Lithuania: Competition Council
After more than 20 years of the market economy in Lithuania, people keep asking: Competition - what is in it for us? What is the Competition Council's contribution? To give a short response, businesses expect playing by the rules, and consumers expect benefit; but a competition authority is as good as it can deliver both.
The Competition Council has been assessing its impact since 2011 and has made a public commitment that, for every €1 put into the authority's budget, it will bring €5 of direct consumer benefit, as measured by the OECD methodology. By this measure, each euro invested into our operations in 2016 brought an almost eightfold direct financial benefit to consumers.
Consumer benefit must go beyond abstract figures. As competition authorities we have to be able to show concrete evidence of our beneficial interventions. To that end, in 2016 we produced three examples of uncovered bid-rigging and finished a market study on reimbursable pharmaceuticals with a specific list of recommendations on how state regulation should be improved to make better use of taxpayers' money. Importantly, in 2016 the Competition Council won court battles in three major cases originating from its earlier interventions. These were against Gazprom (breach of merger conditions designed to facilitate access to supply of cheaper natural gas), Maxima/Mantinga (RPM in bakery products lasting 10 years) and E-turas (price coordination by travel agents using an online platform).
High as competition benefit from our interventions may be, society can remain sceptical if not all market participants play by the same rules, thus creating the sense of unfairness to the whole process.
To deal with such scepticism, and to strengthen competition culture, the Competition Council follows three rules.
First, the authority applies the same measure to all competition restrictions, regardless of whether such restrictions are created by state or private bodies. This is reflected in our case statistics: from 2011 to 2016, we established 27 breaches of competition law by private firms and 31 infringements by public administrative bodies. From 2017, the latter will also run the risk of financial sanctions, from which - unlike undertakings - they have so far been immune. Equipped with new sanctioning powers, our authority expects the deterrence against public restrictions of competition to become more effective.
Our second rule is to combine strong enforcement, including sanctioning, with effective advocacy. For quite a few years we have been increasingly active in this field, and in 2016 we launched a competition roadshow aiming to visit several municipalities and reach out to representatives of both local governments and businesses.
The third rule we have come to learn is that a competition agency must not operate in isolation. Individual achievements bring satisfaction, but by working together with allies we can take on bigger challenges and create more benefits for consumers and businesses.
Our traditional allies have been competition authorities of other countries, if only because working with like-minded people is easier. There is no better example of such cooperation than the European Competition Network (ECN). In place since 2004, the ECN has already exceeded many expectations, but further improvements can be made to ensure the network operates more effectively. To that end, in 2016 the Lithuanian Competition Council presented its views on the European Commission's initiative of empowering national competition authorities to become better enforcers.
Closer cooperation with our ECN peers should not prevent us from seeking partnerships on our home soil. Engagement with national authorities can be easily overlooked or taken for granted, but as our 2016 experience demonstrates such engagement contains huge - and yet unfulfilled - potential for a more effective competition enforcement and advocacy.
Our fight against bid rigging would have been less effective but for the support we received from the public procurement and anticorruption authorities. In 2016, we started working closely in relation to bid-rigging cases - three of which our authority successfully completed - and our experience of working together led to creation of an information exchange and resource sharing mechanism that becomes fully functional in 2017.
In our 2016 market study of reimbursable pharmaceuticals the Competition Council identified regulation as creating barriers to entry for cheaper generics. This study complemented another inquiry into the pharmaceutical sector completed by the State Audit Office in the same year. Findings and recommendations of both authorities are key drivers of a regulatory reform that the Ministry of Healthcare intends to carry out in 2017. The agreement we signed with the State Audit Office promises to take the existing inter-agency cooperation even further.
In 2016, the authority was involved in a complex assessment of banks' and insurance companies' mergers. Some of that merger work, as well as one investigation of a suspected abuse of dominance in the banking sector, will continue in 2017. Our experience has shown that getting expert assistance from the Central Bank - a regulator of both banking and insurance markets - can be a big advantage in making our competition assessments better and quicker. The 2016 cooperation agreement with the Central Bank envisages secondment opportunities as a way to share technical expertise between the authorities. We hope to exploit the efficiencies that this sharing may bring to our work.
The stories of successful cooperation leave a lot to be desired. Nowhere is the case for better cooperation more pressing than in the field of activities of municipalities. Some local government bodies treat disruptive forces of competition with scepticism, and there are those involved in outright competition restrictions that bring harm to consumers. All this presents a challenge for us: understanding the concerns municipalities may have, and explaining the consumer benefits of pro-competitive behaviour of a municipal authority. To face that challenge, in 2017 we will continue our competition roadshow targeting local governments and businesses. It will not be easy, but the benefits of cooperation - and, ultimately, competition - are worth the effort.