Croatian Competition Agency Confirms Coca Cola’s Compliance with Commitment Decision and Closes Investigation

Coca Cola’s Compliance

  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

Earlier this month, the Croatian Competition Agency confirmed that Coca Cola HBC Hrvatska d.o.o. had complied with the commitments the company had offered, and which had been accepted by the CCA, in the course of an investigation of vertical restraints imposed by Coca Cola on its distributors (most notably exclusive purchasing and tying arrangements). Early on, the CCA expressed concern that Coca Cola’s practices would constitute infringements under Articles 8 and 13 of the Croatian Competition Act (essentially corresponding to Articles 101 and 102 of the Treaty on the Functioning of the European Union).

The concerns were that exclusive purchasing obligations and tying arrangements imposed on Coca Cola’s distributors could lead to the foreclosure of Coca Cola’s competitors, placing distributors at a competitive disadvantage towards other buyers, who are not subject to exclusivity agreements. To a number of local stakeholders, it seemed that the types of violations discussed warranted imposition of fines, which is why the decision to accept and go through with commitments was met with a certain degree of criticism.

Croatia has had relatively few in-depth investigations, especially in abuse-of-dominance cases involving tying practices. In this context, and considering the insignificant precedential value of commitment decisions in general, acceptance of commitments in these types of cases (involving undertakings that are likely dominant) does not benefit the development of Croatian competition law practice. This is largely because commitment decisions do not contain detailed legal findings and typically do not end up in litigation before the courts. In the absence of significant case law with detailed legal reasonings, undertakings can struggle to assess the compliance of their practices with Croatian competition law and the CCA’s decisions. Furthermore, commitment decisions are naturally less helpful to victims of competition law infringements that are requests for compensation of damages, considering that a commitment decision does not contain a finding of infringement, but concludes there are no longer grounds for action.

This being said, the CCA’s opting for a commitment decision in this case appears to be in line with its practice of accepting commitments offered by dominant undertakings which entered into single branding agreements (most notably the CCA’s July 12, 2012 decision in proceedings against Primalab d.o.o., Zabok). CCA’s commitment decision also follows the approach taken by European Commission in proceedings against The Coca Cola Company and its bottlers, which had joint dominance in the market for sale of carbonated soft drinks where the restraints imposed on their distributors included, among others, exclusivity and tying arrangements leading to foreclosure of rival suppliers. It would appear that choosing to accept the commitments offered by Coca Cola allowed the CCA to accomplish a relatively quick change of behavior in the market – a result that would probably only be achieved through a prohibition decision after a much longer adversarial procedure, which could go on for several years.

In its March, 2014 policy brief titled “To commit or not to commit?”, the European Commission expressed its position that opting for a prohibition decision instead of a commitment decision is suitable if the aim is to punish for past behavior, or if it is important to set a legal precedent, or if the only commitment that can be offered is to cease anti-competitive behavior. Commitment decisions are generally not appropriate in cases where nature of infringement requires imposition of fines, which is why their application is excluded in cartel cases. The situation with abuse-of-dominance cases is not as clear as with cartels, since the gravity of the infringement found in the preliminary assessment significantly influences the decision as to whether commitments are appropriate or if deterrence is required. Still, the European Commission’s practice shows a frequent use of commitment decisions in abuse-of-dominance investigations dealing with similar restrictions. For this reason, the CCA’s imposition of commitments in the present case – although subject to local criticism – is not entirely unusual. The CCA would, of course, also have the power to impose fines where an undertaking fails to comply with commitments accepted by the CCA.

By Iva Basaric, Partner, and Lovro Klepac, Senior Associate, Babic & Partners Law Firm

This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.