Estonia: economist perspective

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Competition Authority is the enforcement authority for Estonia. Read their profile

The past year has witnessed changes in the Estonian Competition Authority (ECA), notably the appointment of a new Director General. Some of the practitioners we interviewed noted that the change in leadership may change some aspects of how the ECA operates, and there are already signs that the ECA has taken a more proactive approach to opening investigations.

In the latter half of 2022, Estonia witnessed exceptionally high merger activity, as 31 mergers were notified during this period. Some of these mergers were particularly complex, requiring some economic analysis, and five of these mergers proceeded to a Phase II investigation, a record high number in Estonia. At the beginning of 2023, merger activity slowed down due to the economic downturn.

The ECN+ implementation, designed to harmonise competition law enforcement within the EU, is still stalling, but it is expected to be implemented shortly. Implementation of the ECN+ Directive may impact competition policy enforcement in Estonia, as the directive may result in significant changes to existing legislation. Currently, Estonian cartels and other anticompetitive agreements are criminal offences, and abuses of dominance have been quasi-criminal misdemeanour offences, and these are potentially subject to change with the implementation of the directive.

This article is based on interviews with the Estonian Competition Authority and with prominent competition law practitioners from the law firms COBALT, Ellex Raidla, Sorainen and TGS Baltic conducted in June 2023.

Following a change in leadership, the ECA launched an inquiry into the motor fuel markets

In August 2022, Märt Ots, the previous Director General of the ECA, resigned and Evelin Pärn-Lee was appointed his successor. This change in leadership may result in the ECA adopting a more proactive approach to opening investigations, as alluded to by some of the interviewed practitioners.

Recently, the ECA has taken the initiative to open a market investigation into the motor fuel market. This has been rare in the past. Typically, the ECA has started investigations based on external complaints. The focus of the ECA’s investigation and the specific competition concerns will crystalise in due course. The ECA aims to publish its final analysis in 2024.

Failing firm defence was central to the assessment of a merger in the postal sector

In March 2022, the state-owned postal service company AS Eesti Post announced its planned acquisition of AS Express Post, a postal operator owned by the media company Ekspress Grupp. Eesti Post operates nationwide within Estonia, while the Express Post network covers Tallinn, Tartu, Pärnu and their surrounding areas, and Viljandi. The merger parties’ businesses overlap within the markets for periodicals[1] and business letters in urban areas and regional advertising services, where the merger would have effectively resulted in monopolisation of the markets.

This was the second time this merger was attempted, as the same merger was already notified and prohibited back in 2011. In this first attempt, the parties referred to the financial difficulties of Express Post and argued that Express Post would exit the market, although they did not officially apply for the failing firm defence. The parties also submitted behavioural remedies, but these were deemed insufficient, and the merger was prohibited.

In the 2022 iteration of the merger, the merging parties attempted to argue for the merger drawing on the failing firm argument (ie, that the exit of Express Post was inevitable absent the merger due to declining demand and increased costs).

Consistent with the European Commission’s guidelines on the assessment of horizontal mergers, the ECA assessed whether the three criteria for a ‘failing firm’ were simultaneously fulfilled:[2]

  • the allegedly failing firm would in the near future be forced out of the market because of financial difficulties;
  • there is no less anticompetitive alternative purchaser; and
  • absent the merger, the assets of the failing firm would exit the market.

The ECA assessed the probability of bankruptcy using the Altman model, a numerical method, and by assessing the profitability of Express Post. Based on this evidence, the ECA accepted that the future operations of Express Post were financially unsustainable, and the company could be forced out of the market. However, the ECA found that the parties were unable to demonstrate the clear absence of a less anti-competitive purchaser and the inevitable exit of Express Post’s assets. The ECA rejected the failing firm argument and prohibited the merger in October 2022, despite the behavioural remedies proposed by the merging parties.[3]

In January 2023, Express Post announced that it would exit the periodicals delivery market.[4] Express Post was the only operator of early-morning periodicals delivery services in the regions where Express Post operated, leaving a void in the market. Eesti Post has announced that they will be launching a service to fill this gap, and they may hire up to two-thirds of the 450 employees laid off due to Express Post leaving the market.[5]

In May 2022, the ECA accepted a failing firm argument in its review of AS Dobeles dzirnavnieks/AB Baltic Mill, a merger between manufacturers of grain mill products and wholesaling of products such as flour and pasta. In this case, the ECA was satisfied with the evidence demonstrating the fulfilment of the failing firm criteria. They performed a similar analysis on the probability of the firm exiting the market as with the postal merger, using the Altman model and analysing profitability indicators.

In contrast to the postal merger, AS Baltic Mill was able to demonstrate that there are no less anti-competitive buyers and that the assets of the failing firm would exit the market, given that the target had unsuccessfully negotiated with several buyers between 2015 and 2020. They argued that the main assets of the company are in remote locations, increasing production costs and making the assets unappealing to potential buyers. AS Baltic Mill also showed that no other company had shown interest in buying the production equipment separately. Thus, all three criteria for accepting a failing firm were fulfilled, and the ECA accepted the failing firm argument. However, the Lithuanian Competition Council prohibited the merger.

ECN+ implementation is still ongoing in Estonia

The ECN+ Directive aims to improve efficiency in the monitoring of competition across EU jurisdictions by harmonising and unifying legislation. In Estonia, the implementation has been further delayed beyond the original target of early 2021, and, in July 2023, the European Commission referred Estonia to the Court of Justice of the European Union for failing to implement the Directive into national legislation.[6] A key challenge appears to be that cartels and other anticompetitive agreements have been criminal offences while abuses of dominance have been lesser misdemeanour (quasi-criminal) offences in Estonia, unlike in many other jurisdictions. This has permitted the use of broad investigation tools typically used in criminal cases for the ECA, such as wire-tapping, but entailed a high burden of proof for anticompetitive and abuse of dominance misconduct.

Currently, there is a new bill awaiting parliamentary approval that would change the anticompetitive agreement and abuse of dominance investigations to administrative processes, and many expect this to pass. The new administrative procedure would entail a lower burden of proof, which may in turn allow for increased use of economic assessment to produce evidence. However, some stakeholders are worried that the administrative process would reduce the legal protection for companies as it would introduce an obligation for the companies to assist the ECA in the investigations.[7] Moreover, some have voiced concerns about whether the new administrative process is compatible with the Estonian constitution and speculate that the Estonian Supreme Court may be asked to investigate the constitutionality of the new administrative process.

A limited number of other antitrust inquiries have been launched under articles 101 and 102 of TFEU

As the implementation of the ECN+ Directive has been ongoing for a long time, there is an overarching perception among practitioners that the ECA is unlikely to initiate new antitrust investigations. While the implementation of the ECN+ Directive would lower the burden of proof required, practitioners have indicated that the implementation would complicate ongoing investigations considerably. This means that if the ECN+ Directive was implemented in the middle of an investigation, it would at best require additional work to reorganise the investigation and at worst render some evidence inadmissible. That said, there have still been some antitrust inquiries, for instance into a suspected cartel in the agricultural industry. This investigation was concluded in May 2022, and some of the investigated companies were fined a total of €209,500. Criminal proceedings concerning private persons are still ongoing.

Proposal to enable the ECA to ‘call in’ potentially problematic mergers that do not meet turnover thresholds

In April 2022, MM Grupp, the key owner of movie theatres in Estonia and a large film distributor for cinemas, purchased a single theatre in Tallinn from Forum Cinemas.[8] The acquisition was carried out without a merger review. In 2021, the target’s revenue fell below the notification threshold of €2 million as a result of covid-related restrictions during 2020 and 2021 and the closure of the Tallinn Coca-Cola Plaza cinema at the end of 2021. This allowed the merger to be completed without involvement by the competition authority.

Concerning this development, the ECA expressed concern that the closure of the cinema in Tallinn might be a deliberate action to force the acquisition beneath the notification threshold.[9] According to the ECA, an investigation concerning this merger was opened already in 2021 and the investigation is still ongoing. Details of this investigation are not public, but some of the interviewed practitioners mentioned that ECA had discussed the possibility of opening an abuse of dominance investigation into this merger. This possibility has legal precedent following the Towercast ruling of the ECJ, which concluded that national competition authorities can review acquisitions of dominant entities under the abuse of dominance rules if those acquisitions are not notifiable under national merger guidelines.[10]

In 2019, there was a similar case concerning a potential merger of two travel agencies. The ECA was concerned that the merger could have negatively affected competition, particularly in the field of intermediation of travel services, which resulted in the prohibition of the proposed merger. The involved travel agencies proceeded with the merger later when the notification thresholds were no longer met.

Because of cases like these, in November 2022, the ECA proposed to amend its mandate such that they would have a ‘call-in clause’.[11] This would allow the ECA to investigate mergers where the ECA has identified potential competitive concerns, even when the notification thresholds are not met. This was previously attempted in 2015, and it remains to be seen whether this new proposal will pass. A similar call-in clause has been implemented into the competition legislation in several European countries, including the Baltic states of Latvia and Lithuania.[12]

New horizontal guidelines could lead to antitrust cases related to collaboration on sustainability matters

The European Commission published its revised guidelines on horizontal cooperation agreements at the beginning of June. As a result, companies have greater clarity on the circumstances under which horizontal agreements between competitors could be permissible under competition law on the grounds of sustainability benefits. Based on our interviews, there is interest in these types of agreements in Estonia.

By way of an example, sustainability arguments appear relevant in the context of an energy storage project that is currently underway in Estonia. The project is co-owned by Sunly AS, Alexela and Vool OÜ. This hydro-pumping project aims to store energy by pumping water into an artificial underground cave. Once completed, the project would provide the capability to store an amount of electricity that is comparable to the average daily electricity consumption of Estonian households, providing flexibility to the whole Nord Pool power market.[13] The project received the go-ahead from Estonian authorities in early 2023, and construction is set to start in the summer of 2024. Other projects involving horizontal cooperation may also materialise in the future, potentially involving information exchange to achieve sustainability goals.


[1] Periodically delivered mail such as newspapers and magazines.






[7] Under the criminal proceedings, individuals at the companies have the right not to provide self-incriminatory evidence.

[8] MM Grupp has attempted to acquire Forum Cinemas in the past, but the plans were abandoned after the ECA indicated their intention to prohibit the acquisition. The attempted acquisition is discussed in more detail in past years’ GCR Enforcer Hub articles for Estonia, see eg, .

[9] See, for example, news article in ERR November 2021:





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