Estonia: economist perspective

The appliance of economic analysis in Estonian competition cases remains low, even in merger investigations. Mergers and acquisitions activity has been relatively high in Estonia during the past year, but many acquisitions have fallen below the notification thresholds. The Estonian Competition Authority (ECA) proposed to prohibit a merger between two companies in the cinema market, but the merging parties withdrew their notification before the merger was officially blocked.

The ECA functions both as a competition law enforcer and a tariff regulator. In Estonia, the implementation of the ECN+ Directive, designed to harmonise competition law enforcement within the EU, is behind the Commission’s schedule and the outcome of the implementation process remains uncertain.

This article is based on interviews with the ECA and prominent competition law practitioners from the law firms COBALT, Ellex Raidla, Sorainen and TGS Baltic, conducted during July and August 2021.

High activity in mergers and acquisitions

The ECA received 36 merger notifications during 2020, which is a decrease compared to the 45 notifications received in 2019.[1] Nevertheless, 2020 and the first half of 2021 were active in terms of M&A activity in Estonia, according to the lawyers interviewed. However, a considerable share of acquisitions has fallen below the notification thresholds in the past year. The revenue threshold that triggers a review by the ECA is €6 million in revenue for the undertakings combined in Estonia and €2 million for at least two of the merging parties in Estonia.[2] Some of the lawyers believe that one of the main reasons behind the large number of transactions not requiring notification is that the buyers are often foreign companies without an active business in Estonia. While many feared that businesses would struggle to survive the outbreak of covid-19, none of the mergers reviewed by the ECA has involved an assessment of the failing firm defence.

A merger notification in the Latvian cinema market was withdrawn after the ECA moved to block it

A key merger investigation in the past year was the proposed merger between UP Invest OÜ and Forum Cinemas OÜ; due to an intra-group merger, the name of the buyer changed to MM Group during the merger investigation. In its investigation, the ECA found that the concentration would give the merged entity a dominant position in the Estonian cinema market.[3]

The buyer controls Apollo Kino OÜ. Apollo Kino and Forum Cinemas both have cinemas in the two largest Estonian cities, Tallinn and Tartu. In addition to the horizontal overlap in the market of cinema film exhibition services, MM Group is active in the market for distribution of films to cinemas, under the trademark Hea Film. Therefore, in addition to the horizontal overlap of two main cinema providers in the two largest cities, the proposed merger included a vertical aspect.

The ECA analysed the competitive situation and the impact of the proposed concentration in three relevant markets: (i) cinema film exhibition services in Tallinn, (ii) cinema film exhibition services in Tartu, and (iii) the distribution of films to cinemas in Estonia. According to the ECA’s decision, the joint revenue-based market shares of the parties were between 80 and 100 per cent in Tallinn over the past three years and between 85 and 100 per cent in Tartu in 2020. Consequently, the ECA concluded that the merged entity would gain or strengthen a dominant position in the already concentrated cinema markets of Tallinn and Tartu, to the detriment of consumers. Furthermore, the ECA concluded that (i) pressure from potential competition is weak, (ii) streaming platforms are not substitutes for cinemas after the covid-19 pandemic, (iii) post-merger price increases were likely, and (iv) countervailing buyer power was not sufficient to prevent post-merger price increases.

Lastly, Hea Film was found to be the market leader in national film distribution, with a 40 per cent market share in 2019. According to the ECA, the vertical link would distort competition by enabling the merged entity to foreclose competing cinemas from Hea Film’s film distribution services. In response to ECA’s competition concerns, the parties proposed a remedy package that would have alleviated some identified problems, but the ECA found the proposed remedies inadequate given the severity of the competition concerns. Therefore, in February 2021, MM Group announced that it had terminated the merger proceedings.

Delays in the implementation of the ECN+ Directive

The ECN+ Directive aims to harmonise and improve the efficiency of competition monitoring within the EU and was supposed to be implemented in all member states by February 2021. However, in Estonia, the implementation of ECN+ has been delayed due to difficulties in incorporating the Directive into the existing competition legislation. The ECA has contributed to the process leading up to the planned implementation of the ECN+ Directive, which has occupied some of the authority’s resources. According to the ECA, it is possible, albeit still uncertain, that the new legislation will be approved by the end of 2021.

Cartels and all other anticompetitive agreements are currently criminalised in Estonia. For better alignment with the EU, the termination of criminalisation is one of the key questions regarding the ECN+ implementation. The ECA representative interviewed estimates that, due to the higher burden of proof, criminal cases take thrice the resources required by administrative proceedings. The ECA expects the number of cases and the use of economic evidence to increase under administrative procedures. The ECA highlights that the criminalisation of cartels has permitted them to use forensic methods that are typically not allowed in competition enforcement, such as phone tapping, to gather evidence. It is currently not clear how ongoing criminal cases will be finalised under the new regime.

Benchmark comparisons are frequently utilised in excessive pricing investigations

The ECA has a wealth of experience in pricing investigations due to its dual role as the tariff regulator of network industries and as a competition authority. The ECA representative notes that caution should be exercised in any interventions concerning firms’ pricing. If prices are regulated and result in low profitability, this may limit the incentive for competitors to enter the market. Therefore, the ECA focuses its price control efforts on markets with no prospect of market entry (ie, mostly on network industries that are considered natural monopolies). When the ECA makes assessments of firms’ pricing, it tends to compare profitability to the national average of a corresponding sector or an international benchmark. In addition to price benchmarking, the ECA has assessed whether the returns generated by a company under investigation have persistently exceeded its weighted average cost of capital (WACC), which is commonly regarded as a reasonable rate of return in regulatory settings.

Alleged abuse of dominant position: pricing by Eesti Post was found unproblematic

Target Master OÜ, a direct marketing and production company, filed a complaint with the ECA regarding the discount for unaddressed advertisement offered by AS Eesti Post to Jysk Linnen’s Furniture OÜ (Jysk).[4] According to Target Master, Eesti Post’s prices discriminated against trading partners and were low enough to be considered predatory pricing. However, the ECA found that the price discount offered to Jysk did not deviate from standard pricing. Moreover, based on previous case law, the ECA concluded that the dominant position of Eesti Post does not imply an obligation to apply uniform prices to its trading partners. The ECA’s investigation found no proof of misconduct, and the investigation was therefore closed.

The lawyers interviewed were not aware of new publicly announced cartel investigations in Estonia.

Private enforcement: port fees challenged by Tallink

The shipping line Tallink Grupp sued the state-owned Port of Tallinn for excessive pricing between 2017 and 2019.[5] More specifically, Tallink Group found the fees charged by Tallinn Old City Harbour too high based on comparisons with other local ports. Port of Tallinn, on the other hand, stated that the fees are lower than those charged in Helsinki or Stockholm. In the spring of 2021, Tallink Group sued Port of Tallin, claiming €15 million worth of damages. The case is now being processed in court. According to one of the lawyers interviewed, it is more common in Estonia than in other EU countries for companies to take abuse of dominance and excessive pricing cases directly to court, bypassing the competition authority.

Most of the interviewed lawyers find it unlikely that class actions will become common in Estonia. One attempt has been made to pursue such a damage claim regarding the excessive pricing of water companies, but potential claims are typically small compared to the cost of a collective proceeding. Without a clear-cut large cartel case, the lawyers do not believe that it is worthwhile to file a collective claim. However, if such a large cartel case arose, some lawyers think that a class action could materialise, most likely financed by a litigation fund.

[1] The ECA’s annual report 2019, page 14:; the ECA’s annual report 2020:

[2] The ECA’s annual report 2020:

[3] The ECA’s public decision of the case MM Grupp/Forum Cinemas on 19 February 2021:

[4] The ECA’s public decision regarding Target Master’s complaint against Eesti Post, published on 19 February 2021:

[5] See, for example, a newspaper article on 2 March 2021: and on 16 April 2021:

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