Three recent landmark decisions highlight the increasing use of economic methods in public and private competition law enforcement in Lithuania. First, in April 2018, the Lithuanian Competition Council (LCC) reported that UAB Rimi Lietuva (RIMI) failed to implement merger remedies that the authority approved as a condition when clearing the merger of large grocery chains in Lithuania. Second, in October 2017, the Supreme Administrative Court of Lithuania upheld the LCC’s decision by which the merger of two major pilsner malt producers in Lithuania was prohibited. Third, in 2019, the preliminary findings of the LCC showed that the merger between a national and a local fixed internet access services and paid TV services providers (Cgates and Splius) would lead to a significant restriction of competition in a local market. Subsequently, the merger filing has been withdrawn by the acquirer. Extensive economic analysis preceded each decision.
This article is based on interviews with prominent competition law practitioners from the law firms Cobalt, Ellex, Sorainen, TGS Baltic and Walless, as well as with the legal and the economist team of the LCC.
The role of economic analysis is increasing in mergers
The number of cleared mergers ranged from 23–37 annually in the 2016–2018 period. In contrast, one to two merger cases per year were prohibited or withdrawn by merging parties due to concerns expressed by the LCC. The number of cases where the LCC moved to the second phase investigation was up to 10 each year. For the past several years, the LCC accepted only structural remedies, though the parties often offered behavioural commitments as well.
According to the interviewees, mergers are overall becoming more complex, one reason being that the market is more and more consolidated. Long investigation times and the extent of data required to submit to the LCC was mentioned by some of the interviewees as creating costs for the companies. A comparison was made to other Baltic states where merger investigation times and information requests by the competition authorities are perceived to be less burdensome.
The LCC and the market participants are using economic methods in mergers more often than in the past. However, the economics used seems to rely more on qualitative arguments and questionnaires sent to market participants rather than, for example, econometric effects analysis. The use of economics has, however, increased as private parties have produced their own analysis. For example, catchment area analysis, small but significant and non-transitory increase in price test, price difference analysis and others have been used both by the private parties and the LCC in recent merger cases.
Abuse cases are relatively rare and focus is on cartels
Abuse of dominance cases are relatively rare. Cartel detection continues to be one of the LCC’s focus points. One of the most prominent cases in 2017 concerned joint bidding in the construction market, which according to the LCC was a by object restriction of competition. The case is now pending in Supreme administrative court.
The EU Damages Directive has been fully transposed to the national law, but damages cases are still rare. There are two stand-alone pending damages cases and two follow-on damages cases.
LCC’s economists have a role in prioritising investigations
All the LCC’s economists are placed in the Economic Analysis Group, formed in 2018. The LCC expects to expand the unit in the future. In addition to case work, the economists play a role in prioritising which investigations the LCC launches. Specifically, the LCC prioritises and selects cases for further investigation based on three criteria: the impact on effective competition and consumer welfare, strategic significance and rational use of resources.