This article outlines the most important developments in Lithuanian competition policy which have taken place over the course of the summer 2023. Contrary to what may have been expected, Lithuanian Competition Council was very active during the hot summer months and many important decisions as well as other developments have taken place over this time. The most important ones are outlined below.
|Gun Jumping in Lithuania: Interim Measures Imposed on Estonian Company MM Grupp
Lithuanian Competition Council (“Competition Council”) is currently investigating the actions of the Estonian company MM Grupp, which is suspected to have executed a concentration without obtaining the merger clearance decision from the Competition Council.
On March 8, 2021, the Competition Council received a notification regarding a concentration from MM Grupp. The intent of the Estonian company was to acquire 51% of the shares (which, together with its existing shares, would total 100%) of another Estonian company, Forum Cinemas Lithuania. This acquisition was intended to confer indirect control over the Lithuanian branch of Forum Cinemas.
Due to incomplete submission of necessary information by the companies involved in the transaction, the deadline for reviewing the notification was suspended. On October 14, 2021, in accordance with the provisions of the Lithuanian Competition Act, the Competition Council terminated the merger procedure and deemed the concentration notification as not having been submitted. The companies involved in the transaction were unable to proceed with the merger as they had not obtained the required clearance.
However, information available to the Competition Council indicated that despite the lack of merger clearance decision, MM Grupp opted to proceed with the transaction by effectively dividing the assets of Forum Cinemas Lithuania and transferring them in separate portions to related entities of MM Grupp. The Competition Council suspects that such actions are performed in order to avoid previously failed merger clearance procedure.
Consequently, on April 7, 2023 the Competition Council decided to impose the following interim measures on MM Grupp for a duration of one year:
(i) Mandate that all acquired assets and businesses from Forum Cinemas be operated and managed independently, solely for the benefit of the pertinent business, and not for the benefit of the broader MM Grupp group of companies.
(ii) Prohibit the transfer of control over the acquired assets and business of Forum Cinemas to any other entity or individual.
(iii) Refrain from any action that would directly or indirectly result in the acquisition of Forum Cinemas’ assets or business.
(iv) Enforce an obligation on MM Grupp and Forum Cinemas not to share any confidential business information, except where such disclosure is imperative for legal compliance.
In response to the imposition of interim measures, MM Grupp lodged an appeal within Lithuanian court. However, the court dismissed the appeal from the company, deeming it unfounded. Therefore, the imposed interim measures on MM Grupp remain in effect.
The decision to apply interim protection measures is unprecedented as it is almost never used in practice. Its application demonstrates increased enforcement activities in response to actions by market players, similarly as observed in the actions of the European Commission and other national competition authorities.
|Lithuanian Competition Council Imposed Fines on Skin Care Manufacturer and its Distributors for RPM practices
On July 25, 2023, the Competition Council issued an infringement decision, imposing fines on cosmetics manufacturer and supplier, Oda LT, along with its distributors, for engaging in resale price maintenance (RPM) practices. These practices involved agreements not to sell Oda LT products to consumers at prices lower than those stipulated by the manufacturer.
The Competition Council concluded that the manufacturer collaborated with its distributors to enforce fixed retail prices for skincare products to consumers, as specified in price lists and conveyed through separate emails. Furthermore, distributors were instructed not to apply any discounts without prior negotiation with the manufacturer.
The main aspects of the infringement were the following:
(i) the manufacturer provided distributors with price lists featuring recommended retail prices using various headings, all of which contained identical retail prices for skincare products during the same period.
(ii) certain distributors signed agreements explicitly obliging them to adhere to the provided prices.
(iii) the manufacturer monitored market prices and discounts, issued warnings to distributors, and demanded the removal of unapproved promotions, displaying a clear intent to enforce its pricing policy.
(iv) distributors complied with the supplier’s pricing instruction. Emails documented instances where the manufacturer communicated with distributors, instructing them not to apply discounts without approval. Distributors acknowledged these instructions and cancelled promotions accordingly.
(v) some distributors informed the manufacturer about competitors’ price disparities, expressing confusion regarding the pricing policy’s clarity.
The investigation was prompted by a leniency application, granting the applicant full immunity as permitted by Lithuanian competition law. The Competition Council imposed fines totalling 217,280 EUR on the supplier Oda LT and its distributors.
In conclusion, the enforcement decision comes as no surprise, given that resale price maintenance (RPM) is widely acknowledged as one of the most serious violations of competition law. This case comes as a reminder and underscores the significance of adhering to competition regulations and the decisive actions taken by the competition authorities to safeguard a level playing field in the marketplace.
More information about described case can be found here.
|Lithuanian Competition Council’s Findings on Online Marketplace Monitoring
During 2022, the Competition Council conducted monitoring on the operations of online marketplaces within Lithuania. This initiative involved the examination of 16 online marketplaces, with responses received from 90 traders.
The rationale behind initiating this monitoring was the escalating prominence of electronic commerce in Lithuania and its pertinence within the realm of competition law. Within online marketplaces, companies offering competing services might encounter competition, as certain operators of online marketplaces also engage in selling through their respective platforms, thereby competing with other suppliers present on these marketplaces.
The Competition Council has published its findings on 19 July 2023 arrived at the subsequent conclusions:
(i) Certain online marketplaces enforce price parity obligations upon traders, essentially dictating the terms under which traders can distribute goods and services through alternate channels. These parity clauses could potentially curtail the entry or expansion prospects for new or smaller providers of online intermediation services. This restriction might hinder their capacity to offer distinct price-service combinations to buyers, concurrently limiting traders’ ability to conduct trade via direct sales channels.
(ii) Multiple online marketplaces impose limitations on merchant pricing by establishing maximum resale prices for specific merchant products. These price caps may curb distributors’ incentives to reduce prices by rendering them fixed. This rigidity could result in consumers being deprived of the opportunity to avail themselves of lower prices.
(iii) Certain online marketplaces implement restrictions intertwined with independent actions by the marketplaces themselves. Hybrid platforms can take advantage of their dual status (by both distributing goods or services themselves and allowing other distributors to trade on their platforms). In their pursuit of boosting the sales of their own offerings, hybrid platforms might confer superior positioning, visibility, or more favorable rankings to their products/services. They might also utilize data generated by distributors employing their platforms. Such scenarios could engender competition concerns, as hybrid platforms might erode competitors’ capacity to vie in presenting their own goods/services. This could consequently fortify the hybrid platform’s market standing, potentially leading to diminished consumer choice, elevated prices, and compromised product quality.
In conclusion, the data collected during the monitoring exercise shows that the number of businesses trading on online marketplaces is increasing year by year. This implies that the relevance of competition rules for marketplaces will increase in the future.
The monitoring process revealed the existence of price parity obligations and maximum resale prices within agreements between certain online marketplaces and traders. Moreover, it surfaced that specific online marketplaces might be imposing limitations linked to their independent actions. While all these practices aren’t inherently prohibited under competition law, they might still harbor the potential to stifle competition contingent on the circumstances of each distinct situation. The compatibility of such restrictions with competition regulations must be gauged on a case-by-case basis, following a full analysis of the individual cases.
|Enforcement of Investigation Obstruction: Maxima LT Case Highlights Serious Consequences and Implications
On August 17, 2023, the Competition Council imposed a fine on Maxima LT for obstructing a document search during a dawn raid as part of an investigation into unfair commercial practices. The Competition Council discovered that in October 2022, during the dawn raid at MAXIMA LT’s premises, an employee of the company, despite being warned about the obligation to cooperate with officials authorized by the Competition Council, instructed another employee to delete a folder of documents. This instruction was carried out, resulting in the actual deletion of the folder.
Although the Investigation concluded on April 20, 2023, the Competition Council decided on the same day to initiate another investigation specifically related to the obstruction incident. As a result of their findings, the Competition Council determined that MAXIMA LT had not complied with the requirements set by the officials authorized by the Competition Council. These requirements were in place to facilitate the review and acquisition of necessary information for the investigation of the alleged violation. Consequently, the Competition Council opted to impose a penalty of EUR 10,000 on MAXIMA LT for their failure to comply.
During the dawn raid at Maxima’s premises, officials from the Competition Council opted to examine the data stored on devices belonging to Maxima’s employees, including computers and phones. During this inspection, the officials came across evidence indicating that one of Maxima’s employees had sent a message to other employee via Messenger. This message explicitly requested the deletion of files from the shared drive.
Subsequently, the mentioned employee proceeded to delete an entire folder of documents from Maxima’s shared drive upon receiving the aforementioned message.
Following this discovery, the officials inquired with the employees about the rationale behind their actions of deleting the folder. However, the employees were unable to provide specific reasons for their actions. Subsequently, one of the employees clarified that the folder primarily contained records of price templates, which they believed were irrelevant to the ongoing Investigation. The employee further explained that the information contained in the folder was dated and deemed unnecessary for the purposes of the officers conducting the investigation.
Competition Council’s evaluation
Even though the deleted folder of documents was subsequently restored, the Competition Council proceeded to initiate an Investigation into obstruction after closing the main investigation. Had the main investigation not been terminated, the Competition Council would likely have regarded the obstruction as an aggravating factor when determining any potential fines in the main infringement decision.
Maxima attempted to justify the actions of the employee by asserting that the deletion had occurred independently, contrary to Maxima’s internal protocols and employee obligations. As a result, Maxima argued that any consequences should be directed at the employee rather than the company. However, the Competition Council maintained the position, in accordance with both Lithuanian and EU case law, that the obstruction was executed by a Maxima employee, thereby making Maxima accountable for her actions.
Regarding the nature of the infringement committed by Maxima, the Competition Council deemed the violation to be more severe, a factor that influenced the fine calculation. This assessment was grounded in the following considerations:
(i) Maxima had deleted a folder of documents during the inspection;
(ii) The actions were not only attempted but successfully carried out, achieving the intended objective;
(iii) By deleting the folder, Maxima failed to adhere to the requirements and requests of the Competition Council’s officers during the dawn raid.
The Competition Council maintained that its evaluation of the infringement remained unaffected by Maxima’s arguments. Maxima’s attempt to distance itself from the employee’s actions and its subsequent efforts to restore the deleted folder and its contents were not seen as significant mitigating factors. This stance was rooted in the understanding that Maxima holds a statutory obligation to cooperate with the Competition Council under all circumstances. Consequently, the fact that Maxima adhered to other instructions from the Competition Council, such as the instruction to restore the deleted folder of documents, did not qualify as a reason to view these actions as mitigating circumstances. These actions were regarded as nothing more than compliance with mandatory instructions issued by the Competition Council officials.
The Competition Council concluded that Maxima’s deletion of the folder constituted a failure to adhere to the requirements established by the officials authorized by the Competition Council. These requirements were crucial for the review and acquisition of essential information pertinent to the investigation. Consequently, Maxima was found to be in violation of the Lithuanian law on Unfair Commercial Practices in Retail.
In accordance with this law, a failure to comply with the directives issued by the officers can result in a fine of up to EUR 10,000. In light of the aggravating circumstances previously outlined and taking into consideration Maxima’s financial situation, the maximum possible fine was imposed. It’s worth noting that the initial fine, calculated using the stipulated formula for fine calculation, amounted to EUR 1,488,708. However, this sum was subsequently reduced to the highest allowable fine of EUR 10,000.
This situation underscores the seriousness with which the Competition Council treats instances of obstructing investigations. Despite the fact that the deleted documents in Maxima’s case were ultimately recovered, the Competition Council chose to levy the maximum fine permissible. Moreover, even if the involved company demonstrates compliance with other instructions from the Competition Council and actively engages in restoring the deleted materials, these actions do not impact the assessment of the obstruction violation.
The dawn raid and subsequent obstruction investigation were conducted under the framework of the Law on Unfair Commercial Practices in the Retail Sector. However, the arguments and interpretations put forth by the Competition Council in this case could hold relevance for other investigations that pertain to the Lithuanian Law on Competition. This law essentially incorporates provisions from the Treaty on the Functioning of the European Union.
More information about Maxima LT case can also be found here.
Dr. Darius Miniotas and Paulina Ambrasaitė