The Lithuanian competition law emerged as a new area of law in 1992 when the first Law on Competition was adopted on 15 September 1992. Though a number of issues was addressed by the 1992 Law on Competition, the implementation practice showed that some improvements were still necessary, especially due to international obligations of the Republic of Lithuania. The European Agreement Establishing an Association between the European Communities and their Member States and the Republic of Lithuania (effective from 1 February 1998) provides that a competition system for trade relations between the Community and Lithuania must be based on the requirements set out in Articles 85, 86 and 92 of the EC Treaty (since 1 May 1999, Articles 81, 82 and 87 respectively). Furthermore, the Agreement requires the Republic of Lithuania to make its rules on competition compatible with those of the EC. With that in mind, the new Law on Competition was enacted in 1999. The major changes introduced by the new Law on Competition concerned the regulation of anti-competitive agreements, concentration control and unfair competition. The new Law on Competition also significantly increased the powers of the Competition Council to investigate breaches of the competition rules.
- The 23 March 1999 Law No. VIII-1099 of the Republic of Lithuania "On Competition";
- The 18 June 2000 Law No. VIII-1871 of the Republic of Lithuania "On Advertisement";
- The 27 April 2000 Resolution No. 45 of the Competition Council of the Republic of Lithuania "On Approval of the Procedure for Submission and Examination of Notification on Concentration and of Calculation of Aggregate Turnover";
- Block exemption for vertical agreements, approved by the 27 December 1999 Resolution No. 38 of the Competition Council;
- Block exemption for certain categories of agreements among carriers in specific transport sectors, approved by the 18 January 2001 Resolution No. 11 of the Competition Council;
- Block exemption for certain categories of agreements among users of land plots of agricultural purpose, approved by the 27 December 2001 Resolution No. 157 of the Competition Council.
The Competition Council of the Republic of Lithuania ("the Competition Council") is a special institution, established under the Law on Competition, that implements the State competition policy and supervises compliance with competition rules. The Competition Council consists of the chairman and four members nominated by the President of the Republic of Lithuania upon proposal by the Prime Minister. The executive work of the Competition Council is performed by its administration.
Notion of Undertaking
Lithuanian competition rules are applicable to "undertakings" as defined in the Law on Competition. According to Article 3 of the Law on Competition, the term "undertaking" means enterprises, their formations (associations, amalgamations, consortiums etc.), institutions or organisations or any other legal or natural persons that perform or may perform economic activities in the Republic of Lithuania, or whose actions affect, or whose intentions, if they were realised, could affect economic activity in the Republic of Lithuania.
Point of Interest
The Law on Competition introduced the notion of a "group of associated undertakings". The group of associated undertakings means two or more undertakings which, due to their mutual control, interdependence and possible concerted actions, are considered as one undertaking when calculating aggregate income and market share.
The Law on Competition establishes the extra-territorial application of national competition rules. In particular, Article 2 expressly states that this law is also applicable to the activities of undertakings registered beyond the territory of the Republic of Lithuania if such activities restrict competition in the domestic market of the Republic of Lithuania.
The Law on Competition, reflecting Article 81 of the EC Treaty, establishes a broad prohibition of all anti-competitive agreements. In this connection, the term "agreement" means contracts concluded in any form (written or verbal) between two or more undertakings or concerted actions of undertakings, including decisions made by any formation of undertakings (association, amalgamation, consortium etc.) of undertakings or by representatives of such a formation. Article 5 of the Law on Competition states that all agreements which have as their object or effect the restriction of competition or may restrict competition are prohibited and void from the moment of their conclusion. Abuses may, in particular, occur in concluding:
When concluded between competitors, the agreements mentioned in items 1 - 4 above are in any case considered as restricting competition. Following the de minimis doctrine, the Law on Competition provides that the prohibitions of Article 5, however, are not applied to undertakings if their share of a relevant market is too negligible to restrict competition. By its 13 January 2000 Resolution No. 13 the Competition Council established that the following agreements between undertakings are considered to be of minor importance and therefore do not fall under the prohibitions of Article 5 of the Law on Competition:
- agreements fixing, directly or indirectly, prices of certain products or any other trading conditions;
- agreements sharing product markets on a territorial basis, according to groups of buyers or suppliers or in any other way;
- agreements fixing production or sales volumes of certain products as well as restricting technical development or investment;
- agreements applying dissimilar (discriminatory) conditions to equivalent transactions with individual undertakings, thereby placing them in different competitive conditions;
- agreements making the conclusion of contracts subject to acceptance by the other party of supplementary obligations which, by their commercial nature or usage, have no direct connection with the subject of such contracts;
- agreements of competitors to take part or not to take part, as well as to make coordinated offers, in public sales, tenders or other similar purchases if it is not based on a joint activity contract or other similar contract that complies with the law.
The de minimis rule, however, cannot rule out the applicability of Article 5 of the Law on Competition with regard to:
- agreements between undertakings the annual aggregate turnover of which does not exceed:
- LTL 10 million - in case of vertical agreements;
- LTL 5 million - in case of horizontal or mixed (horizontal/vertical) agreements; and
- agreements between undertakings the annual aggregate turnover of which is higher than the above-mentioned figures provided that the aggregate market shares held by such undertakings do not exceed on any of the relevant markets:
- 10% - in case of vertical agreements;
- 5% - in case of horizontal or mixed (horizontal/vertical) agreements.
- horizontal agreements which have as their object fixing of prices, limiting of production or sales or sharing of markets or sources of supply;
- vertical agreements which have as their object fixing of resale prices.
Agreements that fall within Article 5 of the Law on Competition are not necessarily void as the law states. On the contrary, a large range of agreements that restrict competition may nonetheless be permitted because of the beneficial effects they produce. Article 6 of the Law on Competition provides that anti-competitive agreements may be exempted if they satisfy four conditions, the first two positive and the last two negative. To qualify for an exemption, the agreement: (i) must stimulate investment or technical or economic development or improve the distribution of goods and, as a result: (ii) consumers must receive additional benefits; simultaneously, the agreement: (iii) must not impose restrictions on the activities of contracting parties that are not indispensable to attaining of these objectives, nor (iv) afford contracting parties the possibility of eliminating competition with respect to a substantial part of the relevant market.
Following the EC competition rules, the Law on Competition establishes that exemptions may be achieved in two ways: either by applying to the Competition Council for an individual exemption with respect to a particular agreement or by drafting an agreement with terms satisfying one of the block exemptions issued by the Competition Council.
Article 7 of the Law on Competition specifies that, taking into account the above mentioned four conditions, the Competition Council adopts legal acts on the granting of block exemptions with respect to certain categories of agreements and establishes terms of application of block exemptions:
Undertakings may apply to the Competition Council for confirmation that the agreement to be concluded qualifies for a block exemption. If the Competition Council does not give a negative response within one month after the registration of the application, confirmation will be deemed to have been given.
- for agreements on granting licenses to use trade marks of goods and services, industrial designs or other objects of intellectual property which may cause restrictions of production, sale, prices or some other competition restrictions if related to the protection of rights to use trademarks, industrial design or other objects of intellectual property or to the requirements of technical terms of licenses;
- for agreements allowed in certain relevant markets; and
- for other specific categories of agreements for which block exemptions are granted by the EC legislation.
Currently, there are three block exemptions approved by the Competition Council:
- Block exemption for vertical agreements;
- Block exemption for certain categories of agreements among carriers in specific transport sectors;
- Block exemption for certain categories of agreements among users of land plots of agricultural purpose.
The undertaking seeking to get an individual exemption should submit to the Competition Council, prior to the conclusion or coming into force of the agreement, an application (according to the standard form as approved by the Competition Council) together with a copy of the agreement itself and documentation proving the compatibility of the agreement with the Law on Competition.
The Competition Council must take a decision to grant an individual exemption not later than within three months after the registration of the application provided that the agreement satisfies the four requirements of Article 6 as mentioned above, or to refuse granting of an individual exemption. If the Competition Council fails to take a decision to refuse an individual exemption within the specified period, an individual exemption is deemed to have been granted according to the conditions provided for in the application and the agreement submitted by the undertaking together with the application.
Point of Interest
Undertakings must, not later than within one month after coming into effect of the agreement concluded according to the conditions of a block exemption, present information on the principal provisions of the agreement to the Competition Council. Failure to present such information does not exclude the application of a corresponding block exemption but may result in fines.
Abuse of Dominant Position
Article 3 of the Law on Competition defines "dominant position" as the position of one or more undertakings in the relevant market in which the undertaking(s) do not directly face competition or which enables the undertaking(s) to have unilateral decisive influence in the relevant market by effectively restricting competition. Unless proved otherwise, the undertaking with a market share of not less than 40% is considered to have a dominant position in the relevant market. Unless proved otherwise, each of a group of three or a smaller number of undertakings with the largest share of the relevant market jointly holding 70% or more of the relevant market, is considered to enjoy a dominant position ("collective dominance").
Maintenance of a dominant position, as such, is not illegal under the Lithuanian law, only the abuse of a dominant position is prohibited. Article 9 of the Law on Competition contains a prohibition on the abuse of a dominant position within the relevant market through the exercise of any actions that restrict or may restrict competition, limit possibilities of other undertakings to act in the market or violate the interests of consumers. This prohibition, among other things, applies to:
Point of Interest
- direct or indirect imposition of unfair prices or other conditions of purchase or sale;
- restriction of trade, production or technical development resulting in harm to consumers;
- application of dissimilar (discriminatory) conditions to equivalent transactions with individual undertakings, thereby placing them in different competitive conditions;
- making the conclusion of a contract subject to the acceptance by the other party of supplementary obligations which, by their commercial nature or usage, have no direct connection with the subject of the contract.
A legal presumption that an undertaking with a market share of not less than 40% is considered as dominant might have the following effects: first of all, such presumption could be difficult to deny (so far, there is insufficient legal practice in this field); and secondly, as a result of the foregoing, undertakings with a comparatively large market share might be discouraged from expanding their economic growth due to fear that significant restrictions will be imposed on dominant entities.
Article 3 of the Law on Competition defines "concentration" as:
- the merger when one or more undertakings, which terminate their activity as independent undertakings, are joined to form the undertaking that continues its operation, or when a new undertaking is established from two or more undertakings that terminate their activity as independent undertakings; or
- the acquisition of control when one and the same natural person(s) that exercise(s) control over one or more undertakings, or an undertaking or several undertakings, acting on the basis of an agreement, jointly create a new undertaking or gain control over another undertaking by acquiring an enterprise or a part thereof, or all or a part of the assets of an undertaking, or shares or other securities, voting rights, or by concluding contracts, or in any other manner.
The Competition Council must be informed of the intended concentration and its prior permission must be obtained when the combined aggregate turnover of the undertakings concerned is more than LTL 30 million in the last financial year prior to concentration and the aggregate turnover of each of at least two undertakings concerned is more than LTL 5 million in the last financial year prior to concentration.
The notification of concentration must be submitted in the standard form as established by the Competition Council.
Point of Interest
If a participant of concentration is an undertaking of a foreign country, its aggregate turnover is calculated as the total of income received from the sale of its products in the Lithuanian market.
The undertakings or controlling persons participating in concentration subject to notification have no right to exercise further concentration actions from the date of performance of the first concentration action until the date of the decision of the Competition Council permitting the concentration.
Any transactions and actions of the undertakings and controlling persons made or performed prior to receiving permission for concentration are considered to be invalid, with no legal force and effect. At the request of the undertakings participating in concentration or of the controlling person, however, the Competition Council may take into account the consequences of the suspension of concentration to the persons concerned and the foreseeable influence on competition and may permit individual actions of concentration until the adoption of a final decision. Such permission of the Competition Council may be granted subject to certain conditions and obligations necessary to take a final decision of the Competition Council.
Timing of Notification and Issuance of Permission
Notification of an intended concentration is submitted to the Competition Council not later than one week after the "first legal action of concentration" which, according to the Law on Competition, may include the following: presentation of an offer to conclude an agreement or acquire shares or assets, the authorisation to conclude an agreement, the conclusion of an agreement, the acquisition of ownership rights or the right to dispose of certain assets. One - week period starts running when the first of these events occurs.
Having received the notification of concentration, the Competition Council publishes notice in Valstybės žinios (the Official Gazette), indicating the nature of concentration and identifying the parties concerned.
The Competition Council has four months to examine the notification of concentration submitted in accordance with the established requirements. The set time begins on the next day after receipt of the notification that complies with these requirements. The Competition Council immediately notifies the parties in writing if the notification on concentration does not comply with the established requirements.
The Law on Competition establishes two phases of examination of concentration. The initial examination period may not last more than one month. Thus, within one month after receipt of a proper notification of concentration the Competition Council either permits concentration or adopts a decision for further examination of the concentration. Such further examination may last up to three months, which in total makes four months as mentioned above.
Having submitted the notification, the persons are informed in writing of any decisions. If within the defined terms (one month for the initial examination plus, if needed, additional three months for further examination) after the date of receipt of a proper notification the Competition Council does not issue a decision or if the persons having provided such notification are not informed of the decision within four months after the date of receipt of a proper notification, the undertakings or controlling persons have the right to exercise the concentration according to the conditions indicated in the notification.
Decisions and Criteria of Appraisal
Having completed examination of the notification, the Competition Council will make one of the following decisions:
According to the Law on Competition, the Competition Council refuses to grant permission if:
- to permit concentration as indicated in the notification;
- to permit concentration by establishing conditions and obligations of concentration for the undertakings or controlling persons participating in the concentration in order to prevent the creation or strengthening of a dominant position; or
- to refuse to grant permission to exercise concentration by imposing obligations on the undertakings or controlling persons concerned to undertake actions to restore the previous situation or remove the consequences of concentration.
The decisions of the Competition Council are published in Valstybės žinios (the Official Gazette).
- the concentration establishes or strengthens a dominant position; and
- results in restriction of competition in a relevant market.
Point of Interest
The Competition Council has the right to cancel or amend its decision on concentration when it has been adopted in reliance on incorrect or incomplete information submitted by the undertakings or controlling persons or where the undertakings or controlling persons have infringed the conditions and obligations imposed on the execution of the concentration.
Undertakings are prohibited from performing any actions contrary to fair business practice and good customs if such actions may damage another undertaking's ability to compete, including:
- unauthorised use of any mark identical or similar to the name, registered or unregistered well-known trade mark or other reference having a distinguishing feature of another undertaking, if this causes or may cause confusion with that undertaking or its activity, or when an effort is made to unfairly use the reputation of that undertaking (through its mark or reference), or where this may impair the reputation (or the mark or reference) of that undertaking, or cause a reduction in the distinguishing feature of the mark or reference applied by that undertaking;
- the misleading of undertakings by providing them with incorrect or unjustified information about the quantity, quality, components, properties of usage, place and means of manufacturing, price of its goods or goods of another undertaking, or concealing risks associated with the consumption, processing or other possible usage of such goods;
- use, transfer or publication of information which is a commercial secret of another undertaking without its consent or obtaining of such information from persons with no right to transfer such information in order to compete, seeking a benefit from such information or causing damage for that undertaking;
- inducing employees of a competing undertaking to terminate their employment contracts or fail to carry out all or part of their employment-related obligations, with a view to self-benefit or seeking to cause damage to the competing undertaking;
- imitating the product or product packaging of another undertaking, copying the external shape or packaging colour or other distinguishing feature of the product if such action may mislead others in determining the identity of the product or such action is taken with the intent to unfairly gain profit through the use of the reputation of another undertaking;
- providing incorrect or baseless information about its own or another undertaking's managers, skills of the employees, legal, financial or other position if such action may cause damage to another undertaking;
- use of advertising considered misleading under the Law on Advertisement.
Investigation and Hearing of Cases
Institution of Investigations
The Competition Council investigates:
The right to request an investigation of restrictive practices is vested in:
- agreements restricting competition and infringements of conditions and obligations of block or individual exemptions granted under Articles 7 and 8 of the Law on Competition;
- abuse of a dominant position;
- performance of concentration without notifying or obtaining permission, or in breach of established conditions or obligations of the concentration, as well as continuing to perform the concentration in violation of a suspension order;
- unfair competition (only if actions amounting to unfair competition violate the interests of a number of undertakings or consumers);
- infringements in case of failure to comply with requests to supply information, failure to comply in a timely manner with such requests, providing incorrect or incomplete information, obstruction of the authorised officers of the Competition Council in carrying out their investigation, or default on the penalties or obligations imposed by the Competition Council.
The Competition Council also has the right to start investigation ex officio.
- undertakings whose interests have been infringed due to restrictive practices;
- governmental and municipal authorities;
- associations and unions representing the interests of undertakings and consumers.
The Competition Council must, within 14 days, decide whether to institute an investigation or declare the application inadmissible. Investigations should be completed within three months from the commencement of the procedure; nevertheless, the Competition Council may, in its discretion, prolong the term by two additional months.
Rights of Authorised Officers of Competition Council in Process of Investigation
While performing an investigation, the officers of the Competition Council have the power to:
Point of Interest
- enter and check any premises, land and means of transport used by the undertaking;
- examine documents of the undertaking under investigation required for investigation, obtain copies and extracts, have access to the notes of the employees of the undertaking, copy such notes as well as information stored in computers and magnetic disks;
- collect verbal and written statements from individuals related to the activities of the undertakings under investigation, demand that they arrive and provide explanations in the premises of the authorised officer from the Competition Council;
- obtain data and documents, or copies thereof, concerning the economic operations of the undertaking under investigation from other undertakings as well as from governmental and municipal authorities;
- carry out an inspection of the economic activity of the undertaking under investigation and obtain findings from expert institutions regarding the material obtained through inspection;
- seize any documents and things having evidential value in the investigation of the case;
- invite specialists and experts to assist in the investigation;
- use technical means for the purposes of the investigation in accordance with legal requirements.
Permission of the court is required for the officers of the Competition Council to enter and check premises, territory and means of transport used by the undertaking, examine documents of the undertaking under investigation, obtain copies and extracts, have access to the notes of the employees of the undertaking, copy such notes as well as information stored in computers and magnetic disks.
In urgent cases where the Competition Council has sufficient evidence on a violation of the Law on Competition, the Competition Council has the right to apply interim measures necessary for the implementation of a likely final resolution of the Competition Council in order to prevent substantial and irreparable damage to the interests of undertakings or society.
In the cases mentioned above, the Competition Council may apply the following measures against an undertaking suspected of infringement of the Law On Competition:
Before adopting a resolution to apply interim measures, the Competition Council must give the undertakings suspected of the infringement an opportunity to provide an explanation or clarification within the time scheduled by the Competition Council. Appeals against the decision on the application of interim measures can be made to Vilnius District Administrative Court within one month from the date of the decision. Filing of an appeal, however, does not suspend the application of interim measures.
- to obligate the undertaking to stop an illegal activity; or
- with a permission of Vilnius District Administrative Court, to impose an obligation to carry out certain actions if the failure to take such actions may result in significant harm to other undertakings or the interests of society or cause irreparable consequences.
Hearing of Cases
Upon completion of the investigation, the officers of the Competition Council submit their case with conclusions and suggestions to a hearing at the session of the Competition Council or cease the investigation if there is no reason to impose sanctions as provided by the Law on Competition.
Cases are heard in public sessions of the Competition Council unless a closed hearing is declared in order to protect State or commercial secrets. In case of absence of a suspected offender and other persons concerned, the case can be heard only when it is clear that these persons have been properly informed of the place and time of the hearing, that they have been given the opportunity to submit explanations and get acquainted with the conclusions reached in the investigation.
After completing the hearing of the case, the Competition Council has the right to adopt a resolution to impose sanctions, refuse to apply sanctions if there are insufficient grounds, close the case if there is no breach of law or reopen the investigation. The resolutions of the Competition Council are published in Valstybės žinios (the Official Gazette).
Not later than within 20 days after the date of delivery of the resolution or, if the resolution has not been delivered, since its publication in Valstybės žinios (the Official Gazette), persons or entities which find their interests injured by the resolution of the Competition Council may appeal against it to Vilnius District Administrative Court.
Sanctions for Breach of Law on Competition
According to Article 40 of the Law on Competition, the Competition Council is entitled to apply the following sanctions:
With the permission of Vilnius District Administrative Court, the Competition Council may impose the following restrictions on the economic activities of undertakings that fail to comply with the sanctions of the Council: temporarily suspend export-import operations, impose restrictions on the execution of bank operations and/or invalidate the entity's permission (license) to engage in economic activity.
- to impose an obligation on an undertaking to cease illegal activity, carry out actions to restore the previous situation or remove the consequences of the violation, including the obligation to cancel, amend or enter into contracts or establish terms and conditions necessary to meet the above obligations;
- to oblige the undertakings or controlling persons, who have made concentration resulting in the establishment or strengthening of a dominant position and subsequent considerable reduction of competition in a relevant market without giving a notice to the Competition Council or obtaining permission from the Competition Council, to carry out actions to restore the previous situation or remove the consequences of concentration, including the obligation to sell all or part of the enterprise, all or part of the assets of the undertaking, all or part of its shares, reorganise the enterprise, terminate or change contracts, as well as establish other terms and conditions to meet the above obligations;
- to impose fines on undertakings (ranging from LTL 1,000 to LTL 100,000 (app. EUR 290 - 29,000, or more, but not exceeding 10% of the aggregate annual income in cases of extremely severe infringements).
According to the "lenience program" established by Article 43 of the Law on Competition, the undertaking which is a party to a prohibited agreement between competitors will be exempted from fines provided for the infringement upon presenting to the Competition Council full information relating to the agreement if all the following conditions are satisfied:
Moreover, the "lenience" will also be granted in case of abuse of a dominant position, if all of the following conditions are satisfied:
- the undertaking provides information prior to the beginning of investigation of the agreement;
- the undertaking is the first of the parties to the prohibited agreement to provide such information;
- the undertaking provides complete information available to it regarding the prohibited agreement and co-operates with the Competition Council during the investigation;
- the undertaking has not been the initiator of the prohibited agreement and has not induced other undertakings to participate in such an agreement.
Point of Interest
- the undertaking provides complete information required for the investigation of abuse of a dominant position and co-operates with the Competition Council during the investigation;
- the prohibited actions committed by the undertaking have not caused substantial and irreparable damage to the interests of other undertakings or public interests;
- the undertaking stops the prohibited actions of its own free will and furnishes proof thereof before the end of the investigation;
- the undertaking compensates, of its own free will, the damage caused by the prohibited actions and furnishes proof of this before the end of the investigation.
Actions against undertakings for violation of the Law on Competition can be commenced not later than within three years from the date of infringement. In the case of a continuing violation, the action may be commenced not later than within three years from the date of the last act of violation performed.