Use of economic analysis in competition law cases is still quite limited in Estonia. For example, in mergers, structural analysis and a focus on concentration levels seem the predominant paradigm. Cartels are criminalised in Estonia, which raises the burden of proof. There have not been any follow-on cartel damage cases. It is an Estonian particularity that there are many excessive pricing cases, with the Estonian Competition Authority (ECA) also being the price regulator in many industries. The knowledge and experience from price regulation cases has led to many excessive pricing cases and affected the economic methods used. The ECN+ directive could, however, lead to economics having larger role investigations.
This article is based on interviews with ECA and esteemed Estonian competition lawyers in Cobalt, Ellex, Eversheds Sutherland, Sorainen and TGS Baltic.
The role of economic analysis is still limited
Economics still has a limited role in Estonian competition cases. For example, as in all Baltic countries, there has been an increasing number of large, more complex mergers in the past few years. Relatively, many mergers have also been prohibited. However, merger review very much relies on market shares, qualitative evidence and opinions from market investigations. For example, customer surveys to calculate diversion rations and a proper small but significant and non-transitory increase in price test are less frequent.
The ECA is a quite small authority, but it does have several economists and the staff is well appreciated by the private practitioners of Competition Law. However, it appears that much of the personnel has been at the authority for a relatively long time. This is likely to influence the methods employed and routines of investigation. Partly due to the dual role of regulator and competition law enforcer, the economic analysis that is applied is mostly financial analysis. It was the view of many private practitioners that the ECA has become more willing to prohibit mergers, which naturally affects the willingness of the private business to challenge the investigations.
Cartels are criminalised
The role of economics is also quite limited in other competition cases. Cartels are criminalised in Estonia, which means that the barrier is high for a proper cartel investigation as the burden of proof is heavier and procedural aspects are different than if cartels were handled as administrative cases. According to the private practitioners, due to the requirements of a criminal process, there is only a limited number of cartel decisions, which also leads to there not being follow-on cartel damage cases. Estonian law allows fines only in criminal case whereas, although cartel investigations can be run as administrative case, the outcome of such an administrative process is an order to stop any misconduct.
Abuse of dominance and excessive pricing
Like cartel cases, a proper abuse of dominance case leading to fines cannot be run as an administrative process, but a quasi-criminal misdemeanour process would be needed. However, as abuse of dominant cases usually rest quite heavily on analysis of economic effects, the barriers of a proper abuse of dominance case are considered high. For this reason, the abuse of dominance cases are run as administrative processes. Estonia distinguishes itself from mainstream European competition law enforcement as it has many excessive pricing cases compared to its other European peers. The ECA is the price regulator for many industries and is willing to use the regulatory framework to analyse questions of excessive pricing in industries not subject to price regulation. The regulatory approach in economic analysis has been accepted and confirmed by the court in past cases.
ECN+ directive could lead to increase in economic analysis
The ECN+ directive is expected to have substantial effects on the legislation in Estonia as its implementation should lead to an adoption of a full administrative process with the right of imposing fines for an infringement of competition law. Currently, fines are available only for criminal offences. It is still unclear how the Estonian legislation will be adjusted, but one evident consequence can be that the role of economic analysis in cartel and, especially, abuse of dominance cases increases as there is no longer the need to show the criminal or quasi-criminal offence.