CCA dismisses initiative against pension companies

The CCA notes that horizontal co-operation between the undertakings that are actual or potential competitors does not necessarily constitute a prohibited agreement (cartel) as a hard-core restriction of competition. Horizontal co-operation agreements can lead to substantial economic benefits, in particular if they combine complementary activities, skills or assets. Horizontal co-operation can be a means to share risk, save costs, increase investments, pool know-how, enhance product quality and variety, and launch innovation faster.

In order to be prohibited under Article 8 of the Competition Act any agreement or concerted practice between two or more independent undertakings must distort competition in the relevant market by object or by effect.

The CCA found that taking into account that compulsory pension funds and voluntary pension funds are established with the very objective of raising and investing of financial funds to increase the value of the assets of a particular pension fund, so they can insure and pay out pensions for the fund members within the meaning of legal provisions, the investment of assets – financial funds – of compulsory and voluntary pension funds that are managed by different pension companies, in the same investment fund and in the sense of specific provisions, cannot be regarded as anticompetitive but justified.

Besides the rise in the value of assets of any particular pension fund another justification lies in the fact that such investment of assets – financial funds – would lower the risk of diversification of investment in the case of compulsory pension funds.

With respect to the complainant’s allegations that potential joint investment in the same investment fund of two or more pension companies that are actual or potential competitors should be regarded as a prohibited horizontal agreement – cartel, the CCA takes the view that the application of competition rules would prevent the pension companies from managing the assets of the pension funds and restrict their core activity which is the investment of the assets of the pension fund with the view of raising its value and lowering the investment diversification risk. On the other hand, the practice as promoted by the claimant would allow only one pension company to invest the assets or financial funds of compulsory and/or voluntary pension funds that it manages in a particular investment fund.

Given the fact that under specific provisions and certain restrictions compulsory pension funds are allowed to invest in alternative investment funds, regardless of the type of the investment fund, and taking into account that the Croatian Financial Services Supervisory Agency (HANFA), as the competent authority for the implementation and supervision of the application of the Act on Alternative Investment Funds, approved the establishment of Cro Value Fond and its rules, that Cro Value Fond is one of three alternative investment funds of similar structure and nature that have been established between 2019 and 2021, that in the Republic of Croatia there are currently 39 alternative investment funds, 33 of them with private offer, that the pension funds in the Republic of Croatia have been ensured direct and significant investments in small and medium-sized enterprises even before Cro Value Fond was established, that the maximum number of investors in Cro Value Fond has not been restricted nor is the investment allowed exclusively for pension companies concerned, that Cro Value Fond is a high risk fund granting no guarantee for the investors nor the expected net internal rate of return (IRR) and with respect to the fact that the investment into Cro Value Fond would make a negligible share of the assets compared with the aggregate net value of the assets of the pension fuds, it is the view of the CCA that it is not likely that the co-operation between the pension companies concerned  regarding the selection of the managing company of Cro Value Fond and the definition of its rules, and the potential investment of the assets of compulsory and voluntary pension funds they manage in the Cro Value Fond as an alternative investment fund would have any anticompetitive effects or a significant anticompetitive effect on at least one of the parameters on the market that is associated with competition, such as the price, production, quality of products, diversification of products or innovation.

As regards to the co-operation of the pension funds concerned in the selection of the managing company of Cro Value Fond and the definition of its rules, that has been challenged by the complainant, the CCA points out that in accordance with the response received from HANFA, in the Republic of Croatia, unlike the practice and regulation in effect in the European Union, the responsibility of the manager of the alternative investment fund is assumed regarding its management and its assets, indicating the possibility of the investors themselves to decide which manager they trust and can rely on to manage their assets, whereas the concertation about the rules is not uncommon with investment funds offered to professional and/or qualified investors, such as Cro Value Fond.