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SUPPORT TO PROMOTING RECIPROCAL UNDERSTANDING AND DIALOGUE BETWEEN EU AND WESTERN BALKAN COUNTRIES The Progress of Republic of Macedonia in the Area of Competition and State Aid Pavlina Petrova CONTENT : I. Summary I. Summary In the year 2004 Macedonian
society entered its 14th year of transition. A lot of changes
have happened during that long transition period, but more other
still await to happen. The obligations of EU membership must be taken seriously. This is the reason that the Republic of Macedonia is now being encouraged to develop a new ‘competition culture’. The three elements of the ‘competition culture’ development, which the Macedonian society should reach, are as follows: - an appropriate legal framework for both antitrust and state aid control; - an efficient administrative capacity applying the competition rules; - an effective state aid and antitrust enforcement record. These three conditions and the enforcement record in particular will be assessed before any European Commission recommendation about the conclusion of the EU accession negotiations with the Republic of Macedonia. II. Stabilization and Association Process The stabilization and association process was launched by the European Union in aftermath of the Kosovo war in 1999. It has created a new policy environment for five South East European countries among which is Republic of Macedonia. Aiming at a further EU accession the Republic of Macedonia has to upgrade its institutions and governance by the European standards and its engagement in mutual regional cooperation. II.1. Stabilization and Association Agreement Republic of Macedonia was the first country from the Western Balkans region, which signed the Stabilization and Association Agreement (SAA) with the European Communities and their Member States on 9 April 2001 in Luxemburg. On 12 April 2001 the Macedonian Parliament ratified the Agreement reaffirming the strategic interest and the political commitment for integration in the European Union. The Stabilization and Association Agreement was finally ratified from all EU Member States in 2004. The main goal of the SAA is to “bring peace, stability and economic development to the region and to open the perspective of integration in the EU.”[1] The Stabilization and Association Agreement offers a lot of incentives to Republic of Macedonia but it sets some important political and economic conditions as well. Article 1 (2) of the SAA fixes the aims of the Macedonian association process, which are as follows [2]: - To provide an appropriate framework for political dialogue, allowing the development of close political relations between the Parties; - To support the efforts of the Republic of Macedonia to develop its economic and international cooperation, also through the approximation of its legislation to that of the Community; - To promote harmonious economic relations and develop gradually a free trade area between the Community and the Republic of Macedonia; - To foster regional cooperation in all the fields covered by this Agreement. In order to develop a closer relationship with the EU for a further EU accession, Republic of Macedonia has to harmonize its political, economic and institutional development to the EU standards and values: democracy, respect for human rights and a market economy. Before the EU accession negotiations can be concluded in the field of competition policy, the Republic of Macedonia will be required to demonstrate that it has national competition laws in place reflecting the principles of the acquis, that national competition authorities have been set up to implement these laws, and that these authorities have a credible enforcement record in all competition policy areas. These requirements derive from the general Copenhagen criteria, which set out the political and economic standards for enlargement.[3] The EU acquis related to competition and ratified by the Republic of Macedonia are described in the SAA Article 69 Competition and other economic provisions. According to the provisions of SAA, all actions that could effect on the prevention, restriction or distortion of competition are incompatible with the Agreement. The actions, which could give a dominant position of one of the parties to the SAA in its territories or in a substantial part thereof and the public aid that distorts or threatens to distort competition by favouring certain undertakings or certain products, are also incompatible. Any practices that are contrary to that are a subject of assessment on the basis of criteria arising from the application of the rules of Articles 81, 82 and 87 of the Treaty establishing the European Community. According to the SAA during the first four years after the Agreement’s entry into force, any public aid granted by the Republic of Macedonia will be assessed taking into account the fact that the Republic of Macedonia will be regarded as an area identical to those areas of the EU Community described in Article 87(3)(a) of the Treaty. As a party to the SAA, Republic of Macedonia should ensure the transparency in the public aid area by reporting on annual base and by providing information on aid schemes upon request. The Government should also provide information on particular individual cases of public aid if requested by the EU. The EU Commission Report 2004 on the Stabilization and Association process of Republic of Macedonia expresses its positive assessment on Macedonian competition and state aid policy. “Whilst much remains to be done, and further progress is essential, first steps have been taken to develop an EU modelled competition policy.” The well-functioning and enforced competition legislation is still in front of the Republic of Macedonia development. But the good start of reforms in Macedonian competition policy is already a fact. Lasting the competition reforms based on transparency would be one of the turning points in the rapprochement between the Republic of Macedonia and the European Union. II. 2. EU Assistance for competition policy EU provides extremely valuable
technical assistance in the competition policy area. Technical Assistance to Draft Trade Laws was launched in April 2003 and aimed to pursue the reform of Republic of Macedonia’s trade related legislation in accordance with the requirements of the World Trade Organisation (WTO) and the Stabilisation and Association Agreement. The project provided extensive technical assistance in approximating the national trade legislation with the EU’s Acquis Communautaire. It resulted in drafting legal acts in the areas of internal trade laws, consumer protection regulation, anti-monopoly legislation, and legislation that provides for state aid, public companies and utilities. The project also supported the initial development of the State Aid Commission. Training for government officials in liberalised trade was a follow up of the project for technical assistance to draft trade laws. It assisted in the design and delivery of a comprehensive package of information, advice and training to high-level officials in trade-administration bodies, regarding the legal basis, procedures and practices of a liberalised trade regime conforming to the EU and the WTO. The new State Aid Law was prepared under the GTZ technical support. Currently GTZ finances a project for Law enforcement. II. 3. Competition and state aids It is already well known that the effective competition is crucial to an open market economy functioning. It cuts prices, raises quality, expands customer choice and allows technological innovation to prosper. The existence of such an effective competition, however, relies on applying effective competition policies. The goal of the EU common competition policy is to protect the effective competition on the common market. Following its aims the EU competition policy is focused on 4 main areas: - Antitrust; - Merger control; - Liberalisation; - State aid monitoring. The basic Community competition rules are laid down by Articles 81-90 of the EC Treaty, as well as by the European Council Regulations 17/62, 2821/71, 4064/89, 1/2003 and 139/2004.[4] By signing the Stabilisation and Association Agreement Republic of Macedonia pledged to bring its legislation in the fields of competition and state aids in line with those of the European Community. Republic of Macedonia has been obliged to meet the EU competition acquis in two main directions: (a) on business’ level - harmonisation of the national antitrust regulations and (b) on state level - harmonisation of the national legislation on state aid control. The Competition Policy of Republic of Macedonia The freedom of market and competition are initially guaranteed by the Macedonian Constitution. Article 55 states that “the Republic ensures an equal legal position to all parties in the market” and “takes measures against monopolistic positions and monopolistic conduct on the market”. The competition policy of Republic of Macedonia is further based on the following regulations: - Law Against Limiting Competition (LALC); - Law Against Unfair Competition (LAUC); - Consumers Protection Law; - Law on Trade; - Law on Postal Services; - Law on Telecommunications; - Law on Broadcasting; - Law on Macedonian Railways; - Law on Energy; - Law on Public Utilities; - Law on State Aid; - Regulation on Establishing Conditions and Procedure for Granting Aid for Rescue and Restructuring of Firms in Difficulty; - Regulation on Establishing Conditions and Procedure for Granting Regional Aid - Regulation on the Procedure and Forms of Notification to the State Aid Commission and for Assessment of State Aid. In June 2004 a new competition law has been drafted with the technical assistance provided by GTZ and European Commission[5]. The draft is in second phase of voting procedure and is expected to pass through the Parliament until the end of 2004. II. 3. A. Competition 1. Legal Framework Current Law Against Limiting Competition The current Macedonian Law Against Limiting Competition (LALC) copies the German model of protecting competition especially with regard to forms of limiting competition and enforcing authorities. It was adopted in December 1999 and became applicable on 1 April 2000. The law has been amended 2 times - in April 2002 and in June 2004. Although the first amendments were aimed at improving the Law, they could be considered as neither substantial nor very successful. The second amendment concerns the cases of preventing, restricting or distorting the competition, which might affect the trade between Republic of Macedonia and the European Community. The amendment stipulates that while assessing such cases the Monopoly Authority shall apply the criteria arising from the application of the EU competition rules. The LALC has built the legal
foundations of the Macedonian competition policy with respect
to the control on cartel agreements and cartel decisions; vertical
limitations to the competition; unequal treatment; prohibition
of concerted practices; abuse of dominant position and merger
control. It also has determined the general procedures and the
legal powers of the Monopoly Authority, as well as the size of
fines. The Monopoly Authority decisions could be appealed before the Minister of Economy. The Minister’s first instance decisions are subject to appeal before the competent government commission. The final decisions could be disputed in the Supreme Court. According to the provisions of Article 13 of Macedonian Constitution the Monopoly Authority is not entitled to impose sanctions. It could only ascertain the presence of law violation and could prescribe appropriate corrective measure, such as: - to order the enterprises to stop abusing the law; - to order the enterprises to change the signed contracts or the enacted decisions; - to declare as void all signed contracts or enacted decisions. [7] For imposing sanctions the Monopoly Authority should approach the court, which is the only institution, entitled to do this. In that way the procedure for protecting competition becomes double - first one is within the Monopoly Authority and the second one is in the court. Running two procedures for one and the same violation, combined with the sluggish court system of R. Macedonia, impedes the law enforcement and results in lack of respect to the antitrust rules. The fact that there is no undertaking in Republic of Macedonia fined for violation of the Law Against Limiting Competition yet, speaks in itself. The law applies not only to undertakings but also to public authorities (state and local governments) when they are involved in conducting economic activity. The place of Monopoly Authority within the Government structure however makes the enforcing of law in case of violation from a public authority not likely to happen. Being a part of the Government raises also the question of Monopoly Authority’s political independence and freedom of taking decisions without political pressure. The four years of LALC implementation proved the existence of a whole range of problems with its enforcement, comprehensiveness and compatibility with the rest of the Macedonian legislation. The practice proved that the law needs to be changed in many directions, namely: - It should be harmonised with the recent changes in the Macedonian commercial legislation as well as with the EU competition regulations; - The administrative procedures before Monopoly Authority should be made clearer and compatible with the EU procedural rules; - The law enforcement mechanisms should be strengthened, including the compulsory measures to ensure standing by law; - And last but not least, the institutional status and the legal power of the Monopoly Authority, as well as its organisational structure have to be changed in order to ensure better law enforcement, accountability and independence of the authority decisions. The EC FYROM Stabilisation and Association Report 2004 [8] as well as the Proposal for a Council Decision on the Principles, Priorities and Conditions in the European Partnership with the Republic of Macedonia, both recommend changes in the Macedonian competition legislation. In order to make the law an effective tool, the competition authority should be entrusted with efficient means directly to enforce the law and impose sanctions. These are the reasons that an entirely new Law Against Limiting Competition has been recently drafted and would be adopted soon. The New Law Against Limiting Competition (NLALC) Since it is expected that the draft for the new law will pass through the parliament in a few months it seems worthy to pay some attention to it as well. The draft for new Law Against Limiting Competition (DNLALC) has clearer structure, is more comprehensive and definitely better than the current law. It is harmonized with the EU competition policy and legislation and is close to Bulgarian, Croatian and Estonian competition acts. The draft consists of 7 parts. Part One introduces the purpose, subject, definitions, scope of application and the enforcement body. Like the competition laws of several transition countries, the Macedonian NLALC will apply not only to undertakings, but also to all natural and legal persons entrusted with performing services of general economic interest or granted with exclusive rights or concessions, as well as to the state authorities. The current law is applicable to the public authorities’ economic activities only. The new broader formulation presupposes some extension out of the economic activities area. However it is not clearly stated and is not likely to happen. The DNLALC proposes the establishment of a new law enforcement body - Commission for Protection of Competition (CPC). Part Two regulates the forms of limiting competition, which are systematised in 3 chapters: Agreements and Decisions that Restrict Competition; Dominant Position on the Market and Control of Concentrations Agreements and Decisions that Restrict Competition Following the philosophy of Article 81 (1) of the EC Treaty, the DNLALC prohibits the agreements, decisions and concerted practices, which have as their objective or effect the prevention, restriction or distortion of competition, especially: - agreements that directly or indirectly fix purchase or selling prices or any other trading conditions; - agreements that limit or control production, market, technology development or investments; - agreements that share market or sources of supply; - agreements that apply dissimilar conditions to equivalent or similar legal transactions with other trading parties, thereby placing them at a competitive disadvantage; - agreements that make the conclusion of agreements subject to acceptance by the other parties of supplementary obligations, which, by their nature or according to commercial usage, have no connection with the subject of such agreements. The agreements, decisions or practices described above are prohibited and declared to be void unless they are of “minor importance.” According to Article 9 (2) an agreement is of minor importance if the common market share of the parties of the agreement and undertakings under their control does not exceed the threshold of: - 10 per cent in case of a horizontal agreement; - 15 per cent in case of a vertical agreement; - 10 per cent in cases where it is difficult to classify the agreement as either vertical or horizontal. An agreement could be considered “of minor importance” also in case when the contractors’ market share for the last 2 years has been increased by up to 2%. The prohibition does not apply also to agreements, practices or decisions that contribute to improving the production or distribution of goods and services or to promoting technical or economic development, while allowing consumers a fair share of the resulting benefit, and which do not: 1) impose on the undertakings concerned restrictions, which are not indispensable to the attainment of these objectives and 2) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. The same conditions are applicable to granting individual and block exemptions. Following the philosophy of Article 81 (3) of the EC Treaty, the DNLALC allows 5 block exemptions, which are as follows: - vertical agreements for exclusive distribution or purchasing rights, for selective distribution rights and for franchising; - horizontal agreements for research and development or specialisation; - agreements for transfer of technology, license and know-how; - agreements on distribution or servicing motor vehicles; - agreements for insurance. CPC, upon a request of the parties of the agreement, is entitled to grant individual exemptions. The term of the exemption shall not exceed 3 years, but it could be extended upon a request of the parties of the agreement if they meet the quoted above requirements. According to the law provisions CPC may, ex officio or upon request of a party, annul the decision on individual exemption, when the decision has been taken on the basis of incorrect or misleading data, which were of decisive influence in the decision-making, or in case if: - the conditions and circumstances on the market, which have been of significant influence for the decision making, have changed, thus the conditions for individual exemption stipulated in the law are not longer met; - the parties of the agreement do not fulfil some of the conditions or do not enforce the measures determined by CPC’s decision . The decision on individual exemption could be amended in case of: - alteration of the conditions and circumstances on the market, which do not depend on the will of the parties of the agreement; - impossibility of the parties of the agreement to fulfil certain condition or to enforce measures determined in the CPC’s decision, due to circumstances beyond their control. Dominant Position on the Market The chapter contains: definition of dominant position, the cases considered as abuse of dominant position and the CPC legal powers in case of abuse of dominant position. As it is in the EU legislation, the Macedonian DNLALC does not prohibit the existence of a dominant position per se, but only the abuse of it. In conformity with the provisions of Article 82 of the EC Treaty, the DNLALC considers the following actions as abuse of dominant position and prohibits them: - directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; - limiting production, markets or technical development to the disadvantage of consumers; - applying dissimilar conditions to equivalent or similar legal transactions with other trading partners, thereby placing them at a competitive disadvantage; - making the conclusion of agreements subject to acceptance by the other contracting parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such agreements; - refusal to trade or encouraging and requesting from other undertakings or association of undertakings not to purchase or sell goods or services to certain undertaking, with an intention to harm that undertaking in a dishonest manner; - refusal to allow access to its own networks or other infrastructure facilities to another undertaking ready to provide adequate remuneration for the access, provided that without such concurrent usage of the network or the infrastructure the latter cannot operate, due to certain legal or factual reasons, as a competitor to the dominant undertaking on any market connected with that network or infrastructure. The CPC will be entitled: - to determine the dominant position and the abuse of that position; - to prohibit the abuse of dominant position; - to determine terms and measures for removal of the negative consequences on competition. Control of Concentrations The parties to a merger must notify of their concentration plans the CPC if: - during the year preceding the concentration, the aggregate worldwide turnover of all participants in the concentration has exceeded 5 million EUR and one of them realises sales on the domestic market; - for the year preceding the concentration, the aggregate turnover from selling goods and/or services on the territory of the Republic of Macedonia of each of at least two of the participants in the concentration has exceeded 2,5 million EUR or if their joint market share exceeds 40%. The thresholds for mandatory concentration notification are specially adapted to the size of the Macedonian market. The CPC has the right to prohibit a concentration, which would significantly prevent, restrict or distort efficient competition on the market or its significant part, in particular as a result of the creation or strengthening of a dominant position of the participants. The law defines what is concentration, what criteria must be taken into account while making appraisal of a concentration, how to estimate the aggregate turnovers and what procedure to follow in allowing or prohibiting a concentration. Part Three determines the organisational structure and obligations of the law-enforcing agency. According to the provisions of the draft-law the Monopoly Authority will be closed and a Commission for Protection of Competition (CPC) will be constituted. The CPC members will be directly appointed by the Parliament and the commission itself will no longer be within the Government structure. The law prohibits CPC President and members from being members of: the Parliament, the Government, the political party bodies; undertakings’ executive bodies; any kind of associations, which might lead to a conflict of interests. The CPC members will be appointed for a term of 5 years with possibility for reappointment. They could be dismissed earlier only upon a proposal of the commission in case if: the member requests such dismissal; the member is sentenced for a criminal offence for which an effective sanction in duration of more than six months has been imposed; the member is absent from the meetings of the commission three consequent times without justifying his absence. In case of not presenting the annual reports due, the entire commission would be dismissed before the end of its mandate. All these changes aim to ensure bigger accountability and independence of the law-enforcing agency. Its decisions often affect powerful business and economic interests, which may have considerable influence on the government. This is the reason why the competition agency should have as much independence from the government as possible, so it can reach its decisions solely on the merits, without reference to politics. The draft also provides for more explicit and more adequate responsibilities of the commission, including giving opinions on draft regulations, which are relevant to the economic activity and which might affect the market competition; and doing competition advocacy. Part Four regulates the enforcing procedures. According to DNLALC the CPC decisions will be final and in case of objection could be disputed in court. This change, although positive, might face problems, because according to the provisions of Article 15 of the Constitution of R.M.: “the right to appeal against individual legal acts issued in a first instance proceedings by a court, administrative body, organization or other institution carrying out public mandates is guaranteed.” However, even the eventual approval of that change will not remove the main problem with the current antitrust law enforcement, namely the impossibility of the antitrust agency to impose sanctions directly. The penalty procedure will continue to involve courts. Taking into account the current state of Macedonian court system, the procedure will continue to be too slow and prolonged. The international practice shows that the companies stop breaking the law only if they are punished rigorously and quickly. This is the reason that the current Monopoly Authority has launched an initiative for changing the Constitution of Republic of Macedonia so that the CPC would be entitled to impose sanctions directly. The problem however is twofold. If the court system is too slow in imposing penalties, it will be similarly slow in reviewing the appeals of the direct CPC sanctions. This creates a serious risk the CPC decisions to become practically barring the right of appeal. The reform in the court system is making progress indeed, however it is not yet satisfactorily efficient to support such change. Part Five regulates the transparency of the CPC work, which is extremely important especially in a legal environment with no Law on Access to Information, which is the case of Republic of Macedonia. The new law will oblige CPC not only to publish its decisions in the Official Gazette of R.M. (Sluzhben vesnik of R.M.), but also to paste them on its website along with the court judgments and decisions, as well as the notifications on concentration. This will enhance the transparency of the CPC work, which should increase the citizens’ trust in the antimonopoly institution and its decisions. Currently the Monopoly Authority website contains more than scanty information from the year 2000, which is about the authority’s structure and its plans for the year 2001. The search in Official Gazette of R.M. did not prove the existence of any decision published there. Parts Six and Seven contain fines and penalties, and the transitional and final provisions. The draft provides for more rigorous fines and penalties including prohibition of conducting the activity for a certain period. The fines for a serious violation could reach up to 10% of the total annual turnover for the year preceding the infraction. Representatives of Ministry of Justice have expressed some objections regarding the size of fines. They base their arguments on the Law on Misdemeanours. The Law stipulates that the monetary penalty for legal persons cannot exceed 5,000 EUR. However, the same law says that for misdemeanours committed in self-interest, or for misdemeanours committed with a big property damage, a size of the fine can be in proportion with the size of the damage that has been done or the supplied interest, but not more than twenty times bigger. The fines provided by DNLALC would definitely exceed the 5,000 EUR limit and this is more than reasonable. In cases of abuse of dominant position or concerted practices, even in such a small market as the Macedonian one, the profits received as a result of law violation are high enough to make the fine of 5,000 EUR to look ridiculous compared to them. The European Court of Justice has already affirmed the EC right of using the fine size as a competition policy instrument. Thus in year 2001 the Swiss company Hoffman-La Roche was fined with the amount of 462 mln. EUR and the German concern BASF was fined with 296 mln. EUR for participating in cartels aimed at eliminating competition in the vitamin A, E, B1, B2, B5, B6, C, D3, Biotin (H), Folic Acid (M), Beta Carotene and carotinoids markets[9]. The Law Against Unfair Competition (LAUC) The LAUC is adopted in December 1999. It regulates the issues of unfair competition such as - misappropriation or misuse of intellectual property (trademarks or commercial secrets), dissemination of false or misleading information about a competitor or another entity, fake statements, etc. The law defines which actions are considered as unfair competition and prohibits them. The LAUC classifies giving and accepting bribe for the purposes of competition as a crime. Giving a bribe shall be penalised with a cash sentence of 200,000 MKD to 1,000,000 MKD[10] or up to three years of imprisonment, while accepting a bribe shall be penalised from three mounts up to three years of imprisonment. The law enforcement is assigned directly to the court. LAUC contains a discriminatory provision towards some foreign companies. Article 24 of the Law states that person without a registered head office within the territory of the Republic of Macedonia and person that has achieved the status of merchant abroad are entitled to protection under this Law only if the Macedonian merchants use appropriate protection in the country where the foreigner has achieved its merchant status. Some of the cases of unfair competition, such as misleading advertising, comparative advertising and misuse of trademarks, are regulated also by the Consumers Protection Law. The law enforcement is assigned to the State Market Inspectorate within the Ministry of Economy. 2. Liberalisation of utilities and undertakings conducting activities of general interest The liberalization of utilities and undertakings conducting activities of general interest is a very important part of the European competition policy. Some times the public authorities grant special monopoly rights, to public or private undertakings to perform services of general economic interest in sectors such as postal deliveries, telecommunications, rail transport or electricity generation and distribution. These special rights generally correspond to responsibilities linked to the performance of the public service entrusted to the undertaking. However, those special rights might create situations that restrict competition. Often these monopolies are in network industries such as transport, energy and telecommunications. Because establishing a second, competing infrastructure is usually difficult, for reasons related to investment costs and economic efficiency, the only way to create competition in these industries is through creating competitive conditions regarding the services provided. While the right to exclusive ownership may persist as regards the infrastructure, monopolists must grant access to third parties wishing to compete with them as regards the services offered on their networks. This is the general principle on which the Community liberalisation directives are based.[11] The legal framework of liberalisation in Republic of Macedonia The current LALC as well as the DNLALC consider the refusal to give access to infrastructure or essential facilities to an undertaking, which will pay for it and which is not able to become a competitor on that market without having access to the infrastructure in question, as abuse of dominant position and prohibit it. These provisions correspond to the general principle of the EC liberalisation policy, namely to make a distinction between the infrastructure and the services provided over this infrastructure, thus providing conditions for competition. Postal Deliveries The liberalisation of postal services is provided by the Law on Postal Services, which was adopted in July 2002. The Law stipulates that the reserved [12] postal services delivering and stamps issuing are exclusive right of the Main Post Operator (Macedonian Post). The unreserved postal services [13] and currier services are open for competition under concession and license base. While several currier services providers have already appeared on the Macedonian market, no concession for unreserved postal services has been granted yet. The universal postal service [14] in Republic of Macedonia is delivered by the MPO. The MPO is entitled to subcontract the universal postal services delivery to other local or foreign legal or physical entities. There is no restriction for foreign persons to apply for licence or concession for postal services delivery. Telecommunications The liberalisation of telecommunications industry is provided by the Law on Telecommunications. The law prohibits the owners and operators of telecommunication networks from performing actions that restrict or distort competition. The authorities responsible for developing competition in the telecommunications industry are: Ministry of Transport and Communications (MTC) and the Telecommunications Authority within the MTC. The Telecommunications Authority is responsible for creating and implementing a long-term plan for introducing competition within the telecom industry as well as for preventing the involvement of public telecom operators and service providers in activities which distort competition. The Macedonian Public Telecom Operator (PTO) was privatised in 2001. The law guarantees its monopoly rights over the fixed voice telephony services, telegraphy services, telex services, public pay phone services, leased lines and call-back services until 31.12.2004. Until the same date the PTO has also the exclusive right of constructing, owning and operating with fixed public telecommunication networks. The initial final date for the monopoly rights’ expiry was 31.12.2005. However, following the SAA requirements the Macedonian government took the decision to liberalise the market a year earlier. Although the earlier expiry of the monopoly rights period, the telecommunications market in Republic of Macedonia will not be actually liberalised in less than one or one and a half years. The new Law on Telecommunications, which has to provide the legislative framework for regulating a liberalised telecommunication market, is not ready yet. It is expected that it will be finished and passed through the Parliament till the end of the year, which means that it will probably come into force in January 2005. The tender procedures for fixed telephony operators will take not less than half a year. Then at least another half or even a year would take to the new operators to start operating and to interconnect their networks with those of the current fixed and mobile operators. Thus Macedonian Telecommunications will for sure enjoy at least one extra year of monopoly comfort. The Law on Telecommunications does not oblige the current PTO to grant access to its communication network after the expiry of monopoly rights period. However, it obliges the PTO to connect its network to the networks of the other PTOs if they request this. Although this requirement, in the year 2003 Macedonian Telecommunications, by abusing its monopoly position on the market, prolonged the interconnection of the second mobile operator with the fixed telecommunication network with almost a year. The Monopoly Authority’s interference was needed in order to force Macedonian Telecommunications to obey the law. The rest of the telecommunication services - such as mobile telephony, cable radio-TV (RTV) services, Internet services, etc. are open for competition on concession base. Before the last changes in the Law on Telecommunications[15] the cable RTV services providers enjoined the exclusive right to operate one provider per area. After abusing their dominant positions couple of times, Macedonian Government decided to solve the problem by opening the market for competition. According to the provisions of the new Article 28-a, the number of concessionaires in a certain area is not limited. The broadcasting activities are regulated by the Law on Telecommunications and Law on Broadcasting. They are open for competition on concession base too. The authority responsible for law enforcement is the Broadcasting Council. At present in Republic of Macedonia there are: 2 mobile phone operators, about 8 Internet providers, a three-channel public broadcaster with national coverage and 29 public radio stations with local area coverage; five commercial TV stations and three commercial radio stations with national coverage and 129 commercial broadcasters with local area coverage (54 TV and 75 radio stations). The Law on Telecommunications does not provide for any restrictions or other discriminatory measures against the foreign legal or natural persons. They enjoy the same rights and have the same obligations as the local ones. The Law on Broadcasting however limits foreigners with regard of broadcasting company ownership. Article 10 stipulates that the share of a foreign legal or natural person in a broadcasting company cannot exceed 25% of the total capital. The Law puts also limits on the share of the foreign capital in the total capital of a broadcasting company - it cannot exceed 49% of the total capital. Railway and Air Transport The legal base for the railway transport liberalisation in Republic of Macedonia is provided by the Law on Macedonian Railways. Article 2 says that operating with the railway infrastructure is allowed to all legal or natural persons, which meet the conditions provided by that Law and by the international agreements in that area. However, there is no other railway carrier yet except Macedonian Railways. In the area of air transport the competition is rather limited by the exclusive contract between the Macedonian Government and the national air carrier MAT. The existence of other air carriers is not excluded, but until the contract expiry in the year 2010 they could perform only charter flights and after receiving an approval from MAT. Currently, except MAT, 10 foreign air companies fly from Skopje and Ohrid to number of destinations all over the world. Energy sector The energy sector of Republic of Macedonia is regulated by the Law on Energy. Activities such as electric power generation, transportation, and distribution; production, transportation and distribution of natural gas; and production, transmission and distribution of heat and geothermal energy, except for internal use, are considered as activities of public interest and could be performed by local and foreign legal and natural entities based on a license. The license on: power generation, transmission, and distribution; international transport of crude oil through the oil pipeline; and production, transport and distribution of natural gas - should be issued by the Government. The license on production, transport, and distribution of heat and geothermal energy should be issued by the Municipality and the City of Skopje upon a prior opinion of the Ministry competent for energy matters. The license for performing the activity may be obtained on public competition basis. If there is no interested entity on the announced competition, the license for performing the activity may be issued on the basis of an application, which is submitted to the authority that issues the license. The license to perform the activity without public competition by exception may be granted in case of a request (or a bid) made by a strategic investor. At present the entire generation, transmission, distribution and supply of electricity in Republic of Macedonia, the imports and transits as well as the maintenance of the stability of the electricity system is provided by the vertically integrated, state owned power utility “Elektro Stopanstvo na Makedonia” (ESM). The process of ESM restructuring and its possible privatisation was open in early 2001. Some real steps however were made not until the beginning of year 2004, when the Ministry of Economy submitted to Macedonian Parliament a draft Law on Transformation of ESM. The draft Law on Transformation of ESM establishes the terms for restructuring and privatisation of ESM. It should be divided into two public companies [16] and should be privatised until the end of 2005. The forthcoming liberalisation of the Macedonian energy market pressed for establishing a supervisory body, which would be entrusted with overseeing the energy market. Thus in July 2003 the Energy Regulatory Commission was established. It is entitled to issue licenses for conducting energy activities and to monitor the licensees’ performance and market behaviour. It is expected that till the end of 2004 the Macedonian Parliament will adopt the Law on Electric Energy Market. The Law should incorporate all relevant EU legal acts and will define problems such as: qualified consumers, ownership issues, energy efficiency, and environmental issues.[17] Public Utilities Public utilities are regulated
by the Law on Public Utilities and number of local governments’
regulations. Trade industry The competition in trade industry is protected by the Law on Trade. According to the provisions of Article 5: “The measures and actions taken by state authorities, bodies of the municipalities and the City of Skopje or legal and natural persons performing public authorisations cannot restrict the trader’s right of free access to the market, prevent the competition or place certain traders into unequal position, except in cases provided by law.” The Law on Trade however allows introducing protective measures in cases of increased and subsidised import, but only after giving a prove that the import causes or there is possibility of causing serious damage to the domestic production. The protective measures shall be applied to all imported goods, irrespective of the country of origin or country of import. If some protective measures have been introduced, the exporting country would have the right to request a certain trading compensation for removing the harmful consequences caused by the protective measures. 3. Administrative Capacity of the Antitrust Regulator Having a good competition regulation does not automatically mean having an effective competition. The law itself has no value and is not of great use if there are not appropriate and efficient enforcement mechanisms. The enforcement of the current LALC is assigned to the Monopoly Authority within the Ministry of Economy and to the Minister of Economy. The latter is competent only for decisions concerning: Public Interest Cartels; Export Cartels; merger permissions in cases where the limitation of the competition is balanced by the advantages that the merger shall produce in the overall country economy, as well as in the cases where the merger is justified by some prevailing public interest. The Monopoly Authority decisions could be appealed before the Minister of Economy and the final decisions could be disputed in court. The initial administrative structure of the Monopoly Authority was the following: - Monopoly Authority Director; - Decision-making department; - Department for Research and Analysis. For no apparent reason the first amendments in 2002 abolished the whole chapter regulating the issues of Monopoly Authority administrative structure, decision-making process and presenting reports. Thus the Monopoly Authority lost its collective decision making body, which combined with the fact that it cannot impose sanctions directly and that it is placed within the MoE structure, weakened its enforcement powers and brought its accountability and decision-making independence in question. This is the reason why the draft for new LALC intends to change the situation: - by placing the Commission for Protection of Competition out of the government structure and making it accountable directly to the Parliament; - by changing the operational structure of the enforcement body; - by making the CPC decisions final. The CPC will become a collective body of 5 members appointed by the Parliament. In support to the decision-making process a Department for Research and Analysis will be created. It is expected that the new structure will unable the commission to start strengthening its institutional capacity and improving its daily work. Taking into account the fact that an entirely new LALC will be adopted, the professional literacy of the regulator could be guaranteed only by ongoing training. The CPC decisions will be final and could be disputed only in court, which combined with its at least legal and structural independence, will increase its law-enforcing powers. These changes however will not resolve the problem with the CPC impossibility to impose sanctions directly, without the court interference. The penalty procedure will continue to involve courts, which makes the procedure slow-moving and prolonged. Only amendments in the Constitution could solve that problem. The Monopoly Authority has launched an initiative for constitutional changes so that the CPC would be entitled to impose sanctions directly. Such fundamental changes however are not feasible in the near future even if they were reasonable. The legal and structural aspects of the formation of a competition agency, however, are only a part of the necessary conditions for independence, and perhaps the lesser part. At least equally important is the development of de facto or informal independence within the government. The agency must actually be confident that it is free to decide its cases without political interference. This type of independence is created only over time, as the government, the business and the public develop an appreciation for a strong and impartial competition policy. [18] The access to Monopoly Authority (MA) decisions is on unsatisfactory level yet. The search in Official Gazette of R.M. did not prove the existence of any MA decision published there. The only information regarding the MA decisions could be received by the media and by visiting the Monopoly Authority’s office. MA website contains just old information from year 2000, which significance and practical value is already zero. Even the legislation section hasn’t been amended since the same year. The two LALC amendments are not even mentioned. MA office representatives announced that a new webpage is under construction and will be ready soon. The new LALC will oblige CPC to paste its decisions, courts judgments and decisions, as well as the other acts of the commission on its website, as almost all monopoly agencies in the other European countries do. 4. Monopoly Authority enforcement record According to the data received by Monopoly Authority, since year 2000 the antitrust regulator has initiated 33 procedures. 4 of them have been initiated by MA itself and 29 by request of interested parties. In 11 cases the MA confirmed the existence of law violation; in 12 cases it rejected the request because it was out of MA competency and in 10 cases MA concludes that the request is groundless. In 10 of the cases the affected part has lodged a complaint against the MA decision and in 3 of the cases the MA decision is subject of dispute in court. (See: Table 1) Table 1 - Authority Monopoly enforcement record since year 2000
Source: The Monopoly Authority of Republic of Macedonia 8 appeals, out of 10, are dissmised, 2 are upheld and sent back for additional investigation. 1 of the 3 court cases has finished with abrogation of the Minister’s final decision. The rest of them are still in the Supreme Court. In many cases of abuse of dominant position the problem has been resolved on voluntary base without the need of issuing a decision. Until September 2004 the Monopoly authority has approved 12 mergers. 11 of them were unconditionally approved and 1 was approved under certain additional requirements. The MA office complains that some times the Basic Courts register mergers without requiring a preliminary merger approval. Cases of law violation Vodovod i kanalizacija Skopje [19] Vodovod i kanalizacija is a public enterprise entitled to manage the water supply of the capital city. In year 2003 the Vodovod i kanalizacija Executive Board decided to oblige the consumers to use the water-meters of Insa company only. The decision limited the consumers’ right of free choice and broke the competition by eliminating the water-meters of Siemens and Meineke from the market. The Monopoly Authority was forced to notify the Vodovod i kanalizacija that its behaviour is considered as abuse of dominant position and prescribed cancelling the Executive Board decision. The appeal of Vodovod i kanalizacija before the Minister of Economy was rejected. The enterprise disputes the final decision in the Supreme Court, but meanwhile it obeys to MA prescription. The court case is still open. Macedonian Telecommunications Macedonian Telecommunications is the Macedonian public telecom operator having the exclusive right of constructing, owning and operating with fixed public telecommunication networks until 31.12.2004. The dominant owner of Macedonian Telecommunications is MATAV Consortium, which Standard & Poor’s credit rating for year 2002 was (BBB+). It is also dominant owner of the Macedonian mobile operator MobiMak. For the last 3 years Macedonian Telecommunications abused its dominant position on the market four times. Here we present two of the cases. The postponed interconnection of the second mobile operator In year 2003 Macedonian Telecommunications has been protracting signing the contract for interconnection with the second mobile operator MTC, thus obstructing its entering into the market for quite a long period. The Monopoly Authority was forced to interfere with a decision for abuse of dominant position and obliged Macedonian Telecommunications to sign the contract for interconnection and to connect the second mobile operator to the fixed network within 10 days. Macedonian Telecommunications appealed the Monopoly Authority’s decision before the Minister of Economy. The Minister upheld the MA decision and the Macedonian Telecommunications disputed it in court. The court judged in favour of Macedonian Telecommunications. Meanwhile the contract was signed and the interconnection was done. Internet service providers’ complaints In April 2004 the Macedonian Internet service providers complained of unequal treatment from Macedonian Telecommunications, because it has decided to give an exclusive access to ADSL connection to its own Internet provider (Mt-net) only. The ADSL connection provides 15 times faster Internet connection for 24 hours. Having the exclusive right of using ADSL would place Mt-net far ahead its competitors. The Monopoly Authority reacted by issuing a decision prohibiting the advertisement of ADSL service as long as the service is not offered to all Internet providers. Macedonian Telecommunications appealed the decision. The appeal was rejected the and final decision is currently subject of dispute in the Supreme Court. The problem with the competition within the Internet providing area will not be resolved as long as Mt-net continues to be a unit of Macedonian Telecommunications. The Internet services provider should be separated from the telecom operator in detached company. Cable RTV operators In August 2004 the Monopoly Authority announced that 3 cable TV operators have abused their dominant market position by offering unjustifiably high prices for network connection. It prescribed the operators to limit their prices up to 2,500 MKD per apartment and 3,000 MKD per house. If the cable operators do not obey the Monopoly Authority decision the authority would approach the court, where the maximum penalty would be 10,000 EUR. This amount is close to nothing for Macedonian Telecommunications, but it could make a cable TV operator to reconsider its behaviour. II. 3. B. State aid control In the course of the following years the Republic of Macedonia should find a way to encourage the state and local authorities to prioritize the actions strengthening economic development and the competitiveness of the economy. Measures providing state aid to individual companies obviously play an important part in this respect. However, such measures also distort competition as they discriminate between companies that receive assistance and others that do not. In the field of antitrust control Republic of Macedonia has already started to approximate its legislation meeting the EU acquis. A Monopoly Authority has been set up to regulate the private sector deeds. It is well known however that the state aid is one of the major channels of government intervention in the economy. The lack of transparent rules and criteria for state aid outlay, combined with the low administrative capacity, increases the risks of private interest pressure and public funds misuse. According to the commission staff working paper FYROM Stabilisation and Association Report 2004: “In relation to internal market related legislation, the situation is mixed. Progress has been made in the areas of competition, state aid, property rights and Customs, but little change has been seen in the areas of procurement and data protection. In all areas, implementation capacity remains weak.” The Macedonian Law on State Aid is already adopted. The members of the State Aid Commission are appointed. Some secondary regulations have been adopted as well. However, the main part of the work is still awaiting to be done: the enforcement, transparency and control. There must not be political resistance to approximation of the Macedonian state aid issues with the Community acquis (or it must be overcome). Otherwise the non-performance will risk creating distortions to the smooth functioning of the market and the free trade between Republic of Macedonia and EU. Macedonian Policy on State Aid The Law on State Aid (LSA), entered into force on 12 April 2003, regulates the rules for and control over the state aid disbursement in Republic of Macedonia. The law became applicable after 1 January 2004 and fixed the frame and conditions for control over the state aid outlay as well as for evaluation of its compliance with the principles of free and fair competition. The following secondary legislation has been adopted as well: - Regulation on Establishing Conditions and Procedure for Granting Aid for Rescue and Restructuring of Firms in Difficulty; - Regulation on Establishing Conditions and Procedure for Granting Regional Aid - Regulation on the Procedure and Forms of Notification to the State Aid Commission and for Assessment of State Aid. The Law on State Aid (LSA) - The EU Treaty on State Aid Articles 87 - 89 of the EU Treaty regulate aids granted by the states. Article 87 states that: “any aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market”. Under the Article 88, the EU Commission is entitled to control State aid. This article also requires Member States to inform the Commission in advance of any plan to grant State aid (“notification requirement”). - The Macedonian Approach The Article 1 of the Macedonian LSA says that the Law in question “regulates procedures and monitoring of granted state aid with aim of implementation of principles of market economy, maintaining fair competition and implementation of commitments undertaken by international agreements ratified by the Republic of Macedonia, containing state aid provisions.” LSA is based on the EU acquis on state aid and takes into account that the state aid issues affect the market competition. The Law on State Aid covers: - Objectives of the law Article 2 (1) states that any State aid “irrespectively whether it is granted under an aid scheme or as an individual aid award, which distorts or threatens to distort competition by favouring certain undertakings or certain products, is incompatible with this law insofar as it may affect trade between the Republic of Macedonia and the European Community”; - Basic Definitions used in the Law (Article 3); - What is Compatible aid under this Law (Article 4); - Which aids may be compatible (Article 5); - Regional aid (Article 6); - Aid for small and medium-sized enterprises (Article 7); - Rescue and restructuring aid (Article 8); - State Aid Commission (Article 9); - Notification obligation, standstill clause and reports (Article 10); - Content of notification (Article 11); - Assessment procedure (Article 12); - Transitional provisions (Article 13); - Final provision (Article 14). The LSA contains most of the required general EU rules. However, without immediate appropriate implementation and providing all supporting regulations, methodology, classification, monitoring and control, this fact itself would not mean anything. In respect of the clearness of procedures, methodology for selection, transparency and actual control the Macedonian state aid legislation still looks rather incomplete. - Some issues, which could create problems a. The state aid should not be limited in forms and to be granted by state only According to the EU state aid rules “the aid does not necessarily need to be granted by the state itself”[20]. The aid could also be granted by a private or public intermediate body appointed by the state (including national, regional or local authorities, public banks and foundations, etc.) Macedonian Law on State Aid (Articles 1 and 3) covers only measures involving a transfer of resources granted by the state. Under the definition stated in the LSA (Article 3), a grantor of state aid could be “the Government of Republic of Macedonia, state authorities, local authorities and other authorities or institutions, which make or plan to make state aid.” In this sense, the definition does not allow private organizations to be appointed by the state as grantors of state aid.[21] It is not clear as well that the financial transfers that constitute the aid can take many forms: grants or interest rate rebates, but also loan guarantees, accelerated depreciation allowances, capital injections etc. b. Through state aid to economic advantage Macedonian state aid legislation does not cover enough the concept that the aid should constitute an economic advantage that the undertaking would not have received in the normal course of business.[22] Examples could be found on EU Competition website [23] or in Aid policy in Latvia [24] : a company buys/rents publicly owned land at less than the market price; a company sells land to the State at higher than market prices; a company enjoys privileged access to infrastructure without paying a fee; a company obtains risk capital from the State on terms more favourable than from a private investor; a company pays less taxes than it would have to do otherwise, etc. This is a way to make difference between state aid and other measures and to make the state aid definition more understandable for the general public. c. State aid selectivity There is no separate part for state aid selectivity and it is not well developed and clear explained in the Law. State aid must be selective and thus affects the balance between certain firms and their competitors. Selectivity is what differentiates state aid from so-called “general measures” (namely measures which apply without distinction across the board to all firms in all economic sectors in a Member State (e.g. most nation-wide fiscal measures)[25]. The selectivity action of the State Aid Commission could be a serious source of corruption. The Macedonian Government should prevent corruption among members of the State Aid Commission by developing and applying a set of strong and clear rules and tools for selection and further control on Commission decisions as well. d. Making Macedonian state aid legislation clearer, more descriptive and understandable Taking into account the EU
Treaty, Macedonian State Aid Commission should develop more detailed
guidelines, rules and frameworks, and should start their implementation
as soon as possible. This will make the process of applying, receiving
and controlling transparent and easygoing, thus not being a threat
for competition distortion.[26]
(a) Regional aid [27]: Article 87(3)(a) and (c) both provide a basis for the acceptance of State aid measures aimed at tackling regional problems: - State aid, which promote the development of “areas where the standard of living is abnormally low or where there is serious underemployment” - “Aid to facilitate the development of ... certain economic areas”, which are disadvantaged compared to the national average. (b) Horizontal rules (cross-industry or horizontal rules set out the EU Commission’s position on particular categories of aid which are aimed at tackling problems which may arise in any industry and region.): aid for small and medium-sized enterprises; aid for research and development; aid for environmental protection; aid for the rescue and restructuring of firms in difficulty; aid to employment; training aid. (c) Sectoral rules (industry-specific or sectoral rules defining EU Commission approach to state aid in particular industries): - Sensitive sectors (a number of sectors which have experienced particularly severe economic problems and which were therefore considered to be sensitive)[28] - Agriculture, fisheries and aquaculture[29] (the general state aid rules do not apply, or apply only to a limited extent in the sectors involved in the production and marketing of products of agriculture and fisheries [30]). Further information on the rules applying in these sectors can be obtained from the State aid units of DG Agriculture and DG Fisheries. - Transport [31] (in the road transport sector, most general state aid rules apply, although there are a number of exceptions, e.g. transport equipment is not eligible for aid and the de minimis regulation does not apply). In order to make the state aid rules more understandable and clearer, there are Fiches developed in the Vademecum Community Rules on State Aids [32]. These fiches are about: the De Minimis rule, Regional aid, SME aid, R&D aid, Aid for environmental protection, Aid for the rescue and restructuring of firms in difficulty, Aid for undertakings in deprived urban areas, Employment aid, Training aid State aid elements in sale of land and buildings by public authorities and Risk capital measures. As a next element on state aid rules enforcement the State Aid Commission should develop and implement such Fiches in Republic of Macedonia as well. The State Aid Commission (SAC) According to Article 9 (2) LSA: “The Commission is composed of three members, professional and competent persons, which are appointed by the Government of the Republic of Macedonia, two members on a proposal of the Minister of Economy and one member on a proposal of the Minister of Finance, for a term of four years with a possibility for reappointment.” The State Aid Commission members were appointed in June 2003 but it looks that the Commission capacity still remains understaffed with only two employees (who in fact are employees of the Department on State Aid in the Ministry of Economy). The statement of Article 9 (6) that the “Professional and administrative-professional work to the Commission will be realized in the State Aid Department of the Ministry of Economy”, combined with the fact that Commission’s members are appointed by the Government makes the Commission, i.e. its decisions, not independent and vulnerable to political and business interests’ pressure. Taking into account the mentioned above and in order to make the SAC work efficient, the following measures should be taken in a short-term period: (1) the administrative capacity of the Commission to implement the law’s provisions should be strengthened considerably to reach the level of effective control over state aid decisions; (2) the Republic of Macedonia should take appropriate measures to insulate the State Aid Commission decisions from possible corruption pressure from interested parties; (3) to exempt certain economic agents from obligations under the law, the Macedonian Parliament should consider introducing stricter fines for administrative offences and maximum eliminating the State Aid Commission discretionary power. The transparency in the SAC work is provided by the Article 9 (4) which says that: “The decisions of the Commission on the compatibility of State aid are binding and are published in the Official Gazette of R.M.". Since 2003 the State Aid Department of the Ministry of Economy with the support of GTZ has organised a lot of workshops on state aid issues. Several possible state aid grantors and eventual state aid acceptors have attended them. The Department, which main work is the professional and administrative-professional work to the Commission, has made a lot of contacts with other ministries and local administration representatives in order to make their future work with state aids clearer. The Rules for Government work are in a procedure to be changed in order to make them and new draft-laws corresponding to the LSA requirements. However, it is still early to give a definitive evaluation of the actual Law on State Aid enforcement as it has been implemented for only several moths. There is no SAC decision published in the Official Gazette of R.M. yet. The period of some months, since the Commission members have been appointed (in June 2003), is too short and rather related to initial organisational work. It is expected that some sort of working guidelines or framework prepared by the Commission in respect of clarifying the working methods and policy will be published till the end of September 2004. In an interview, a SAC employee mentioned that there is only one case SAC is working on and it is a notification one. It was also explained that the state aid register is public and transparent. The provisions of the law and the introduction of a public state aid registry are prerequisites for more transparency and better control over government decisions in this area. The public register is required by Article 9 and is a responsibility of the SAC. It is not taken a stand in the Law on State Aid what should be the position regarding state aid for public monopolies. The Macedonian Government has to take explicit obligations to reduce it. It might be expected that the state aid distortionary effect on the Macedonian economy would be high due to the poorer administrative and economic development of the country. At the same time this would increase direct state intervention in the economy and would raise doubts about protection of particular private interests through public resources. If SAC does not have appropriate powers and support to ensure a sufficient degree of transparency in the granting of state aids now, this will considerably increase the future workload in dealing with these matters on stabilization and association in the pre-accession period. Transparency would be among main principles promoted by establishing a comprehensive inventory and reporting of all aid measures in force. The State Aid Commission will play a special role in increasing awareness of the state aid control framework among the ministries, the public administration and the business community. The secondary legislation In support to the state aid principles’ better implementation several secondary regulations were adopted. The secondary legislation is in conformity with the EU acquis. a. Regulation on the Procedure and Forms of Notification to the State Aid Commission and for Assessment of State Aid (RPFNSACASA) This regulation provides for the procedures about: notifications, which the granting authority is obliged to submit to SAC; requests for additional information; examination and decisions; and state aid reporting. In fact, the Regulation states the lawful time frames, the ways to complain, state aid control and assessment. The state aid reporting to the State Aid Commission is presented by two standard forms. The first standard form is called State Aid Report. It should be prepared by the state or local authority or other state aid giver directly responsible for state aid schemes and their performance. The second standard form is the Yearly State Aid Report. It should be prepared by the state aid grantor and sent to the SAC in a yearly base. - The principle “ex ante notification” The supervision of state aid in Republic of Macedonia is based on a system of ex ante authorisation. Under the legislation requirements (Article 12 of LSA and Article 2 of RPFNSACASA), the grantors are required to inform (ex ante notification) the State Aid Commission on any plan to grant or alter state aid and they are not allowed to put such aid into effect before it has been authorised by the SAC (standstill-principle). Under the LSA, the SAC is given the competence to determine whether or not the notified aid measure constitutes state aid in the sense of Article 2 (1) LSA, and if it does, whether or not it qualifies for exemption under Article 4 or 5 LSA. The Government, state and local authorities and the other state aid grantors can not grant any state aid unless it has been notified and authorised by the SAC. Any aid, which is granted in absence of SAC’s approval, should be automatically classified as unlawful aid. According to the LSA, the SAC is under the obligation to order the repayment from the beneficiaries of any unlawful aid that is found to be incompatible with the Macedonian Law on State Aid, hence with the EU acquis. Article 11 of the RPFNSACASA states that the Commission based on “its own initiative or on the basis of information on unlawful state aid received from interested parties ... shall request the provider and/or the recipient of unlawful state aid to submit relevant information on the aid within an appropriate time limit.” According to the law, if the Commission is not notified about a given state aid then this state aid is unlawful aid. Then the question is why the Commission does not suspend the aid? Or if the aid is given under the Commission decision published in the Official Gazette of R.M. than this state aid cannot be called unlawful aid until the clarification of circumstances. This discrepancy should be clarified. b. Regulation on Establishing Conditions and Procedure for Granting Aid for Rescue and Restructuring of Firms in Difficulty (RECPGARRFD) The Regulation, its general rules and definitions follow the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty . [33] The Regulation is about rescue and restructuring aid granted by the Macedonian | ||||||||||||||||||||||