IN PASSING THE RULING THE COURT REFERRED TO THE OPINION OF THE EUROPEAN COMMISSION

26 10 2009

Following the three years’ litigation proceedings the Competition Council was notified of the favourable decision of the Court. For the first time ever in the history of competition infringement case law, with a view to assessing the legitimacy of the Resolution passed by the Competition Council, the Court applied to the European Commission with a request to issue its opinion regarding the matter under consideration. Having examined the case according to the appeals filed by UAB  Schneidersöhne Baltija (currently Papyrus Lietuva UAB) and Libra Vitalis to overrule the Resolution of the Competition Council the expended panel of judges of the Supreme Administrative Court of Lithuania (hereinafter – SACL) announced its unappealable decision. The SACL acknowledged that the Competition Council essentially correctly assessed the established infringement – the prohibited agreement entered into by six undertakings operating in the relatively highly concentrated oligopolistic markets (the chalky paper market and office paper markets) and imposed appropriate fines upon the infringing undertakings.

The Ruling of the Court is of utmost importance in respect of enforcement of the requirements of the Law on Competition and substantiating the competition case law in investigating an anti-competitive effect potentially produced by cartel agreements entered into by undertakings for exchanging confidential information.

It was exactly three years ago, on 26 October 2006, when the Competition Council passed the Resolution concluding that a number of undertakings engaged in the wholesale paper trading market – UAB Antalis Lietuva, UAB Libra Vitalis, UAB Lukas, UAB MAP Lietuva, UAB Papyrus Distribution and UAB Schneidersöhne Baltija had infringed the requirements of Article 5 of the Law on Competition and Article 81(1) of the Treaty establishing the European Community and subjected the infringing companies to appropriate fines. The actions of the undertakings were resolved to have infringed competition rules whereby they, in the period from 1999 until May 2004, had been on a regular quarterly basis exchanging information of confidential nature on the shares they were holding in the relevant markets for chalky and office paper that was sufficiently indicative of the sale volumes of the appropriate type of paper by each individual undertaking. The Competition Council resolved that that such exchange of information had produced an anti-competitive effect in the relevant markets – reduced the incentives of the undertakings involved to compete, and hampered the entry into the markets by any new competitors. In terms of its scope, the infringement affected the entire Lithuanian chalky and office paper market.

UAB Schneidersöhne Baltija and UAB Libra Vitalis, in disagreement with the Resolution of the Competition Council, appealed the Resolution to the Vilnius Regional Administrative Court. In the opinion of the Court, the CC had rightfully stated that the exchange of information resulted in the lessening of incentives to compete and the enhancement of barriers to enter the relevant market. Also the Court approved the conclusion of the Competition Council’s Resolution on the effect of such information exchange upon trade between Member States – the infringement of Article 81 of the Treaty establishing the European Community. UAB Schneidersöhne Baltija and UAB Libra Vitalis, in disagreement with the Ruling of the Vilnius Regional Court filed an appeal against the Ruling to the Supreme Administrative Court of Lithuania.

By its Ruling of 16 October 2009, the SACL essentially confirmed the conclusions of the Competition Council concerning the restricting effect of the prohibited agreement.  However, in its statement concerning the application of the provisions of Article 81 of the EC Treaty the Court maintained that following the accession of Lithuania to the EU on 1 May 2004, the undertakings concerned had exchanged the confidential information on a single occasion only, and had ceased the infringement of the Law on Competition. Having considered the above the SLAC concluded that the fines imposed upon UAB Libra Vitalis and UAB Schneidersöhne Baltija had to be by one eighth lower than actually imposed (for example, LTL 179,450 upon UAB Schneidersöhne Baltija (the actual fine imposed was LTL 235,330), and LTL 170 494 upon UAB Libra Vitalis (the actual fine imposed was LTL 194,850).

The Court also supported the conclusions of the Competition Council to the effect that in the case concerned the information exchange could restrict competition in two ways: lessening of competing incentives and impediment of entry into the relevant markets. In the opinion of the extended panel of judges the Competition Council had provided sufficient, convincing, consistent and logic evidence of the restrictive character of the information exchange. The restrictive impact, inter alia, concerned the leading participants of the relevant markets whose actions could have affected the markets concerned to a largest extent. The extended panel of judges resolved that the conclusions of the Competition Council concerning the anti-competitive effect had been arrived at without violating any material procedural rules, are sufficiently complete and well-founded, and the case contained no evidence that any conclusions had been made on the basis of any inaccurate or distorted circumstances or by abusing the authority.

When assessing the anti-competitive effect of the information exchange, having regard to the opinion of the European Commission and the case law of the Community Courts the extended panel of judges had no grounds for any doubts that the system for information exchange as examined in this specific case could materially affect the independence of the decisions taken by market participants thus replacing the normal competitive risk by practical cooperation.

In its assessment of the Ruling of the Supreme Administrative Court of Lithuania the Competition Council hereby notes that independent behaviour of undertakings in the market is of utmost importance for the development of competition. Both the European competition rules and the Law on Competition of the Republic of Lithuania prohibit competitors, specifically those joined into associations that unite undertakings producing and marketing identical products from cooperating and exchanging relevant information such as prices, fluctuation of prices, market shares and any changes thereof. Such “coordination” of actions may be recognised to constitute a cartel agreement. Associations of undertakings should be very cautious in pursuing their policies and refrain from exchanging any information qualified as confidential and allowing any coordination of corporate actions.

Competition Council Spokesperson