The European Antitrust Review 2015 Section 4: Country chapters

Lithuania: Overview

Regulatory framework

The primary source of competition law in Lithuania is the Competition Law of the Republic of Lithuania of 1992 (the Law). Subsequently, the Law has been revised as a result of Lithuania’s accession to the EU and, following the amendments that entered into force on 1 May 2004, the Lithuanian competition regime is now largely aligned with the EU model. This development was related to the procedural changes in EU competition law (the coming into force of the Council Regulation 1/2003 of 16 December 2002 on the implementation of the rules of competition laid down in articles 81 and 82 of the EC Treaty (articles 101 and 102 TFEU) (Regulation 1/2003)), as well as the harmonisation of national law with the EU competition law.

The major amendments regarding Lithuania’s accession to the EU included:

  • the seven-day term for the submission1 of a notification on an intended concentration has been abolished and the Council shall be notified prior to the implementation of a concentration;
  • a fee of between 5,600 and 11,200 litas for the submission and processing of merger notifications was introduced; and
  • the substantive test for assessing the compliance of a concentration with the provisions of the Competition Law was changed – the Council now has the right to refuse clearance not only when it is likely to create or strengthen a dominant position, but also if the intended concentration imposes a significant restriction of competition in a relevant market.

The most recent amendments of the Law came into effect on 1 May 2012 and are discussed below.

The aim of the Law is to protect the freedom of bona fide competition in Lithuania. The Law has laid down fundamental rules for the prohibition of anti-competitive agreements and concerted practices, abuse of a dominant position and unfair competition, and it has provided rules for merger control.

The national supervisory authority and competition watchdog in Lithuania is the Competition Council (the Council). In 2012, the financing of the Council was increased by almost 14 per cent to about €1,274,300 – in 2013, this remained unchanged (the Council retained 64 staff in 2013), threatening to compromise its ability to thoroughly ensure the supervision of the Law.2 The Council, however, proposed new financing schemes to the government, claiming additional financing from independent sources and not just the state budget. Therefore, the Council is fighting an uphill battle: it is striving to enhance its enforcement activities, but it is persistently hampered by limited resources and an ever-dwindling budget. However, some credit is due to the Council for receiving two stars in Global Competition Review’s 2014 ‘Rating Enforcement’ survey.3

The Council has passed a good deal of secondary legislation facilitating the implementation of the provisions of the Law. Therefore, the Law is not the only source of competition law in Lithuania. The aforementioned secondary legislation and the Law have been drafted closely following the principles set out in the Treaty Establishing the European Community (the Treaty), the Treaty on the Functioning of the European Union (TFEU) and other sources of EU competition law.

Anti-competitive agreements and concerted practices

Prohibition

Article 5 of the Law contains a prohibition on all agreements that have, as their object, the restriction or possible restriction of competition, including:

  • agreements to fix, directly or indirectly, the prices of certain goods or services or other conditions of sale or purchase;
  • agreements to share a product market on a territorial basis, according to groups of buyers, suppliers or in any other way;
  • agreements to fix production or sale volumes for certain goods, as well as to restrict technical development or investment;
  • agreements to apply dissimilar (discriminating) conditions to equivalent transactions with individual undertakings, thereby placing them at a competitive disadvantage; and
  • agreements to make conclusion of contracts subject to the assumption by other parties of supplementary obligations which, by their commercial nature or according to their purpose, have no direct connection with the subject of the contract.

Such agreements or provisions of the agreements are considered void from the moment of their conclusion unless subject to the de minimis rule or the exemption (articles 5(3) and 6 of the Law). The prohibition above covers both horizontal agreements (between actual or potential competitors) and vertical agreements (where undertakings operate in different levels of the production or distribution chain).

Agreements, specified by the points above, are considered to be restricting competition in all cases if concluded by actual or potential competitors.

As can be derived from the provisions above, these reflect the provisions of article 101 of the TFEU and must be interpreted in the light of the EU case law under article 101 of the TFEU.

De minimis

The Law provides that provisions of article 5 of the Law shall not be applicable to agreements between undertakings which, due to their non-appreciable influence, cannot substantially restrict competition. The Law provides that conditions and requirements for such agreements shall be set out by the Competition Council.

Indeed, such conditions and requirements were laid down in the Resolution of Competition Council No. 1 of 13 January 2000 on approval of requirements and conditions for agreements which, because of their non-appreciable effect, are not considered in breach of paragraphs 1 and 2 of article 5 of the Law, as amended by the Resolution of the Competition Council No. 1S-172 of 9 December 2004 (the Resolution).

Clause 4 of the Resolution provides for presumptions when the agreements are considered to be incapable of restricting competition due to their insignificance:

  • horizontal or mixed agreements between undertakings, the aggregate market share of which does not exceed 10 per cent of the respective market; and
  • vertical agreements between undertakings, the separate market share of which does not exceed 15 per cent of the respective markets.

Clause 5 of the Resolution also provides for thresholds in case of cumulative effect of the agreements. These provisions, as well as provisions of clause 4 of the Resolution, mirror the provisions of the Commission notice on agreements of minor importance, which do not appreciably restrict competition under article 101(1) of the TFEU (the De Minimis Notice).

Clauses 7 and 8 of the Resolution provide that de minimis rules do not apply to the ‘hard-core restrictions’ – horizontal and vertical agreements, which are considered to be most severe violations of article 5 of the Law. The list of these agreements is provided in clauses 7 and 8 of the Resolution and mirrors the list provided in clause 11 of the De Minimis Notice. It contains such hard-core restrictions as price fixing, limitation of output or sales, allocation of markets and so on.

Exemptions

Article 6(1) of the Law stipulates that article 5 thereof, which governs prohibited agreements, shall not apply in cases where the agreement promotes investment, technical or economic progress or improves the distribution of goods (thus allowing all consumers to get additional benefits), nor where:

  • the agreement does not impose restrictions on the activities of the parties thereto, which are not indispensable to the attainment of the above-mentioned objectives; and
  • the agreement does not afford the contracting parties the possibility of restricting competition in the major part of the market concerned.

Agreements complying with the terms and conditions listed above are effective from the moment of conclusion thereof – no prior decision of the Council is required. In case of any dispute concerning the compliance of the agreement with the provisions of article 6(1), the burden of proof concerning the compliance shall fall upon the party to the agreement that wishes to benefit from the exemption.

Article 6(3) of the Law provides that the Council also has a right to adopt regulations and to classify agreements, as well as to define conditions, upon the satisfaction of which an agreement shall be deemed to be in compliance with the conditions of article 6(1) of the Law.

Consequently, the Council, by its Resolution No. 1S-132 of 2 September 2004, has established that agreements that satisfy the conditions for the granting of an exemption laid down in the regulations of the Council of the EU and European Commission regarding the application of article 101 of the TFEU shall also be deemed to satisfy the conditions for the exemption under Lithuanian law. In cases where legal acts of the European Union provide that for the undertakings to be eligible for the exemption the income of such undertakings is to be of a certain amount (as a condition for the granting of the exemption), by applying Lithuanian law, the amount of the income is reduced 10 times.

Whistle-blowing

The Council, by its Resolution No. 1S-27 of 28 February 2008, has set out the rules on exemption from and reduction of fines for the members of restricted agreements, which reflects the Commission Notice on immunity from fines and reduction of fines in cartel cases.

Case law and recent developments

Between 2000 and 13 May 2014, the Council investigated 46 cases of restricted agreements (under article 5 of the Law). Most of the cases are the ones imposing the least burden of proof on the Council, such as horizontal price-fixing and market-sharing agreements. Investigating horizontal agreements has been declared a priority of the Council in contrast to investigations that require a proof of economic effect on competition (eg, abuses of dominant position).

The most recent decision by the Council was adopted on 4 March 2014 (No. 2S-1/2014) in the beer production market. The Council found that between 2004 and 2013 the Lithuanian Guild of Breweries and its members in the Brewers’ Code of Honour agreed not to produce beer of certain strength. The Council concluded that the agreement by the Lithuanian Guild of Breweries and its members infringed the requirements of competition law. The agreement created possibilities to avoid competition in a certain segment within the beer market, predict the behaviour of competitors and foresee their actions related to the volume of beer production.

However, the Council decided not to sanction the Lithuanian Guild of Breweries and its members as in the course of the investigation the parties to the agreement terminated actions that restricted competition. While taking the decision, the Council also took into account the fact that in 2008 the authority had approved in writing the former version of the Code.

Furthermore, on 8 April 2014, the Supreme Administrative Court of Lithuania confirmed the Council’s findings that vertical agreements in the cash services market concluded by three major Lithuanian banks and a leading security services banks restricted competition in the Lithuanian cash services market, had anticompetitive market foreclosure effect and limited the possibilities of bank clients to choose the provider of cash-in-transit services. However, the Court annulled the largest fines in the history of Lithuania that were imposed on parties of the agreements by the Council because the Competition Council had not properly evaluated the commitments proposed by the security services provider and, therefore, referred the relevant part of the case back to the Competition Council for further investigation. Thus, on 24 April 2014, the Competition Council reopened the investigation into vertical agreements in the cash services market.

It is worth noting that on 18 January 2012, the Lithuanian government adopted a resolution establishing a new methodology for setting the amount of fines (Resolution).4 The latter Resolution resembles the 2006 Guidelines on the method of setting fines imposed pursuant to article 23(2)(a) of Regulation No. 1/2003.5 The revised Resolution seeks to individualise and set up a more transparent mechanism while establishing the amount of fine. The Resolution envisages that fines may be based on up to 30 per cent of the company’s annual sales to which the infringement relates, multiplied by the number of years of participation in the infringement. Moreover, it aims to deter the infringers with the imposition of higher fines on recidivists.

Abuse of dominant position

Article 7 of the Law prohibits the abuse of a dominant position (by performing actions in the relevant market that have as their object or effect the restriction of competition, limiting the opportunity for other undertakings to participate in the market or violating consumer interests) and lists cases of conduct likely to constitute an abuse, similar to article 102 TFEU, which can consist of:

  • directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
  • limiting production, markets or technical development to the prejudice of consumers;
  • applying dissimilar (discriminative) conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or
  • making the conclusion of contracts 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 contracts.

Article 3(2) of the Law defines a dominant position as a position of one or more undertakings that face no direct competition in a relevant market or a position that enables them to exert unilaterally a decisive influence in that market by effectively restricting competition therein. The Law also defines presumptions of dominance and collective dominance, stating that:

  • an undertaking with a market share of not less than 40 per cent shall be considered to have a dominant position in the market unless it is proved otherwise; and
  • each undertaking in a group of three or fewer undertakings that have the largest share of and hold jointly 70 per cent or more of the market shall be considered to enjoy a dominant position, unless it is proved otherwise.

The amendments to the Law, which came into force on 1 January 2010, included an amendment that reduced the dominance position threshold applicable for the retail trade operators. Thus, unless proven otherwise, an undertaking engaged in retail trade with a market share of not less than 30 per cent (compared to previous 40 per cent) shall be considered to enjoy a dominant position within the relevant market. Moreover, unless proven otherwise, each of a group of three or fewer undertakings engaged in retail trade with the largest shares of the relevant market, jointly holding 55 per cent (compared to a previous 70 per cent) or more of the relevant market, shall be considered to enjoy a dominant position. The amendment of 1 January 2010 aimed to strengthen the supervision of the major supermarket chains.

The Council, in its Decision No. 52, 17 May 2000 (as amended by Decision No. 1S-15, 12 February 2005), set out the criteria for defining dominance based on EC case law and to bring national regulations in line with EC law (particularly the Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings).

Under the provisions of the above-mentioned decision, the main criteria for defining dominance are:

  • the market share of an undertaking;
  • the division of the market among competitors;
  • credible changes in the market structure;
  • barriers to the entry to the market; and
  • other factors that enable the evaluation of whether or not an undertaking holds a dominant position in the market.

On 24 February 2000, the Council also adopted Decision No. 17 regarding definition of the relevant market. This decision mostly reflects the provisions of the European Commission notice ‘on the definition of the relevant markets for the purposes of community competition law’.

Under this decision, ‘relevant market’ shall be understood as a market of certain goods in a relevant geographic territory, whereas a ‘product market’ means the aggregate of goods, which – from the consumer’s point of view – are appropriate substitutes according to their characteristics, application, prices and geographic market. A demand-side substitutability (potential competitors and barriers to entry) should also be taken into account. A territory on which the conditions of competition in respect of a relevant product market are essentially similar to those of all undertakings and which, taking this fact into consideration, may be distinguished from adjacent territories.

Case law and recent developments

With the newly adopted Resolution, as discussed above, fines for an abuse of dominant position are expected to increase. Furthermore, an amendment of the Law, which came into force on 3 May 2010, extended the period of limitation of imposing liability from three to five years. The amendment also describes cases when the running of this prescribed period is suspended. The latter measures are taken to eliminate preconditions for violators to escape the liability unduly for their anti-competitive practices.

The Council officially states that investigations in cases where the economic effect on competition has to be proven (for example, abuses of dominant position) are not a Council priority when compared with horizontal agreements restricting competition. Therefore, the case law concerning abuses of dominant position is expected to decline.

One of the main cases where abuse of dominant position was analysed is the case related to a dominant position in the fuel supply market enjoyed by AB Mažeikių Nafta (now AB Orlen Lietuva), a major oil refinery in the Baltics.

On 21 January 2013, the Supreme Administrative Court upheld the Competition Council’s decision to impose a fine on AB Orlen Lietuva for the abuse of dominant position with the aim of restricting fuel import into the territory of Lithuania. Among other Competition Council’s cases, this one was subject to the longest examination in courts and took seven years. The Supreme Administrative Court noted that, when setting the fine, the Competition Council correctly evaluated the abuse of dominance as a very serious infringement and the fact that the company had repeatedly infringed the Law of Competition.

Mergers

Concentrations

The Law describes the term ‘concentration’ as either a merger when one or more undertaking terminates its independent activity and is joined to an undertaking that continues its operations; or when a new undertaking is established from two or more undertakings that terminate their independent activity.

Moreover, a concentration is judged to exist in the case of the acquisition of control. More specifically, control exists when one and the same natural person (or persons) is already controlling one or more undertakings or else, when one or more undertakings, by agreement, jointly set up a new undertaking (except in cases where a new undertaking does not perform all the functions of an autonomous economic entity)6 or gain control over another undertaking by acquiring an enterprise or part thereof, all or part of the assets of the undertaking, shares or other securities, voting rights, by contract or by any other means.7

A concentration shall not be deemed to arise when commercial banks or other credit institutions, intermediaries of public trading in securities, collective investment undertakings or management and insurance companies acquire one-third7 or more shares in a company (to later dispose of), provided that:

  • they do not exercise voting rights in respect of those shares;
  • disposal of the shares takes place within a year of the date of acquisition; and
  • the acquiring undertaking informs the Council about such an acquisition within one month.

In accordance with the Competition Law, ‘control’ means any right that entitles a legal or natural person to exert a decisive influence on the activity of an undertaking. This definition also includes the right of ownership to all or part of the assets of an undertaking or the right to use all or part of such assets; and other rights that confer a decisive influence on the decisions or the composition of an undertaking’s personnel. A presumption of control exists if one-third8 of the total voting power in the undertaking is owned by a controlling person. A one-third control requirement is actually stricter than the one-half control threshold defined in article 5(4) of Council Regulation (EC) No. 139/2004.

The most recent amendments to the Lithuanian merger control regime, which came into force on 1 May 2012, did not introduce any other substantial changes in the area of merger control except for the amendments discussed above that increased the threshold applicable to the notion of control.

Notifications and thresholds

Mandatory pre-merger notification is required under Lithuanian law if the concentration fulfils the turnover thresholds as described below. However, the Council also has the authority to review transactions that fall below thresholds where it is likely that concentration will result in the creation or strengthening of a dominant position or a substantial restriction of competition in a relevant market. In Lithuania, pre-notification consultations with the competition authority are encouraged and are almost inevitable in practice.

Transactions that are subject to mandatory notification in Lithuania may not be implemented until they have been reviewed by the Council (the standstill obligation). The Law requires that parties to a concentration notify the Council of the transaction when the following two cumulative turnover thresholds are met:

  • the combined aggregate turnover of the undertakings participating in the concentration exceeds 50 million litas9 in the preceding business year; and
  • the aggregate turnover of each of at least two undertakings concerned exceeds 5 million litas in the preceding business year.

In May 2012, amendments were made aimed at promoting the effective use of the Council’s limited resources by not assessing less significant issues and raising fewer competition issues that might divert resources for the supervision of potentially more problematic concentrations.

Due to the EU ‘one-stop shop’ principle, when a concentration meets the thresholds for notification at EU level, no notification at national level is required.

The obligation on parties to suspend the completion of a merger until the Council has approved the transaction is subject to fines, which can be as high as 10 per cent of each of the parties’ turnovers. No agreements or actions related to concentrations that are made by the participating undertakings or controlling parties are valid if executed before clearance is obtained. In exceptional circumstances, however, the Council can grant derogation from the suspension obligation.

The combined aggregate income of the undertakings is calculated based on the rules defined in article 10(2) of the Law and in Decision No. 45 of the Council, 27 October 2000. The income of Lithuanian entities is defined as the figure given in the profit–loss report of the financial accounts of the undertaking.

The Law does not stipulate any exemptions to the notification requirements; in fact, the Council has the power to intervene against any concentration that falls below the notification thresholds, where there is no obligation to notify. In cases such as these, the Council may intervene by ordering the submission of a complete notification within a 12-month deadline following the implementation of a concentration if the concentration is likely to result in the creation or strengthening of a dominant position, or a significant restraint of competition in the relevant market. The latter option was introduced in order to assess competition issues in smaller markets. In practice, however, the Council exerts this power perhaps once or twice per year.

No legislation exists that deals specifically with foreign mergers. The Law explicitly states that it also applies to the activities of undertakings registered outside Lithuania if said activities restrict competition on the domestic market. However, the aggregate turnover of a foreign undertaking (registered outside Lithuania) participating in a concentration that may affect the Lithuanian market is assessed only on the income received from the sales of its products in Lithuania.

Sector-specific merger control legislation applies to banks and other financial intermediaries, insurance companies, broadcasters and others. Such legislation requires the approval or consent of the relevant official supervisory body, which should be obtained prior to the implementation of concentration.

The aggregate turnover of certain undertakings (insurance companies, collective investment companies and management companies, as well as undertakings of foreign states) is calculated in a different manner.10 For instance, if a participant in the concentration is an insurance undertaking, the value of gross insurance premiums will be calculated rather than the aggregate income.

Notification about a concentration must be filed with the Council before the concentration is implemented. However, a notification can be filed even when there is only a clear intention to conclude a contract or to make a public offer to buy stock. Those provisions basically mirror provisions in the Council Regulation (EC) No. 139/2004.

A standard form of notification is given in Decision No. 45 of the Council. The fee payable upon submission of the notification is 5,600 litas (for a combined turnover up to 100 million litas), 8,000 litas (for a combined turnover between 100 millon and 500 million litas) and 11,200 litas (for a combined turnover of 500 million litas or above). A concentration cannot be implemented before the resolution of the Council is passed. All agreements and actions related to concentration and made by the participating undertakings and persons in control are not valid if made before the above-mentioned resolution is passed. However, before a final resolution is passed, a Council can issue a separate permission for certain actions upon a justified request by the undertakings participating in concentration or by the controlling person. To accelerate the processing of applications to grant ex ante clearance (having assessed that the intended concentrations would not create any dominant position or significantly weaken competition and taking into account the consequences of the suspension of concentration on the persons concerned), the Council has the right to allow the completion of the individual acts of concentration pending the final decision.

Examination of notifications

The Council adopted the Resolution on Approval of the Procedures for Submission and Examination of Notification of Concentration and Calculation of the Aggregate Turnover (the Guidelines), which sets out the regulation of concentration in greater detail.11

Merger control in Lithuania is carried out by the Council, which is the primary authority dealing with Lithuanian merger control cases and it handles all merger control notifications.

In line with EC Merger Regulation No. 139/2004 (the ECMR), the Law requires that concentrations exceeding certain turnover thresholds be filed with the Council prior to implementation of the transaction. A mandatory notification must be made after:

  • the submission of a proposal to conclude the agreement or acquire shares or assets;
  • an instruction to conclude the agreement;
  • conclusion of the agreement; or
  • the acquisition of the right of ownership or the right to dispose of certain assets.

A notification can be filed even when there is only a clear intention to conclude a contract or to make a public offer to buy stock. These provisions reflect those of the ECMR.

A standard form of notification should be lodged with the Council jointly by all parties taking part in a concentration. In the case of the acquisition of control, notification must be submitted by the acquiring party. The Competition Law allows the Council four months in total to examine the submitted notification if it is in accordance with the established requirements. If commitments are offered, the examination period may be extended for an additional month at the request of the notifying parties. However, in practice, the Council clears the majority of mergers within a month of filing.

The time limit commences the day after the receipt of a complete notification. The Council immediately notifies the parties in writing if the notification is incomplete; in which case the term for the examination begins to run once the Council is provided with a complete notification.

There are no fast-track procedures; moreover, pursuant to the Competition Law, the Council is not explicitly empowered to render advance rulings either. Nevertheless, parties can approach the Council prior to the filing of the notification. To accelerate the review procedure, the parties may enter into pre-merger consultations with the Council. The aim of said consultations is to reduce the scope of the notification and to clarify matters of crucial importance to the Council in the review process for the clearance of transactions; it is common for undertakings to seek advice from the Council that will significantly improve the quality of the notifications, which in turn speeds up the Council’s process of rendering a final decision.

The Council publishes all notifications received and decisions made in the Official Gazette, specifying the nature of concentration and the parties concerned. All interested persons have the right to submit their opinions on the intended concentration during the two weeks following publication. Interested persons include:

  • parties submitting a notification on concentration;
  • other persons participating in the concentration;
  • natural or legal persons, as well as public organisations, whose interests are affected by the intended concentration; and
  • public and local authorities.

Persons who have submitted written objections to the intended concentration are notified of the anticipated decision, the date of the procedural meeting of the Council examining the issue and the time limit allowed to submit additional requests and explanations to the Council.

Persons that have submitted objections to the intended concentration in writing have the right to familiarise themselves with the materials related to the case (except for commercially sensitive or secret information), submit comments and submit a request to participate and be heard at the meeting of the Council.

The Council, upon completing the examination of the notification, may either:

  • allow the unconditional implementation of the concentration;
  • impose conditions upon the concentration to prevent the strengthening of dominance or restriction of competition; or
  • block the implementation of a concentration and impose an obligation on the undertakings or controlling persons concerned to perform actions restoring the previous situation or remove the consequences of the concentration.

If the Council does not render a decision within the allotted time, the undertakings have the right to implement their concentrations under the conditions defined in their notifications.

An undertaking under investigation may appeal to the Council against the actions of any authorised investigating officers within a 10-day period from the date of the disputed actions, and the CC must make a decision within 10 days of receipt of this complaint. The undertaking has the right to lodge a complaint with the Vilnius Regional Administrative Court if the Council’s decision is unsatisfactory or if no decision was issued during the 10-day period; however, such a complaint will not stop an ongoing investigation.

All decisions rendered by the Council may be appealed to the Vilnius Regional Administrative Court within 20 days of the receipt of the decision or its publication in the Official Gazette. An appeal does not stop the implementation of a decision unless the court decides otherwise. Within 14 days of the adoption of a decision by the Vilnius Regional Administrative Court, it may be further appealed to the Supreme Administrative Court of Lithuania.

Case law and recent developments

Since 2011, the economy and businesses have gradually begun to recover, and a slight trend towards increasing the numbers of received notifications and granted clearances can be noticed. In 2011, the Council cleared 49 concentrations; in 2012, 29; in 2013, 29; and up until the first quarter of 2014, nine concentrations.

On 12 May 2014, the Competition Council fined UAB Lukoil Baltija (a subsidiary of the Russian Oil company Lukoil) 11.8 million litas for implementing non-notified mergers and obliged the company to eliminate the breach. Having concluded a joint venture agreement with UAB Baltic Petroleum, in December of 2003, UAB Lukoil Baltija took over the control of 15 petrol stations. In June 2008, the company acquired control of one more petrol station. Hence, UAB Lukoil Baltija implemented non-notified mergers, acquired control of 16 petrol stations and, thus, infringed the Law on Competition. This Council’s decision is currently being reviewed by the Lithuanian courts.

On 11 December 2013, the Supreme Court of Lithuania (final instance) resolved a private competition enforcement case Urbico v Nordea, in which the claimant Urbico claimed that the bank Nordea acquired de facto control of Urbico by the means of credit and supplementary agreements (pledge of 100 per cent of shares and transfer of more than 80 per cent of claimants assets) without a merger clearance, though such acquisition of de facto control constitutes a merger. The claimant sought to annul the credit and supplementary agreements. The Court dismissed the action stating that credit agreements per se cannot be held as a means of control and the supplementary agreements were aimed at ensuring debtors obligations to the creditor and not to acquire control.

On 23 September 2013, the Council also terminated an unprecedented investigation in which it was analysed if commercial bank Swedbank AB had acquired de facto control over a publicly listed Lithuanian alcohol company Alita by means of credit and supplementary agreements. In this case, Swedbank allegedly had veto rights in regard to forming Alita’s business plans, appointing top executives and other business decisions. The Council’s decision is currently subject to an appeal and is being investigated by the Lithuanian courts.

Lastly, in 2012, the fee for submission, and the processing of merger notifications, was increased from 4,600 litas to 5,600, 8,000 or 11,200 litas, depending on the turnover of the parties to the concentration. This new fee is still relatively small compared with other jurisdictions.

Enforcement

Council

The main institution overlooking the implementation of competition law is the Competition Council (www.kt.gov.lt). It is composed of five members appointed for a term of six years. The chairman of the Council is appointed by the president of the Republic of Lithuania.

The Council cooperates with the European Commission and national competition authorities within the European Competition Network (the ECN) and the European Competition Authorities. Through the ECN, the information-exchange process is coordinated in cross-border mergers. The Council seeks to render decisions in line with the merger control practice of the European Commission.

In addition to the supervision of the Law, the Council performs supervision of the Law on Monitoring of State Aid to Undertakings and also carries out functions assigned by the Law on Prices and the Law on Advertising.

The Council is responsible for controlling:

  • agreements that restrict competition;
  • abuses of dominant positions;
  • concentrations that create or strengthen a dominant position with the effect of eliminating or restricting competition;
  • unfair competition; and
  • anti-competitive activities of public and local authorities.

The Council investigates competition restrictions both on its own initiative and on the basis of notifications and complaints. The Council has extensive investigatory powers; it may:

  • request information from undertakings under investigation;
  • search premises with or without notice (but only after obtaining a court order);
  • inspect and copy documents;
  • seize evidence;
  • obtain oral and written explanations;
  • require individuals to appear at the offices of the Council;
  • obtain information and documents from other economic entities (not subject to the investigation) and also from public and local authorities; and
  • enlist police assistance.
  • According to the Law, the Council has the right to:
  • impose administrative fines up to 10 per cent of the gross annual income;
  • prohibit concentrations;
  • prohibit anti-competitive practices;
  • apply interim measures; and
  • grant exemptions in respect of certain agreements and decisions.

A maximum penalty of 10 per cent from an aggregate turnover is the same as provided in article 14(2) of Council Regulation (EC) No. 139/2004; however, article 16 of the same regulation provides a possibility for the General Court to further increase this maximum penalty rate. There is no such provision in the Law.

According to article 172-18 of the Code of Administrative Law Offences, a penalty of between 20,000 and 50,000 litas may be imposed on a person who fails to report a prospective concentration to the Council.

In urgent cases where there is sufficient evidence of infringement of the Law, the Council shall have the right to apply interim measures necessary for the implementation of the final decision of the Council – that is, to obligate the undertakings to terminate an illegal activity or, with the court’s permission, to obligate the undertakings to perform certain actions in order to prevent serious damage to other undertakings or public interests or irreparable consequences.

Appeals to the Council

An undertaking under investigation may appeal the actions of the authorised investigating officers to the Council within 10 days after the actions were made. The Council must make a decision in another 10-day period. The undertaking has the right to lodge a complaint with the Vilnius Regional Administrative Court if the decision of the Council is not satisfactory or if the decision was not issued at all within 10 days. However, such complaint shall not stop the ongoing investigation.

Appeals to the court

All decisions made by the Council can be appealed to the Vilnius Regional Administrative Court. The appeal shall be filed in writing no later than 20 days after the receipt of the resolution of the Competition Council or, if the resolution is to be published on the website of the Competition Council, after the date of publication. An undertaking whose legitimate interests have been violated by acts performed in contravention of articles 101 or 102 of the TFEU or other restrictive practices, shall be entitled to bring a private action before the Vilnius Regional Court seeking termination of the illegal acts and recovery of the damages.

A civil claim for the infringement of domestic competition law may be submitted directly to the court according to the general rules defined in the Code of Civil Procedure of the Republic of Lithuania. The district or regional courts (if the amount of the claim is more than 150,000 litas) have jurisdiction to hear such cases at first instance. If the claim is justified, the court may:

  • prohibit the performance of illegal actions;
  • oblige the defendant to take certain actions;
  • restore the situation that existed before challenged actions were taken; and
  • compensate damages caused by illegal actions.

Both parties to the dispute can ask the court to implement interim measures at any time during the proceedings.

The decision of the court may be appealed to the higher court (ie, the regional court or the Court of Appeals) depending on which court heard the case at first instance. The Supreme Court has jurisdiction to hear cases in cassation, and its decisions are final and not subject to further appeals. The Supreme Court hears cases exclusively on the questions of law.

It is worth noting that the Supreme Administrative Court has recently ruled that the decision of the Council to initiate a competition infringement investigation is not a subject to appeal and cannot be dismissed (case No. AS143-212/2011).

Notes

  1. The running of the term starts from either an instruction or proposal to acquire shares or assets; or an acquisition of the title or the right to dispose of assets, whichever comes first.
  2. The Competition Council’s annual report of 2013, available at www.kt.gov.lt/en/annual/2013_eng.pdf.
  3. Ratings are available at www.globalcompetitionreview.com/surveys/survey/828/rating-enforcement-2014/.
  4. Lithuanian Official Gazette, 2012, No.12-511.
  5. Official Journal C 210, 1.09.2006, p. 2–5.
  6. The notion of control was supplemented by the amendments of the Competition law of 1 May 2012 to be more aligned with the EU competition model.
  7. Joint ventures are caught by this part of the ‘control’ definition.
  8. The one-third criteria was introduced by the amendments of the Competition law of 1 May 2012, compared with the previous requirement of 25 per cent.
  9. The one-third control threshold was introduced by the amendments of the Competition law of 1 May 2012, compared with the previous requirement of 25 per cent.
  10. An increased combined aggregate turnover of 50 million litas was introduced with the amendments of the Competition law of 1 May 2012, compared with the previous threshold of 30 million litas.
  11. Resolution of the Competition Council of the Republic of Lithuania of 27 April 2000, No. 45, amended on 13 January 2005.
  12. Resolution of the Competition Council of the Republic of Lithuania of 27 April 2000, No. 45, amended on 13 January 2005.

Motieka & Audzevičius

Gyneju street 4
01109 Vilnius
Lithuania
Tel: +370 5 2 000 777
Fax: +370 5 2 000 888

Ramuˉnas Audzevicˇius
ramunas.audzevicius@ma-law.lt

Mantas Gudžiuˉnas
mantas.gudziunas@ma-law.lt

www.ma-law.lt

Motieka & Audzevicˇius is a leading law firm in Lithuania with core practices in dispute resolution, corporate and M&A, competition/antitrust, regulatory and governmental, and tax. The firm’s expertise is recognised by the leading international law directories Legal 500, Chambers Global, Chambers Europe and International Tax Review.

Geographically, the focal point of the firm’s activities is the Baltic region, where in collaboration with Latvian partners Skrastins & Dzenis and Estonian Hedman Partners an outstanding service quality is offered. Other geographical areas of activity include Poland, Russia, Ukraine, Belarus and other CIS countries. Motieka & Audzevicˇius is also a member of the international Globalaw network.

The lawyers’ expertise is ensured by their premier legal education from world leading legal education institutions. The team has also substantial experience with landmark disputes and deals, especially in the energy and natural resources, pharmaceutical, aviation sectors, banking and financial services, health care, agriculture, real estate and construction.

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