CHAIRMAN OF THE COMPETITION COUNCIL JONAS RASIMAS: THE LENIENCY SYSTEM YIELDS FIRST RESULTS AND BRINGS ABOUT HOPE FOR THE FUTURE

18 02 2010

Today the Competition Council for the first time in its history resolved to grant immunity from a fine to the undertaking that was the first to submit the information on participation in the prohibited agreement. The undertaking took advantage of the possibility available according to the leniency program enforced by the Competition Council for participants of prohibited agreements to avoid imminent sanctions for the hardcore infringements of the Law on Competition.

The Competition Council granted complete immunity to UAB Lintera for the infringement of Article 5 of the Law on Competition having thoroughly considered all circumstances established during the investigation conducted by the Competition Council. UAB Lintera, a former participant of the prohibited agreement between competitors was the first to notify of the prohibited agreement in operation of which the Competition Council had no previous knowledge and had not initiated any investigation, also submitted some incriminating evidence as well as cooperated with the specialists conducting the investigation. It is of utmost importance that the information provided by UAB Lintera enabled the Competition Council to establish the existence of the hardcore infringement of the Law on Competition, however, not less important is the fact that the company, having been exempted from the imminent sanctions will be able to further continue its operations and compete in the market under the economic downturn conditions, as well as to participate in public procurement tenders. Note that according to the provisions of the Law on Public Procurement tender organizers are entitled to reject a tender of the supplier who had been subjected to a fine for the participation in a prohibited agreement and less than three years have passed since the conclusion of the infringement.

„I am assured that other undertakings possibly being part of restrictive agreements in other markets could be encouraged to notify the Competition Council of such agreements having considered that should the prohibited agreement had been notified by some other undertaking rather than UAB Lintera, the latter could have been subjected to a fine in excess of LTL 2 m” - Jonas Rasimas, Chairman of the Competition Council commented on the importance of the resolution.

Having thoroughly assessed the findings and conclusions of the investigation “Concerning the compliance with the requirements of Article 5 of the Law on Competition of the Republic of Lithuania of the actions of the undertakings engaged in trading in small mechanisation and other tools and equipment participating in public procurement tenders“ as well as explanations presented by other undertakings the Competition Council concluded that the UAB Lintera, UAB Prof-T and UAB Frezlitus had infringed the requirements of Article 5 of the Law on Competition UAB Prof-T was sanctioned to a fine of LTL 97,200, UAB Frezlitus – LTL 4,000 (the company had participated in one tender only).

The three competing companies were acting not independently but rather, while participating in public procurement tenders, concerting their actions.  Such concerted actions constitute a hardcore infringement of the Law on Competition as they are prohibited by their objective to restrict competition alone. It was established that the actions of the companies coordinating their tender prices essentially enabled one company – UAB Prof-T to win all tenders. The investigation included the examination of the activities of the companies concerned in relation to their participation in public tenders in the period 2007-2008 for marketing small mechanisation and other tools and equipment.

The Resolution of the Competition Council noted that the data obtained in the course of the investigation provided sufficient evidence that the competing companies had agreed to submit their concerted tenders including in terms of the prices.  UAB Lintera and UAB Frezlitus actually did not compete with UAB Prof-T in the tenders (calls for tenders) thus enabling the latter to win all tenders.  UAB Prof-T was awarded the tender in five instances considered under the investigation. It was established that prior to participation in tenders executives of the companies had been concerting their actions. Mention should be made of such instances as the tender under the normal commercial practice for the procurement of the precise sickle for composite castings announced by the SE Ignalina Nuclear Power plant, call for tender for the procurement of pneumatic spanners announced by AB Mažeikių nafta, tenders under a simplified procedure for the procurement of pneumatic tools, bolts and spare parts of grinding-machine tools, etc.

The agreements between the undertakings participating in public tenders to directly or indirectly fix the prices of the goods that are prohibited by Article 5 of the Law on Competition impede any expedient use of the funds allocated for the procurement by the contracting undertakings or completely deprive them of such possibility. This creates a threat that as a result of such prohibited agreements contracting authorities may be forced to procure substandard items, goods, services or works or those exceeding market prices and, as a result, incur some unforeseen excessive expenses.

As noted by Jonas Rasimas, Chairman of the Competition Council, in this particular case specifically significant is the initiative taken by the cartel participant and its contribution to disclosing the cartel in operation. The Resolution of the Competition Council whereby for the first time ever the provisions of the „Rule on immunity from fines and reduction of fines upon participants of prohibited agreements“ were applied in practice is an inducement to other undertakings to thoroughly assess the possibilities made open to them to timely terminate the unlawful activity without being subjected to any economic sanctions.  Late in 2009 the Competition Council received the information from another undertaking on the alleged cartel agreement which is to be completely investigated in the course of this year – this brings about hopes that the leniency program has become fully operational.

Competition Council Spokesperson