Monopolising Dayton or how Ivica Todorić’s empire swallowed Bosnian markets

A shorter version of the article was originally published on Bilten.Org and this is a revised and expanded version of that article.

For some time now it has been been impossible to find a supermaket in the capital of Bosnia and Herzegovina (and more widely in Bosnia) that does not belong to the Agrokor concern of Ivica Todorić. The expansion of his food production, distribution, retail and wholesale empire to the Bosnian market already began in the 2000s when Agrokor bought Kiseljak of Sarajevo. It is certain that Todorić had already made his first „political friends“ in Bosnia in this period, which later allowed his company to penetrate the Bosnian market unhindered. In this respect it is worth recalling that the rise of the empire of Ivica Todorić is the result of a capitalist logic which is founded, inter alia, on the concentration and centralisation of capital (Marx’s ‘general law of capitalist accumulation’).[i] These two processes lead large capitals to first absorb smaller capitals, then dominate, even monopolise the national market, and subsequently drive them to struggle over regional and finally glob

Agrokor is a product of long-term processes of debt-led accumulation in the region. Todorić’s father had already used alleged personal connections with Tito to create a private business that spanned the entire SFRJ. Todoric Jr. would benefit from personal connections with the Croatian president, Franjo Tudjman, to buy up enterprises on the cheap in the 1990s.[ii] In both cases economic liberalisation, and finally privatisation, to repay external debt were the wider canvas on which this ‘riches to riches’ story was played out. As Marx writes in Capital Volume I: „Fanatically bent on the valorization of value, he ruthlessly forces the human race to produce for production’s sake…Accumulation for the sake of accumulation, production for the sake of production.“[iii] Marx famously argues that the development of joint stock companies (like that of Todorić) represents ‘transformation of the actual functioning capitalist into a mere manager in charge of other people’s capital and of the capital owner into a mere owner, a mere money capitalist’.[iv] For Marx this expresses the progressive socialisation of production within a capitalist framework.[v]

This is one of the examples of the process of concentration and centralisation of the post-Yugoslav regional food production, distribution, retail and wholesale sector. The rise of dominant vertically organised firms controlling production, distribution, retail and wholesale in Slovenia, Croatia, and Serbia, led to a struggle to overcome the narrowness of the national market, and with the exception of Slovenia, the lack of purchasing power of domestic consumers. The 2000s saw a bitter struggle in which Agrokor, Merkator and Delta tried at different points to merge or take one another over with Agrokor emerging in 2013-14 as the regional hegemon. On the one hand, the takeover of Merkator by Agrokor to create a regional giant was a response to the threat of the colonisation of the domestic market by European multinationals like Carrefour and Lidl; on the other, it is the outcome of decades long processes of debt-led accumulation in the region. We should not forget that Merkator was put on sale, amongst other reasons, to rescue its creditor bank, Nova Ljubljanska Banka, and in turn the Slovenian state, which had taken on the debts of the banks, from bankruptcy.[vi] Agrokor recently backed out of a takeover attempt of the Turkish food retail giant Migros, but in order to compete in a highly concentrated European market dominated by global players like Carrefour and Tesco it is planning to launch itself into the Russian and Turkish markets.[vii] Thus, contrary to the common sense view, the concept of ‘tycoons’ cannot be simply reduced to robber dynasties that have enriched themselves from the plunder of state property, nor to the ‘rugged entrepreneur’, even when expressed in Marxist jargon (“primitive accumulation”). We should understand the takeover of Merkator as one of a series of steps by means of which Agrokor is evolving into a capitalist corporation, with the ambition of a listing and share issue, that is, to become a “manager in charge of other people’s capital”, on the London Stock Exchange. What has happened in Bosnia is not an exception, but rather confirms this rule.

It is often said that Bosnia is a state with which Croatia has a trade surplus, that Croatia’s largest export market is precisely Bosnia, and that it has invested more than half a billion euros in Bosnia…etc…but it is less often heard that Croatia is continuing its policy of the 1990s towards Bosnia by other means. Few people ask themselves what are the consequences for the Bosnian economy. Economic relations are further destabilised by Croatia’s entry into the EU, which has meant that export barriers have become even greater for Bosnian farmers and companies, if not actually insurmountable.

The crisis in Bosnia is nothing new. It has already been going on for twenty years, and in what follows we will see how the state in the period of crisis helps bigger capitals swallow up smaller capitals and clears the path for what in the majority of capitalist countries is formally considered illegal concentration, that is, monopoly.[viii] Ivica Todorić has for some time been the absolute ruler of and biggest player on the Bosnian food retail chain and trade market. He has not just bought up almost all the other market players, but with the purchase of Slovenia’s Merkator has become the owner of the Bosnian supermarket chain „DP Marketi“ which the Slovenian giant bought in 2011 before being sold to Todorić for more than half a billion euros. However what is problematic is that Agrokor in Bosnia has in a perfidious manner become the company which, it may be freely said, has a complete monopoly in food and drink retail. The decision regarding the monopoly implications in the sale of Merkator was taken by the Competition Council of Bosnia – one of several insitutions which has „exclusive authority in deciding whether there is illegal competitive activity on the Bosnian market“. In other words, the aforementioned council has authority at state level and reaches decisions which are valid for both Bosnian entities. The fundamental task of this council is to ensure the unhindered development of the free market and the respect of laws on competition[ix] in which are prescibed the forms of ‘prevention, limitation and distortion of market competition’ within and outside Bosnia, to the extent that the latter are present on its territory.

For this reason the judgement of the Competition Council of Bosnia[x] regarding the concentration of Agrokor and Merkator really is questionable.[xi]

This judgement is one in a series of striking examples of the way in which the Bosnian state administration and apparatus established by the Dayton constitution is allowed to function, as well as not to function, without fear of any possible sanction.[xii] But the judgement on the permissibility of the concentration of Agrokor and Merkator reveals one more thing – the relation between the Bosnian state and the business operations of Ivica Todorić. Namely, just like the workings of the other institutions in Bosnia, that of the Competition Council conforms to the (ethnic) structures guaranteed, established and institutionalised by the Dayton constitution, from which it follows that the members of the Competition Council are representatives of the constituent nations of Bosnia and Herzegovina. Article 24, clauses 1 and 2 of Bosnia’s Law on Competition[xiii] explicitly states:

„(1)The Competition Council may authoritatively decide if at least 5 members of the Competition Council are present at its session. (2)The decisions of the Competition Council are reached by majority voting among the members present, and such that at least one member from all the constituent nations must vote for each decision. Members of the Competition Council may not abstain from voting.“

This is where the fun starts. The judgement of the Competition Council states that: „concentration in the sense of article 18, point 7 of the Law on Competition…by which Agrokor has obtained 53.12% of the shares of Merkator is considered permissible…“ Nothing would be contentious here if it were not for the fact that the aforementioned article also states that: „if the Competition Council  does not reach a decision within the period defined by article 41 of this law then concentration is judged to have been permitted.“ Further on in the Judgement concerning the concentration of the aforementioned companies it is written that the Competition Council could not reach a decision because some members of the Council, „whose number cannot be revealed because it is a business secret“, voted For and Against. But article 41 of the Law on Competition unambiguously states that; „(1) Once it has been decided to set a procedure in motion, the Competition Council is bound to reach a decision in the period…of three months concerning the analysis of concentration according to article 18 of this law.“ How then was concentration permitted?

Given that the Competition Council did not reach a decision in the legally defined period of three months, concentration in accordance with the other article of the law is automatically judged permitted. In practice this means that the members of the Council took advantage of a loop-hole in the law to produce a judgement whereby the concentration of Agrokor and Merkator is considered permissible. The question poses itself of whether we are dealing with negligeance or forethought. The question is even more provocative given that the text of the Judgement states that: „The Competition Council has judged that the implementation of the concerned concentration could have as a consequence negative effects which could significantly distort competition in the relevant market in individual cities in Bosnia and Herzegovina.“

Thus, even though the Competition Council judged that Todorić might monopolise the Bosnian market, this nevertheless did not prevent it from reaching a Judgement following which the concentration of Agrokor and Merkator is considered permitted in law.

For example, in the two neighbouring states the matter was resolved thus: the Commission for the Protection of Competition in Serbia following Todorić’s acquisition of Merkator set conditions compelling „the sale of 21 retail sites (alternatively 22) in 15 cities and municipalities of Serbia, a net total sales space of around 20,000m².[xiv] In Croatia the Agency for the Protection of Market Competition decided that „the control of Agrokor over Merkator is considered conditionally permissible“ until such time as „95 sales outlets of Konzum and Merkator/Getroa“ are put on sale.[xv]

The Judgement of the Competition Council of Bosnia states that Agrokor responded to „the draft proposed final judgement by stating that it considered that the concerned concentration would neither create a new nor strengthen an existing dominant position, so that the same should be authorised without the setting of conditions, but that if the Competition Council consider it necessary to set conditions the same communicate proposed measures.“ Can it be that the bearer of the request, that is, Agrokor and Merkator, placed conditions on the Competition Council, and not the other way around? Given that the members of the Competition Council of Bosnia reached their decision by not doing their job, we return to the question: negligeance or malice of forethought?

It would appear that what the Judgement of the Competition Council terms a „business secret“ is merely another name for the Dayton system, which by institutionalising ethnic and nationalist divisions, creates the framework for external interventions in the internal affairs of Bosnia. In this way nationalist divisions which serve the interests of the rich are further exacerbated at the expense of the working people and completely impoverished population of Bosnia.[xvi] Under the conditions of nationalist paralysis, the Protectorate becomes the real power, thereby preventing any possibility of fundamental change in economic policy within such a political system.

„This story is only unfortunate in one respect…and that is that it is true“.[xvii] Of this truth, however, speak neither the representatives of the responsible institutions, nor the trade unions, nor the representatives of the political parties, nor wider public opinion. For the experience up to now of the logic of big business imposes the conclusion that the so-called rationalisation of costs and operations is inevitable, which means that the workers, suppliers and distributers of both constituent companies will be made redundant or have their contracts cancelled.

In conclusion, it is necessary to repeat once again that the success and rise of men like Todorić in markets like that of Bosnia has nothing to do with the creative dynamic of capitalism and its entrepreneurial spirit. Rather it is a direct conseqence of the debt economy and a joint venture of state and capital in which individuals earn milions and billions, while entire industries are destroyed and entire societies are indebted for generations to come.

 

 

Tijana Okić teaches philosophy at the University of Sarajevo and was a member of the working groups of the Sarajevo Plenum.