Association Agreement with the EU, which, inter alia, imposes upon Bosnia and Herzegovina the obligation to adopt and implement best practices in the area of competition law, in alignment with the standards set by the EU.

Therefore, it means that the European Commission’s Ancillary Restraints Notice potentially could be used as guidance. However, according to the Council’s decisional practice, a parallel examination of antitrust (restrictive agreements) and mergers aspects is not present in merger control proceedings.

A transaction must be notified within 15 days after the occurrence of the earliest of the following events: (i) the conclusion of an agreement that establishes the legal ground for the concentration (such as a share purchase agreement or joint venture agreement); (ii) the announcement of a public bid; or (iii) the acquisition of control.

Earliest stage would be to notify the transaction based on the serious intent to proceed with the transaction.  This includes scenarios where there is a framework agreement, a letter of intent, or a memorandum of understanding signed by all parties involved, or if there is a publicly announced intention to make a public bid.

There is no established practice regarding pre notification discussions. However, the Council is available for pre-notification discussions with respect to filing notification, which are not legally binding. The notification must be submitted by the party acquiring control over the other undertaking.

Once the notification is submitted, the Council evaluates whether the information and documents provided are complete. If the notification is found to be incomplete, the Council will request the notifying party or parties to address the deficiencies within eight days.  In exceptional circumstances, this deadline may be extended by an additional 15 days.

Upon determining that the notification is complete, the Council issues a certificate of completeness and provides it to the notifying party or parties.  For a merger notification to be considered complete, it must meet the requirements set out in the Competition Act and the Notice on the form of a merger notification and the criteria for evaluating a concentration regarding both content and submission procedures.

Consequently, the formal review period begins only after all required documents and data are received.  The Council will then either: (i) approve the concentration through a summary decision (Phase I) within 30 days if it determines there are no significant competition concerns; or (ii) initiate a detailed investigation (Phase II) if there are potential competition issues. Should the Council not make a final decision or open Phase II proceedings within the 30-day period, the concentration will be automatically deemed approved. If an investigation is launched, the Council must reach a decision within three months from the start of Phase II.

The investigation begins with an official written decision from the Council. During this phase, the Council can gather relevant evidence by requesting data, statements (both oral and written), and documents from the parties involved; inspecting documents and databases at the parties’ premises if necessary; and obtaining information from third parties.  If required, the investigation period may be extended by up to three additional months.  At the end of the investigation, the Council may either approve the transaction with or without conditions or prohibit it.

If, within the specified period, the Council does not make a final decision, it may extend the deadline for issuing the final decision by up to three months in cases where it deems that additional expert assessments or analyses are necessary to establish the facts and evaluate the evidence, or when dealing with sensitive economic sectors or markets.  The Council is required to notify the parties involved in writing about this extension.

Timetables in merger controls cannot be shortened. Nevertheless, resolving a case more swiftly may be facilitated by ensuring that the initial notification is as complete and comprehensive as possible or by promptly addressing any additional information requests from the Council.

According to the Competition Act, the responsibility for submitting a notification falls on the undertaking acquiring control over all or part of one or more undertakings. Conversely, in joint venture cases, the notification must be filed jointly by the acquiring undertakings.

In addition to the Competition Act, the rules governing the form and required data for a merger notification are detailed in the Notice on the form of Merger notification and the criteria for evaluating a concentration.  This notice mandates a single form for all merger notifications, without providing options for a “short-form” or “long-form” submission.

The Council’s practice is notably formalistic, typically requiring original documents such as certified excerpts from commercial registers, certified financial statements or annual reports, and a power of attorney as part of the notification process. Additionally, all documents must be accompanied by a certified translation into one of Bosnia and Herzegovina’s official languages (Bosnian, Croatian, or Serbian).

The Council has the authority to request any further information deemed necessary for assessing the proposed merger. Likewise, the notifying party or parties may also provide any additional information or documents they believe are pertinent to the evaluation of the transaction.

The information in the notification must be accurate and complete. The notification should include:

• basic details about the notifying party and the participants in the merger, including names, headquarters, business activities, and information about the authorized representative and contact person;
• a detailed description of the legal form and basis of the merger, such as merger agreements, acquisition contracts, or other relevant documents;
• financial statements for the previous year and the total annual revenue of the participants in the concentration must be submitted, along with an assessment of market shares before and after the concentration;
• an estimate of the market shares of the main competitors, the ownership structure of the participants in the concentration, and a list of other businesses where the participants hold significant ownership stakes;
• determination of the relevant markets where the participants operate and description of the distribution and retail network, as well as research and development activities. (NB: If the notification has been submitted to other competent authorities outside Bosnia and Herzegovina, this should be mentioned in the notification);
• mentioning of other authorities outside the territory of Bosnia and Herzegovina that are authorized to assess the concentration, to which a request for evaluation of the same concentration has been submitted or there is an intention to submit such a request.
• detailed description of the distribution and retail network for products and/or services in the relevant market, with a special focus on the distribution and retail network used by the participants in the concentration (own, contractual, etc.).
• Description of completed or planned research and development investments by the participants in the concentration (type and form of investment or research, its importance for the production and distribution of products and/or services in the relevant market, and the amount of funds already invested or intended for investment).
• justification of the legal and economic reasons for the concentration, as well as the expected benefits for consumers, such as price reductions, quality improvements, innovations, and an expanded choice of products and services.
• signature of the person responsible for the accuracy and truthfulness of the information in the application.
• Place and date of application submission.

Supporting documents that need to be filled also are considered to be power of attorney for representation, transaction documentation or documentation which serves as the basis for defining the markets and market shares.

The Council, in addition, may request further information necessary for assessing the notified merger.  This includes annual financial statements from the three years prior to the merger, detailing total revenue from product and service sales, both globally and within Bosnia and Herzegovina.  The Council may also seek data on the value and volume of production or sales achieved by the merger participants in the relevant market during those same three years.

The filing fee for a notification is BAM 2,000 (around EUR 1,000).  Additionally, if the concentration is approved during Phase I, the parties are required to pay a clearance fee of BAM 5,000 (approximately EUR 2,500).  In the event that a Phase II is initiated, the fee is calculated as 0.03% of the total annual turnover achieved in local markets by each of at least two parties in the year prior to the concentration, with a maximum limit of BAM 50,000 (about EUR 25,000)

The Competition Act requires that certain details about the notification be published in a daily newspaper.  The publication must include (i) the names of the involved undertakings, (ii) a concise summary of the transaction, and (iii) the industry sectors impacted by the concentration in question.

Third parties are required, at the request of the Council or an authorized official, to provide all necessary information either in the form of written submissions or oral statements, as well as to present any required data and documentation, regardless of the medium they are stored on. They must also grant direct access to all business premises, immovable and movable property, business records, databases, and other documentation, without obstruction due to business, state, or technical secrets.  Additionally, they are obliged to provide necessary information and data to other individuals who may help resolve and clarify specific issues related to the prevention, restriction, or distortion of market competition, and to facilitate any other necessary actions to establish all relevant facts in the procedure

As previously mentioned, the Competition Act mandates that certain details about the notification be made public in a daily newspaper. This announcement must include (i) the names of the involved undertakings, (ii) a short summary of the transaction, and (iii) the industry affected by it.

Additionally, the Council is required to publish its decisions, with the names of the parties involved and the main content of the decision, including any penalties imposed in the Official Gazette of Bosnia & Herzegovina and on the Council’s website (link: https://bihkonk.gov.ba/ ). The Council will consider the legitimate interests of the parties involved in the transaction while publishing this information.

The Council has been a member of the International Competition Network (ICN) since 2005. In 2012, it joined the competition authorities of Albania, Bulgaria, Croatia, Kosovo, North Macedonia, Montenegro, and Serbia in signing the Sofia Statement, aiming to enhance regional cooperation. The Council has also signed memorandums of understanding with competition authorities in Bulgaria, Croatia, North Macedonia, Serbia, Turkey, Montenegro, and Slovenia, which allow for the exchange of non-confidential information in ongoing cases.  Additionally, the Council collaborates with the Energy Community Secretariat under a 2012 Declaration on Cooperation.

The Competition Act does not explicitly stipulate what type of remedies could be acceptable for the Council. Furthermore, the Act does not distinguish between behavioral and structural remedies. Nevertheless, if the Council is of the opinion that the proposed concentration could restore, prevent, or restrict competition in the relevant market, it is authorized to impose the following measures: (i) the re-transfer of acquired shares, (ii) the suspension or limitation of voting rights in the undertakings participating in the concentration, and/or (iii) the termination of control over a joint venture or other forms of concentration. Additionally, the parties involved in the concentration may voluntarily propose such remedies.

If the Council determines that a concentration can only be approved with commitments, it will outline the required measures and establish a timeline for compliance.  Although the Act and related regulations do not differentiate between behavioral and structural remedies, the Council can implement any measure necessary to restore effective competition in the market.  Such measures might include: (i) requiring the re-transfer of acquired shares, (ii) imposing restrictions or suspensions on voting rights in the involved undertakings, and/or (iii) mandating the termination of control over a joint venture or other forms of concentration.  It is generally understood that proposals for remedies can be presented at any point during the review process.

Under the Competition Act, fines of up to 1% of the total annual turnover may be imposed on undertakings that do not meet the notification deadline.  In addition to the undertakings, responsible individuals within these entities may face fines ranging from BAM 5,000 to BAM 15,000 (approximately EUR 2,500 to EUR 7,500).  The Council assesses these fines based on the total annual worldwide turnover of the notifying undertaking(s) or applicant(s).

In practice, the Council enforces a very stringent policy regarding fines for delays in notifying transactions, specifically for those notifications made after the deadline has passed.

Undertakings that violate the suspension of the merger obligation face fines of up to 10% of their total annual turnover from the year prior to the breach. Additionally, individuals responsible within the offending undertaking may incur fines ranging from BAM 15,000 to BAM 50,000 (cca EUR 7,500 to EUR 25,000).

The Competition Council may impose fines of up to 1% of total revenue from the previous business year if parties provide inaccurate or misleading information during the merger review process. If the applicant fails to provide the necessary information required by law when submitting a request to the Competition Council, the Council will request additional information from the applicant.

If the applicant does not comply with the Council’s request within eight days, the request will be considered withdrawn.  In special cases, the Council may, upon the applicant’s request, extend the deadline by an additional 15 days if there are valid reasons.

Decisions made by the Council regarding merger control can be contested before the Court of Bosnia and Herzegovina.  The Competition Act does not specify who has the right to appeal the Council’s decisions.  According to the BiH Administrative Disputes Act, those eligible to file an appeal include: (i) the parties involved in the transaction; (ii) any interested third party or public body that may have a right affected by the decision; and (iii) a relevant authority if the decision violates the law.  It is important to note that filing an appeal does not suspend the enforcement of the decision. The deadline for filing an appeal is 30 days from the date the decision is received or published.

According to the 2022 Annual Report, the Council received 19 merger notifications throughout 2022.  By the end of 2022, it issued 12 final and legally binding decisions, including both clearances and rejections of merger notifications.  Additionally, one concentration was automatically cleared due to the lack of a decision within the statutory review period.

To the best of our knowledge, there have been no recent official proposals to reform the merger control regime in Bosnia and Herzegovina. In August 2020, the Council established a working group tasked with preparing a draft proposal for amendments to the Competition Act. However, this draft has not yet been released to the public.