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20 January 2011
The Competition Protection Office recently initiated ex officio merger control proceedings against the Federation of Slovenian Retired Persons' Societies. According to the office, the federation had acquired control over Vzajemna Zdravstvena zavarovalnica dvz, a Slovenian mutual health insurance company, but failed to notify the concentration within the statutory 30-day time limit.
The detailed facts are not yet publicly available as the procedure is still pending, but the excerpt from the decision published on the initiation of proceedings reveals that the case is unique.
The federation is a non-profit, non-governmental organisation which pursues the aims of ensuring the quality of life of retired persons and of inter-generation solidarity. Vzajemna is a health insurance company organised as a mutual company (ie, its capital is not divided into standard (transferable) shares; rather, the policyholders become members of the company and hold equal fractions of the aggregate voting rights).
The federation had organised a public voting proxy collection from the members of Vzajemna for the purpose of voting at the general meeting held by Vzajemna on July 26 2010. At the general meeting the representatives of the federation held 17,540 out of the total 18,997 votes (92.4%). The representatives submitted a counter-proposal to the scheduled items of the meeting and appointed their own nominees to the Vzajemna board.
The Competition Protection Office concluded that in so doing, the federation acquired control over Vzajemna and failed to notify the acquisition in a timely manner.
The case gives rise to several questions. First, the Slovenian Competition Act applies only to concentrations between 'undertakings' (defined as entities engaged in economic activity, regardless of their legal and organisational form and ownership status). As the federation is a non-profit organisation (and, as such, should not engage in economic activity, at least in principle), the Competition Protection Office will have to prove that it qualifies as an undertaking within the meaning of the act.
Second, the act defines a 'concentration' as a lasting change in control. While it can safely be said that the federation acquired control over Vzajemna at the general meeting, it is questionable whether the acquisition can be qualified as a lasting one. The following facts could be viewed as speaking against such nature of the acquisition:
In other words, it could be argued that the acquisition of control over Vzajemna by the federation was merely a temporary one - as in principle, any other person or organisation could undertake the same task and appoint different persons to the board (and the federation could not legally prevent it). On the other hand, arguments could be made in support of the notion that control over Vzajemna was acquired on a de facto basis (eg, due to links between the federation and the majority of members in Vzajemna).
It is hard to conclude on the merits of the case based on the limited facts that are publicly available. However, the case appears to be a testimony to the active enforcement policy approach adopted by the Competition Protection Office. Given the size of the fines that may be imposed by the Competition Protection Office for breaches of competition law (ie, as much as 10% of the incumbent undertaking's annual turnover), the case may be regarded as a warning that the Competition Protection Office does not hesitate to act in apparently borderline cases.
For further information on this topic please contact Vid Kobe at Schönherr Slovenia in cooperation with Filipov Petrovic Jeraj in partnerji op doo by telephone (+386 1 2000 980), fax (+386 1 4260 711) or email (email@example.com).
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