The Right of Small and Medium-Sized Enterprises to Positive Discrimination in Free Market Competition
Pubblicato online: 31 dic 2019
Pagine: 321 - 346
DOI: https://doi.org/10.2478/danb-2019-0017
Parole chiave
© 2019 Branko Korže, published by Sciendo
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.
Free market competition among business entities The concept of ‘business entity’ is in this article used as a synonym for market participants offering goods and services. In this article I use for micro, small, and medium-sized enterprises as defined by the 2009 (RS) Companies Act the established term of ‘SME’, and for those exceeding that Act’s criteria the term of ‘large enterprise’.
This article focuses on the market position of SMEs in relation to large enterprises, provides a theoretical grounding for the right of SMEs to positive discrimination, and lists proposals for the legislature to ensure these subjects’ existence and further development in the conditions of economic globalisation. The aim of the article is to justify the state’s task to positively discriminate by special measures in favour of SMEs on the basis of smallness as their personal circumstance. It bases the need for the special measures of positive discrimination to be enacted on the rule that persons in essentially similar positions are to be treated equally, whereas those in essentially non-similar positions unequally; and the justification of the measures on the theory of Rawls’ procedural equity, which is based on the supposed equal starting points.
The article is composed of a theoretical and empirical part. In the theoretical part, by using the descriptive method, it discusses the literature from the area of HRs on the basis of which it deductively infers the right of legal subjects to free economic initiative and the right to equality, as well as the right to positive discrimination. Furthermore, by means of the deductive method, it discusses the particularities of SMEs which prevent them from having an equal market position in comparison to large enterprises, and calls on the legislature to take positive discrimination measures. In the second part, based on the established circumstances requiring the adoption of special measures, it examines their regulation in the legal system of the Republic of Slovenia (hereinafter ‘RS’) and, on the basis of the survey results, inquires whether SMEs are aware of such measures’ effects and how such are reflected in their practical activities. Finally, the article concludes with proposals for appropriate changes and supplements in the legal order of the RS.
Human rights are a fundamental value (individuals’ integrity) that a democratic state must ensure to every citizen, and under certain conditions also to other subjects on its and even on foreign territory.
In accordance with democratic principles and the principles of the 1948 Universal Declaration of Human Rights (hereafter ‘UDHR’), GA Res 217A (III), UN Doc A/810.
The protection of HRs consists of prevention from interference with HRs by the state and third persons, See more in Tratar (2008).
The original bearer of HRs is a human being as a natural person and his values, as well as associations which natural persons as the bearers of such rights join. Following the mentioned fact, business entities are both objects and subjects of human rights protection,
In the framework of the United Nations, basic acts in the area of HRs protection include the UDHR, the International Covenant on Civil and Political Rights (hereinafter ‘ICCPR’), 999 UNTS 171. 993 UNTS 3. ETS No. 136.
The right to equality is, according to Šturm,
By the concept of equality, we understand a matching between different objects, subjects, processes, or circumstances in essential, however not all, characteristics. The characteristics are compared by quantity and quality; thus the principle of equality is crucially connected with the principle of justice as the essence of law. Theories that discuss the relationship between equality and justice stem from different starting points and substantiate the existence of several types of justice. Schmid (2008) divides them into three basic groups: the theories of moral justice (e.g., the view of justice according to the Church’s teachings in Aristotle, Kant, Smith, and Marx), the theories of utilitarian justice (e.g., the views of Machiavelli and utilitarian theorists), and the anti-utilitarian theories of justice (Rawls’ theory of fairness). Other authors deal with many different approaches to form a theory of justice, such as Landy and Conte (2010), that in general distinguish among distributive, procedural, interaction, and informational justice. In recent times many authors have referred to a theory of social justice
The right to equal protection needs to be separated from the right to equality, which in its practical exercise encompasses entitlements of legal subjects derived from the right to equality. Mahnič (2002) defines the right to equal protection as a “legal formal derivation of the idea of equality of all people”, or the “equality that is manifested and exercised at the legal level, which means that it defines equality among people in relation to law and legal norms”. Lampe (2010) defines the right to equal protection as a “fundamental HR which requires equal treatment irrespective of any personal circumstance”. According to Krajnc (2016), equal protection means that “all individuals have equal rights and duties that must be respected by others, as well as ourselves”.
Prohibition against discrimination follows from the right to equal protection. The prohibition against discrimination is a duty which requires from the legislature
I have established that full equality can never be achieved, while for the equal protection of legal subjects it is necessary that their position is regulated in conformity with the criteria of justice. Pauer-Studer (2000) has carried out the following axiom of justice: “Persons need to be treated in view of standard X equally, if there are no reasons to treat them unequally, for the reasons which cannot be reasonably rejected”. In the mentioned sense, it is imposed on the legislature to regulate essentially equal states of facts equally, and essentially different ones unequally in proportion to their difference.
Positive measures do not violate the principle of equality and equal protection of legal subjects, but are intended to exercise equal protection among them. An omission or refusal of necessary and appropriate adjustments which are dictated by special circumstances would thus interfere with the right to equal or non-discriminatory treatment. Ibid. Ibid. Ibid. Ibid. Ibid.
Competition can be defined from various angles. Neumann and Weigand (2004) define it as “constitutive property of a market economy following immediately from the right of each individual to pursue his or her own interest”. For Kirchner (2004) market competition signifies rivalry among market participants, which enables the opposite party freedom of choice, the buyer a choice among various offerors, and the offeror a choice among different buyers. Zabel (1999) claims that the essence of market competition is that “every market participant ensures his or her priority over other participants by the use of admissible means”.
The free economic initiative of business entities as an economic freedom stems from the HR to freedom, which in convergence with social and other HRs creates the basis of free competition. As well, a social market state as the HRs guardian is obliged to ensure it as a long-term public interest. In the system of a social market state, free competition is not just created by unplanned rivalry among market participants, but their economic interests are realized in the conditions of co-existence and the exercise of other HRs.
As economic values may conflict with other social values and Ibid.
Korže Ibid. Ibid.
Neumann and Weigand (2004) assert that competition policy is an important part of economic and social policy, and thus it is a subject of opposing economic and social interests. They claim that from the view of economic interests the leading principle is the maximization of economic efficiency, whereas from the view of social interests completely different principles are at issue, such as, e.g., distributive justice. Ibid.
A conflict between economic and other social functions of competition appears when the state does not play its role in the mentioned sense. The predominance of the economic functions of competition over the other functions sooner or later results in negative effects on the existence and development of business entities (poor infrastructure, less qualified staff, poor entrepreneurial inventiveness, poor health of the workforce, etc.), whereas the predominance of social functions (‘hyper-production’) over the economic ones overburden the economic functions resulting in non-competitiveness of business entities in the market. Ibid. See more about the meaning of human rights respect for long-term stability and competitiveness of business entities in Čertanec (2015). See more in Garcia (1999).
I have established that business entities, equally as it
In the market game, business entities must continuously strive for an advantage with respect to their competitors, which is necessary for their existence and development. The right to free economic initiative, grounded on the HR to freedom and the right to creativity, which individuals exercise directly or in the legal organizational form of companies on the basis of the HR to free association, enables competitors’ activities in the market game to be inventive and unique. Still, they must be in conformity with the HR to equality limited by the equal rights of other competitors participating in the market, and the protection of fundamental social values or public benefits. The HR to equality thus limits the competitive activities of market participants, however, on the basis of such they must also be ensured under equal conditions to enter the market, carry out their business activities, and also leave the market game. The state must ensure to competitors the respect, exercise, and protection of the right to equality or prevent discrimination among them and, when it is necessary to exercise the right to the equality of subjects in special circumstances, take measures by which it discriminates positively concerning them. Due to diverse factual situations determined by life, in which the bearers of the right to equality are found, the legislature is imposed to regulate essentially different factual situations in an abstract legal norm differently than it is regulated for those whose characteristics are essentially similar. Therefore, it is the duty of the legislature to ensure market conditions for competitors such that they are able to exercise their right to free economic initiative under equal conditions, or that they are not discriminated against concerning such conditions.
The right to equality or equal protection and the prohibition against discrimination are already regulated by the UDHR, which in Art. 1 determines the right to freedom, dignity, and equality as an inherent HR. In Art. 2 it provides that ‘everyone is entitled to all the rights and freedoms set forth in this UDHR, without distinction of any kind’. In Art. 7 the UDHR determines that ‘all are equal before the law and are entitled without any discrimination to equal protection of the law’.
The ICCPR and the ICESCR provide in Art. 2 that the state party to the respective Covenant will respect and ensure the rights proclaimed in the Covenants without any discrimination, while Art. 26 of the ICCPR supplements that provision determining that everyone is equal before the law and entitled to equal legal protection without any kind of discrimination. For that reason, ‘[t]he law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground’.
The ECHR does not define the right to equality, however, in Art. 14 it prohibits discrimination and provides that ‘[t]he enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground’. In the preamble to Protocol No 12 to the ECHR, a provision is substantively supplemented to oblige state parties to ensure equality before the law to all people.
In the scope of the transferred sovereign rights that enable the operation of a EU single market, the member states have transferred to EU authorities also rights in the area of regulating competition protection in a single EU market (Art. 3 and Arts. 101–109 of the Treaty on the Functioning of the EU OJ EU, No 2012/C 326/01.
ZVarD regulates the possibility of taking special measures to ensure equality which is of a temporary character, and whose goal is to ensure the exercise of the right to equal treatment, equal opportunities, or actual equality and participation in the areas of the social life of persons who are in a less favourable position due to a certain personal circumstance, and are taken with the purpose of preventing or remedying the consequences of such a position, or represent compensation for a less favourable position (Art. 17.1). In Art. 17.2 the legislature lists examples of measures by which persons in a less favourable position in a certain area or environment are ensured special benefits or stimulations (the so-called ‘stimulating measures’), and measures by which, if required measures and conditions are fulfilled, priority is given to persons with a certain personal circumstance, and may be used in cases where in such persons an evident disproportion exists concerning the possibilities of access to rights, goods, services, or benefits (the so-called ‘positive measures’). If it is established that the goal of their implementation is achieved, they must cease to apply immediately (Art. 18.2).
The striving of business entities to become economically stronger is based on free economic initiative as a human economic freedom, and is not in itself contrary to the essence of free competition if they pursue such a goal according to the traditionally defined economic functions of competition. Contrary to this freedom are practices of business entities in their wish to secure economic power that make use of processes leading to an unfair market game. The legislature has defined such practices and envisaged measures for their prevention. The focus of study thus deals with different actual positions between large enterprises and SMEs, which result from a privileged economic and market position of the large companies, and lead to an inequality among them. By the integration and concentration of capital, the market position of business entities is strengthened, the scope of overall purchase and thereby the economy of scope are increased, which results in lower costs of doing business. The described strivings and their effect, which are mainly legitimate and a legal right of business entities, can lead to unequal positions between economically powerful, merged, or connected market participants and small ones which do not have such power. The competitive advantages of large enterprises in view of SMEs on the market do not stem from objective competitive advantages, but from the effects of their economic power that already at the beginning enable them direct and indirect advantages. Schaper (2010) claims that inequality between large entities and SMEs is reflected in the following worse position of SMEs:
their business activities are geographically restricted; the scope of their products and services are limited; their market share is limited; concerning knowledge and skills, they are limited due to informational asymmetry; their access to well-established business entities in the market is worse; they depend on a small number of key consumers; they have higher costs to ensure the conformity of their operation with the regulations; they are restricted concerning financial resources; and they have limited access to specialized legal and economic advices.
Despite the fact that SMEs are numerically predominant, they are the most vulnerable group and very sensitive to competition. Ibid. Ibid. Ibid.
Mahnič (2002) claims that the ensuring of equality for SMEs is a social goal that the RS as a social state must ensure by special normative intervention measures, since that is allegedly necessary for an efficient economy. Storey (2010) believes that positive discrimination is admissible if it is actually well-founded and necessary. Such regulation does not prevent, limit, or distort competition, but makes it possible. A care for the respect, protection, and remedying of any violation of the HR to equality (equal protection) imposes on the legislature the duty to create by appropriate measures conditions by which SMEs are ensured a basic market position such that is enjoyed by economically more powerful entities or, in the areas where this is not possible, to positively discriminate by appropriate normative measures concerning SMEs such that their existence is ensured. Equal and fair treatment of all business entities, given a simultaneous consideration of the specific character of SMEs, is a condition to stimulate competition. Ibid.
The Slovenian legislature defined the right to equality in more abstract details in ZVarD, whereby SMEs are not enabled effective exercise of the right to equality and prevention from discrimination. The operationalization of the mentioned legal foundations should be carried out by the legislature by a
The EU establishes that SMEs in an EU single market, in comparison with large businesses, are confronted with special problems, such as an inoperative market (difficult access to financial resources and investments into research and innovation, lack of resources to meet environmental regulations), and structural impediments (lack of a managerial and professional knowledge, rigid workforce market regulations, deficient information about growth opportunities at the international level, etc.). Commission Recommendation 96/280/EC of 3 April 1996 concerning the definition of small and mediumsized enterprises, OJ EU No L 107/4. OJ EU L 124/36. Ibid. Ibid.
In addition to the SMEs Commission Recommendations, the European Charter for Small Enterprises was adopted. The Charter determines the EU obligation to consider the “view of a small entrepreneur” Ibid. Ibid. Ibid.
In June 2008, the EU Commission also adopted the Small Business Act for Europe COM (2008) 394 final.
From the 2011 Commission Report,
In 2011, the EU Commission also published a proposal for a new framework programme for SMEs’ competitiveness – COSME 2014–2020, which is part of the research, innovation, and competitiveness bundle. In 2013, the EU Commission prepared a proposal of the Framework Programme for Research, Innovation, and Technological Development – HORIZON 2020. By EU Regulation, No. 651/2014, in connection with the provisions of Articles 107 and 108 of TFEU, the EU Commission proclaimed certain types of aid to SMEs as compatible with the internal market. The exemptions mainly refer to investments, aid for current operations and aid for access to financial recourses, and are thusly exempted from their reporting to the EU Commission. In 2018, the EU Commission emphasized the importance of digitalization in company law, due to which the online establishment of SMEs’ international operations was made easier.
States are empowered to regulate the area of business entities status in the framework of their sovereign powers. The Slovenian legislature defined business entities in Art. 13 of the 2007 Obligations Code (hereinafter ‘OZ’) as entities which carry out profitable activity. In Art. 55 of the 2009 Companies Act (RS) (hereinafter ‘ZGD-1’), the legislature determined that, based on the criteria such as an average number of workers in a business year, net income from sales, and the value of assets, they are classified into micro, small, medium, and large enterprises.
The purpose ( Council Directive 2003/38/EC of 13 May 2003 amending Directive 78/660/EEC on the annual accounts of certain types of companies as regards amounts expressed in euro, OJ EU L 120/22.
Based on the categorization of companies according to the mentioned criteria, the legislature regulates differently the rights of individual entrepreneur (Art. 53.2 of ZGD-1), examination whether the state of individual active and passive items in books of account matches the actual state of affairs (Art. 54.4 of ZGD-1), the obligation to make a consolidated annual report (Art. 56.5 of ZGD-1) and audit the annual report (Art. 57.1 of ZGD-1), the responsibility of auditors (Art. 57.3 of ZGD-1), the requirement to explain statements (Art. 69.4 of ZGD-1) and report to the Government on payments by companies which carry out the activities of research, searching, developing, and exploiting the resources of minerals, oil, land gas, or other materials (Art. 70.b.1 of ZGD-1), and the amount of fines due to minor offences committed (Art. 685 of ZGD-1). In 2014, the Financial Operations, Insolvency Proceedings, and Compulsory Dissolution Act (RS) (hereinafter ‘ZFPPIPP’) differently regulated the admissibility of: carrying out preventive reconstruction proceedings (Art. 44.b of ZFPPIPP); the carrying out of simplified compulsory composition proceedings (Art. 221.a of ZFPPIPP); the limitation, exclusion and enforcement of liability for damages (Art. 44 of ZFPPIPP); the approval of a financial reconstruction agreement (Art. 44.r of ZFPPIPP); and the right to challenge legal acts in bankruptcy proceedings (Art. 271 of ZFPPIPP).
In Section 4 of the 2008 Prevention of the Restriction of Competition Act (RS) (hereinafter ‘ZPOmK-1’), the legislature regulated special rules concerning liability for damages due to a competition law violation. In Art. 62.h of ZPOmK-1, the legislature provided the joint and several liability of SMEs as an exception to limit their liability. In para. 2 it determined that SMEs are liable for damages only to their direct and indirect buyers, if they prove that their market share on the relevant market during the violation of competition law was at all times below 5 percent, and that the use of general rules on joint and several liability would irreparably jeopardize their economic ability of survival, while their resources would lose the entire value. As SMEs, it lists those violators who have less than 250 employees, whose annual turnover does not exceed EUR 50 million, or whose annual joint balance of accounts does not exceed EUR 43 million.
Furthermore, there is also different regulation for SMEs compared to large ones in accordance with other laws. Pursuant to the 2010 Economic Zones Act (RS), SMEs are entitled to certain more favourable conditions concerning initial investments (see Art. 20.a), the 2006 Corporate Income Tax Act (RS) (hereinafter ‘ZDDPO-2’), and the 2011 Personal Income Tax Act (RS) (hereinafter ‘ZDoh-2’) enable tax exemptions for investments in research and development (Art. 55 of ZDDPO-2, Art. 61 of ZDoh-2), and for investing (Art. 55.a of ZDDPO-2) of which primary purpose is to aid SMEs.
For the special treatment of SMEs, the Slovenian legislature enacted the 2007 Supportive Environment for Entrepreneurship Act (RS), which in Art. 1 determines measures to encourage entrepreneurship and organization in that area and procedures to allocate resources intended to create a supportive environment for entrepreneurship. Moreover, the Government has adopted an Action Plan for the Implementation of the SMEs Act, Ibid.
The 2015–2020 Programme to Implement Financial Incentives by the Ministry of Economic Development and Technology Commission Regulation (EU) No. 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ EU L 187/1.
It may be concluded from the actual position of SMEs described in the previous section that, in the organizational and functional sense, their position essentially differs from the position of large enterprises, making the first being less competitive in the market than the latter. The differences relate to their more difficult entry into the market as well as concerning the conditions of their operation and existence in the market. Thereby it needs to be emphasized that the duty of the state to establish a special protection of SMEs is not only based on their right to equal protection or the prohibition against discrimination, but also on broader social interests demonstrated in relation to the significance of SMEs for state economy and consumer supply, such as, e.g., the ensuring of local provision of everyday life needs to inhabitants close to their dwellings, the carrying out of individual activities, in particular craftsmanship. Therefore, special protection of SMEs can be justified by the state’s duty to ensure the respect and protection of the HR to equality or equal protection, and by the tasks of every democratic and particularly social market state to prevent by intervention measures market anomalies that have an impact on the entire and regular supply of goods in the market. The legally defined task of the state is based on the theoretical starting points from Section 2, which deals with the substantive framework of the HR to equality (equal protection) and, in relation with the principles of justice, the prohibition against discrimination or the conditions that dictate that the state discriminates against certain legal subjects positively. In the legal regulation of rights and obligation of legal subjects the basic criterion is the discussed rule according to which ‘objects or subjects’ which are similar in their essential characteristics are treated equally, while ‘objects or subjects’ that are essentially different, according to the objective criteria of Rawls’ procedural theory of justice, are treated differently.
According to the Agency of the Republic of Slovenia for Public Legal Records and Related Services, Ibid. Ibid.
I have tested the theoretical findings on the actual state of respecting the HR to equality and the prohibition against discrimination concerning SMEs based in the RS through empirical research. The goal of the empirical research was to examine through a survey a thesis according to which SMEs are in a deprivileged position in comparison to large enterprises in the FM. The survey includes questions relating to the recognition and experience of respondents in relation to their presence in the market (e.g., delivery periods, price), and the differences between SMEs and large enterprises. The survey results are the basis to create proposals for necessary systemic changes and amendments in the RS legal order.
The entities involved in the survey were SMEs irrespective of the branch of activity, capital ownership, and other circumstances. The surveyed entities were members of the Chamber of Commerce of Slovenia (hereafter ‘CC’), the CCSB and the University Incubator Ljubljana. Two hundred and fifty entities responded to the survey that was sent to CC members, The survey was available in the period from 23 March 2017 until 23 June 2017 and from 12 July 2017 until 12 October 2017. The survey questionnaire was composed of 22 questions and formed on the basis of own theoretical and scientific findings, and was published online by means of 1KA online survey tool. The survey was available in the period from 25 March 2019 until 25 June 2019. The survey questionnaire composed of 26 questions and was formed on the basis of own theoretical and scientific findings and was published online by means of 1KA online survey tool.
The low response rate may have resulted from the complexity of the questionnaire, as well as the fact that the surveyed entities did not recognize the importance of the analysed topic to a sufficient extent.
The data collected by the survey were analysed, whereby the results presented in the continuation are to a certain extent relativized by certain limitations stemming from the character of the survey, as well as from a low response rate by the entities surveyed. The survey was addressed to business entities’ leadership, composed in a manner such that respondents could respond to the questions by circling one of the suggested replies as well as by briefly explaining their replies in a descriptive manner.
Out of 98 surveyed enterprises, CC members, 80 were completed. The sample of the surveyed enterprises includes 33 micro (41 percent), The percentages in decimals are rounded, to 5 down, and over 5 up.
The results show that 47 percent of the respondents replied affirmatively to the question whether they ensure equal conditions for business operation in comparison with large enterprises. Thirty-four percent of them asserted that they were in a worse position, as the legal order does not ensure their equal position with respect to buying reproduction material, payment insurance, advance payments and payment deadlines, transportation, storage, and administrative costs concerning documentation management. The remaining surveyed entities did not provide reasons for their negative replies.
Regarding the question of whether the respondents have equal access to established suppliers as large enterprises, 66 percent of them stated that they were not in a worse position, 20 percent believe that they were in a worse position, while 14 percent did not have an opinion. The respondents who believed they were in a worse position grounded their unequal position on unequal conditions in public procurement procedures, lower rebates due to smaller quantities, more difficult access to competent workers of the suppliers, and more difficult access to data/databases, etc.
Concerning the question of whether the addressed enterprises are ensured equal conditions of business in the market in comparison with large enterprises in relation to the sale of goods, 58 percent of the respondents replied that they were not in a worse position, 29 percent of them stated that they are indeed in a worse position, while the remaining ones did not have an opinion on that. The respondents that believed they were in a worse position base their beliefs on unfair competition practices, dumping prices, and greater negotiation strength of large companies, as well as buyers’ low response to their offers due to a smaller scope, worse payment conditions for them, better competitive abilities of the large companies, direct access of the large to merchants’ shelves, while the small-sized access them only through agents, etc.
To the question whether equal conditions are provided for the respondents in comparison with large enterprises in obtaining business through public procurement procedures, only 40 percent of the respondents believe that they were in an equal position in comparison with the large, while 30 percent of them stated that they were not in an equal position, whereas 30 percent of them did not have an opinion. The respondents who don’t believe they have an equal position assert that such is demonstrated in the adaptability of public calls and biased calls, discriminatory dumping prices, the inability of newly established entities to compete with the references of large ones, too complex preparations to make bids for small-sized entities, too frequent annulments of decisions once the small have been selected, corruption, connections and acquaintances, etc.
With respect to the question whether SMEs are provided equal conditions of operation in comparison with large enterprises to obtain financial resources and assets, 51 percent of the respondents believed that they were in an equal position, while 26 percent did not agree with that, and 23 percent did not know. The respondents who believed they were in a worse position state that such a position is reflected from their more difficult access to financing, SMEs are treated as more risky, procedures are too complicated for small companies, while large ones more easily secure financing due to their bonuses and cheaper insurance, also through connections and acquaintances, large ones may employ specialists skilled in obtaining financial resources, and in large enterprises workers are prepared to work for a minimal wage, while in small ones that is not the case.
With regard to the question concerning the obtaining of workers in the market and the preservation of their employment, 77 percent of the respondents state that they are ensured equal conditions of operation in comparison with large enterprises, 13 percent believed that that is not the case. The remaining ones did not reply to this question. The respondents who believed they weren’t in an equal position stated some reasons like working in specific industries (e.g. construction operations), as they found it more difficult to find suitable workforce.
Concerning the question whether, in view of the criterion of size of business entities and their economic power in the market, the state must protect the position of SMEs by appropriate special legal measures, 60 percent of the respondents believed that the state must ensure equal conditions of operation for all business entities in the market, 14 percent stated that that was not necessary, while the remaining ones had no opinion concerning such. Among the tasks that the state must carry out to ensure the protection of SMEs, the respondents stated: the protection of legality and the prevention of corruption and nepotism; control over the issuing of invoices, coherent and clear regulations; equal and fair application of regulations for all; state authorities’ timely activities; faster operation by administrative authorities and faster resolution of judicial disputes; consumer protection with controlling the truthfulness of product characteristics; severe sanctions for entities giving untrue information about their products; ensuring long-term stable conditions of business operation without greater and fast changes; ensuring a stable framework of operation stimulating investment and ensure regular payments for services performed; transparency; prevention from cartel agreements; supporting development-oriented SMEs who provide workplaces; the persecution of unfair competition; ensuring public calls based to select a bidder on the quality/price criterion; reduction of administrative and other obstacles for SMEs ensuring equal conditions for all entities – equal exemptions and business requirements; providing fast administrative procedures for all legal entities; prevention of moonlighting; the reduction of administrative barriers; and the introduction of flat taxation.
With respect to the question whether they stated that any of their HRs were violated in connection with the conditions of business operation in the market, and whether they are acquainted with the striving of the EU, international (e.g., by the Organisation for Economic Co-operation and Development) and national organizations (e.g., the CCSB), or competent RS authorities to enact special measures to protect SMEs, 11 per cent of them responded positively, while 61 percent negatively, with 28 percent had no opinion on that. From the replies of those who recognized HRs violations, it follows that the respondents were not aware of their HRs. In relation to replies, they only recognized a problem of inequality in the area of labour law and tax law (bad supervision). They stated that large enterprises have more benefits because they have more possibilities for subventions, e.g., in employment and development. Only one respondent stated that all the entities should have equal rights regardless of their size. The respondents did not know constitutional and international convention rights and the content of the UN Guiding Principles on Business and HRs adopted by UN HRs Council (2011).
Among the proposals to improve the position of SMEs the respondents stated the following:
Definition of criteria to ensure a minimal quality of materials; Increase of penalties for grey economy; Simplification of bureaucratic procedures; Cancellation of all types of aid and subsidies and the lowering of taxes and contributions; Awareness and creation of a code of conduct; Punishment of those market participants who distort the market by inadmissible low prices; Enabling by regulations that market participants will be competitive in domestic and foreign markets: Lowering of VAT and its more consistent collection; Care for the transparency of business operation; Incentives for business entities to act legally; Change of the government; Greater flexibility in employment and the possibility of dismissal without reasons; Termination of all existing economic concepts; Selecting a bidder with the most favourable, not cheapest, bid; Stricter control of business entities who do not pay subcontractors; Fair judiciary, punishment of non-payers and removing them from the market, lower taxation of small companies’ profit intended for investment; and The conditions of business should be proportionate to the size of an economic entity.
From the respondents’ replies, it follows that a majority of SMEs do not recognize that they are in a non-equal or discriminatory position in comparison with large enterprises in the economic system and the market. The surveyed enterprises that otherwise say that they operate in worse conditions than large ones, do not recognize that in the exercise of the human right to equality or equal protection the legislature should be obliged to improve their competitive position at a system level by positive discrimination measures. They perceive the need for changes primarily in connection with the need for more consistent implementation of the valid legal regulation, particularly in relation to the selection of a bidder in public procurement procedures based on the criterion of quality, not the lowest price. The individual respondents who recognize that SMEs are violated their right to equal protection by the conditions of business in the market propose various general system improvements and a better supervision over all the business entities in the implementation of the valid regulations.
The sample is small due to a low response rate. I assume that reflects the ignorance and non-awareness of the survey addressees that also business entities are objects of HRs protection, and that the state is bound to ensure conditions for their exercise. Due to a small sample, the survey results probably do not entirely reflect an objective state of affairs, however, they point to essential characteristics of the business environment and the areas in which the state should ensure by legal and other means that, given the conditions of free competition, small companies should not be ‘victims’ of the economically strong. The valid legal acts by which the legislature has regulated the protection of the HR to equal protection and the conditions for positive discrimination do not ensure to SMEs appropriate protection, since the provisions of such acts are too abstract, thus the legislature should in every area in which the existence and development of SMEs is jeopardized in a competition battle with the large ones, regulate such with
In addition to the possibility to obtain financial and other incentives for SMEs to enter the market and the mitigation of individual administrative requirements that SMEs are entitled to in the valid legal order, the state should be bound to abolish by positive discrimination measures more severe conditions for business operation of SMEs in order to compete with larger rebates of the large in specific branches (e.g., such that suppliers would be obliged in a specific business year to recognize the small a rebate on the joint extent of turnover in the same percentage as they recognized it to the large ones), and to ensure better implementation of regulations from the area of free competition restriction, in particular concerning the control of abusing a dominant position and abolishing negative consequences in an individual relevant market of goods and services with respect to an SME being pushed out of the market, etc.
In the area of public procurement, the forms of demonstrating bonuses should be supplemented by mechanisms such that SME would easier fulfil that requirement. The obtaining of financial resources in the financial market should be made easier for SME by substitutes to equalize worse conditions in comparison with those of large enterprises, which would ensure their equal starting position and would not be contrary to the prohibition of obtaining state aid (the equalization of a competitive position). In the area of retail trade, the legislature should create a standard of local supply and should enforce such by special incentives concerning the conditions of business of small retailing shops, in particular in rural areas. By such a solution, not only the requirements of equal protection of an SME would be met, but also the right of citizens to local supply and for which their consumer protection would be contributed.