Competition Council of the Republic of Lithuania

Accumulated experience so essential for Lithuania standing at the threshold of the accession to the European Union that would be an appropriate generalisation of the work of the Competition Council reviewed in the present Annual Report for the year 2003. The competition policy implemented jointly by the Competition Council, as the public authority and the courts has been producing tangible positive effect upon the market structures and the conduct of market participants. The enhanced competition among undertakings promotes innovations, reduces production costs and increases the overall production efficiency. Lithuanian producers are becoming increasingly competitive in the newly opened European markets, and the values generated by competition are becoming apparent to growing numbers of Lithuanian consumers benefiting from improved possibilities to choose from a wider supply of goods and services at lower prices.

During 2003, specialists of the Competition Council devoted substantial efforts and attention to the consideration and harmonisation of amendments to the Law on Competition. Amendments to the Law underlying the activity of the competition authority are primarily concerned with the direct application of the European Union competition rules as of May 2004. By assigning appropriate powers by the amendments of the Law on Competition we have been making very thorough arrangements to get prepared for the day when Articles 81 and 82 of the Treaty establishing the European Community will be applied not only by the European Commission but also by the Competition Council of the Republic of Lithuania and the Lithuanian Courts.

We fully comprehend the mission assigned to our authority in view of Lithuania’s becoming a Member State of the European Union. First, the Lithuanian business society may have legitimate expectations that joint efforts will succeed in overcoming the barriers to competition and defending the public interests. This, however, will entail enhanced responsibility. Undertakings will be released from the obligation to apply to the Competition Council for individual exemptions, - agreements restricting competition, however, satisfying the conditions for exemption will be effective without any prior administrative decision. This brings about some release for undertakings, at the same time enhanced liability, since the undertakings will have to make a discretionary decision on whether or not an agreement is likely to fall within the category of prohibited agreements. The competition policy implemented by the European Commission pursues its principal objective - to strengthen the competition processes, hence our task is to analyse such processes in Lithuania and pass well grounded decisions.

The quality of the investigations conducted and the capacity of our specialists to collect evidence in order to arrive at legally correct decisions as well as the correctness of the application of legal proceedings is perhaps best disclosed after the investigation material is lodged to the court. This also enables to assess the efficacy of measures applied by the officials of the Competition Council for the purpose of establishing the most severe infringements of the competition law, - restrictive agreements and abuse of dominant position. Amendments to the Rules of procedures of the Competition Council adopted in 2003 have been usefully serving this objective. The policy implemented by the institution would not be sufficiently efficient unless the supervisory and monitoring functions are constantly improved, and the decisions passed and sanctions imposed produce tangible effect.

Concentration control remains among the most important areas of activity of the Competition Council. In the year 2003, in view of more active merger processes this assignments required particular scrutiny on the part of the Competition Council officials. These recent developments are caused, on the one part, by the strive of companies to more efficiently operate in the market, and on the other - theirs efforts to attain the size securing their competitiveness under constantly changing market conditions. The Competition Council has been monitoring the on-going processes in the former monopolistic State-owned sectors of economy (energy sector, alcohol production and others) with a view to assessing such processes in accordance with the merger control requirements thus ensuring an efficient competition in the markets. As an example, in 2003, while monitoring the merger processes in the Lithuanian milk purchase market the competition authority passed decisions preventing the creation of a dominant position capable of significantly restricting competition in the market concerned. The Competition Council also had to deal with issues related to the deepening concentration in the retail trade sector. The assessment of mergers effected abroad between large companies exercising significant market power, as well as operating in the Lithuanian markets and generating income therein has become an increasingly frequent task for our experts. On numerous occasions complicated cases were successfully resolved due to close cooperation with the Government and the Ministry of Economy of the Republic of Lithuania.

The relevant amendments to the Law on Advertising enabled the Competition Council to enhance its efficiency in the supervision of misleading or prohibited comparative advertising, to accelerate the proceedings of sanctioning and eventually to more efficiently implement the provisions of the said Law.

The Treaty establishing the European Community prohibits State aid, which distorts competition within the Community. Thus the State aid granted to Lithuanian enterprises was assessed both in the view of exemptions applied by the European Commission, and the forthcoming changes to be effected after the European Commission brings the modernised State aid monitoring regulations into effect. Acting in accordance with the Law on Monitoring of State Aid to Undertakings in several instances the Competition Council refused to authorise the intended State aid on the grounds of its potential effect upon the balance of the competition forces.

During the year 2003, members and specialists of the Competition Council have been continuing their close cooperation with the representatives of the Organisation for Economic Cooperation and Development (OECD), and counterpart authorities of European States. Workshops were held in Vilnius, as well as in other States providing occasions for specialists of the Competition Council to share experience and introduce the peculiarities of the investigations conducted thereby to their colleagues. A memorable event for our institution was the visit to Lithuania of Philip Lowe, Director General of the Directorate-General for Competition of the European Commission. The visit presented an opportunity to exchange views on both the prospects for further cooperation and the development of the competition law and policy. The activities of the Competition Council, as well as its efforts targeted to strengthening the competitive environment in Lithuania were positively assessed by the European Commission in its report of 2003 on the progress made by candidate countries.

The present Report 2003 is not confined to the overview of main achievements of the Competition Council in its pursuit to safeguard and promote competition in Lithuania, the paper seeks to familiarize the reader with the most important guidelines and prospects of the competition policy in Lithuania which we are prepared to implement successfully upon the accession of Lithuania to the European Union.

Rimantas Stanikūnas

Chairman of the Competition Council

I. Priorities of the Competition Policy

The main task for the Competition Council (further - the CC) is to ensure sufficient preparedness for the application of the EU competition rules and operation in the EU legal environment upon the accession of Lithuania into the European Union. These tasks necessitated the distinction of several priorities in the area of competition, which were duly reflected in the Pre-accession Economic Program of Lithuania for the year 2003. The priorities include the tasks to ensure the further harmonisation of the Lithuanian competition legislation taking due regard of the forthcoming changes in the EU legislation, establish the procedures for cooperation with the European Commission and the national competition authorities of other Member States in handling issues of case investigations and competition policy, ensure the efficient application of competition rules, enhance the awareness in issues of competition law and application thereof. Significant attention was devoted to the improvement of the Lithuanian competition legislation and enhancement of the efficiency of the enforcement of the LC (further - the LC).

In an attempt to attain the envisaged objectives as a priority task was designated the further harmonisation of the Lithuanian competition law with the EU acquis. Amendments to the LC have been drafted in pursuit of further alignment of the procedures for the investigations of alleged infringements of the LC and the related cases with the new Council Regulation No. 1/2003, and tightening of the sanctioning policy. Late in 2003, the proposed amendments were submitted to the Government of the Republic of Lithuania. In addition to the initiation of drafting of the LC, during the year 2003, other pieces of national competition legislation were tabled for revision.

1. Development of the framework of legislation

In late 2003, the CC submitted the draft Law on the Amendment and the Supplement of the LC to the Government of the Republic of Lithuania the subject matter whereof was declaration of the Law on Monitoring of State Aid to Undertakings void and introduction of amendments to the Civil Code of the Republic of Lithuania (further - the draft Law). The draft was prepared in line with the law harmonisation measures and the acquis implementation plan for 2003 within the National Programme for the Adoption of the Acquis approved by Resolution No. 292 of 5 March 2003 of the Government of the Republic of Lithuania, as well as the Decree No. 69 of 22 April 2003 of the Prime Minister of the Republic of Lithuania (as amended by Decree No. 192 of 21 August 2003). The draft Law was prepared by the CC working group CC headed by Šarūnas Pajarskas, Head of Administration of the CC. Comments and proposals concerning the draft Law were also submitted by experts of the Danish European Institute participating in the project „Drafting of competition legislation in Lithuania“ launched in 2002 and funded by the Danish Government.

The draft Law pursued two major objectives:

1) provide for the legal prerequisites for efficient enforcement of the competition policy in Lithuania upon the accession of Lithuania into the European Union, and assume obligations related to the EU membership;

2) amend (declare void) the provisions which, as practice showed, have not proved justifiable and supplement the Law with provisions facilitating the CC to more effectively protect the freedom of fair competition.

On 16 December 2002, the Council adopted Regulation (EC) No. 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (further - the Regulation), which in essence reforms the system for supervision of prohibited agreements within the meaning of the EC competition law, by replacing the system of authorisation by the system of directly applicable exemptions and granting the national authorities of Member States the right and obligation to directly apply provisions of Articles 81 and 82 of the Treaty establishing the European Community (further - the Treaty). Direct application of this Regulation and implementation of the EU competition rules upon the accession of Lithuanian into the EU requires relevant legal preconditions, which may be established by relevant amendments to the LC and the Code of Civil Procedure. The draft Law proposed to supplement the LC by a new Chapter „Application of the EU competition rules“, which provides that the CC is an institution authorised to apply the competition rules of the EU, the supervision whereof within the meaning of the EU competition law has been assigned to national competition authorities. This provision substantially expands the limits of competence of the CC by ensuring the simultaneous application of Articles 81 and 82 of the Treaty and the LC in the investigations conducted by the CC of whether or not agreements or abuse of dominant position are capable of affecting trade between Member States in accordance with the requirements of, respectively, Articles 81 or 82 of the Treaty. Having regard to the fact that the CC for the purpose of application of the EU competition rules acts in accordance with the procedure established by the LC the draft Law reviewed the provisions concerning the procedures for conducting of investigations and imposing of sanctions.

Seeking to align the harmonisation of the regulation of prohibited agreements under the national and the European law the model of prior authorisation in respect of agreements between undertakings have been repealed and, upon the enactment of the draft Law, agreements complying with the established conditions for exemption shall be effective without any prior authorisation to that effect by the CC being required.

Since the national courts shall have the power and the obligations to directly apply Articles 81 and 82 of the Treaty the draft Law governs the peculiarities of the legal proceedings of the competition cases. To that purpose the Code of Civil proceedings will have to be supplemented so that competition cases are investigated in accordance with the provisions of the Code with an exception established by the LC. Upon receipt of complaints related to the scope of application of Articles 81 and 82 of the Treaty the court shall notify thereof the European Commission and the CC which at their own initiative may submit comments on the application of Articles 81 or 82, shall be entitled to familiarize themselves with the particulars of the case, provide explanations and evidence, participate in the proceedings dealing with the case, and submit requests. The draft Law also provides for an additional basis for the renewal of the case ensuring the possibility for the parties of the proceedings to protect their rights where the application of Articles 81 or 82 as ruled by the court contradicts the decision of the European Commission concerning the application of the Articles in question.

The draft Law provides for material changes in the area of implementation of concentration control. The practice shows that some markets (services markets in particular) may effect concentrations without having notified the CC thereof, by virtue of their minimum income ratios being below the thresholds invoking the obligation to apply to the CC for authorisation of the concentration. Thus the draft Law proposes to authorise the CC to independently initiate the concentration control proceedings in cases where less than 12 months have elapsed after the merger has been put into effect. The basis for the refusal to grant the authorisation of the concentration was considerably expanded having regard to the draft Council Regulation on the control of concentrations between undertakings. The binding instruction to the undertakings to suspend the concentration after submission of the notification to the CC was also repealed. Undertakings will have a discretionary right to choose at which stage of the implementation to notify the CC thereof (prior to the realisation of concentration).

The Law on Monitoring of State Aid to Undertakings stipulates that State aid control is being implemented by the CC in the procedure established by the said Law. Upon Lithuania‘s accession to the EU this function shall be implemented by the European Commission since by virtue of Article 88 (ex 93) of the Treaty the European Commission has been granted appropriate powers to decide on whether or not a State aid is compatible with the common market and the requirements of the European law. The Treaty as well as Council Regulation (EC) No. 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 88 (ex 93) of the EC Treaty will become directly applicable as of 1 May 2004. Therefore the Law on Monitoring of State Aid to Undertakings is proposed to be declared void as of that date, alongside supplementing the LC by a provision that the CC is a coordinating institution concerning all matters related to State aid subject to the relevant rules of the EU. In the manner provided by the Government of the Republic of Lithuania the CC shall perform the expert examination of the intended State aid, participates in the process of notifying the European Commission of State aid, and submits conclusions and recommendations to State aid providers. The preliminary assessment of intended State aid by the CC and conclusions of advisory nature would be equally beneficial to State aid providers as well as the undertakings of the Republic of Lithuania. This would enable them to avoid problems related to granting of State aid in contravention of the effective legislation of the European Community. In addition, the CC will be assigned the responsibility to maintain the Register of State aid (including de minimis aid).

Beyond any doubt, the adoption and the implementation of the Law will have a significant impact upon the development of the competition law; enhance the efficiency of the CC in its pursuit to protect the freedom of fair competition.

The European Commission in its Regular Report of 2003 on Lithuania‘s progress towards accession noted that Lithuania in essence is fully capable to fulfil its negotiation commitments and requirements in the area of competition and upon accession to the EU Lithuania will be able to enforce the relevant acquis. Nearing the completion of the pre-accession stage Lithuania is expected to approve a more stringent sanctioning policy and continue to enhance the efficiency of enforcement of competition rules. Furthermore, Lithuania should continue to monitor the appropriate application and the implementation of State aid legislation in particular, in the area of aid for rescuing and restructuring of enterprises.

2. Integration into the European Union

After the signature of the Treaty of Accession on 16 April 2003, Lithuania was invited to join the activity of the appropriate European institutions wherein it was assigned the observer status. The period preceding the full membership of the EU was designated as the time devoted to information and consulting procedure pursuant to which Lithuania will be entitled to present its views concerning the enforcement of the newly adopted EU legislation. Although enjoying the observer status rights in the same manner as all other States seeking the EU membership, Lithuania was able to present its views in the course of the negotiations during the meetings of the working groups of the European Council, the Permanent Representatives Committee (COREPER), and the Council Ministers. The Ministry of Foreign Affairs of the Republic of Lithuania was coordinating all activities related to the EU institutions, next to performing other assignments was hosting the meetings of the Delegation for EU Accession Negotiations which were also attended by CC representatives. Since in the year 2003 the COREPER was considering the new Council Regulation on the control of concentrations between undertakings, experts of the CC submitted the official position of Lithuania to the Delegation for EU Accession Negotiations. Late in 2003, following the extensive discussions in the working group of the CC and deliberations in the COREPER the Regulation was approved by joint political consent.

Representatives of the CC were regularly invited to participate in meetings of the competition working group of the Council the agenda whereof include d the discussion of the draft new Regulation. Twelve such meetings were held in the period between 16 April 2003 and the end of the year, and the CC representatives participated in three such meetings, and one meeting was attended by the representative of the Mission of the Republic of Lithuania to the European Communities.

In accordance with par. 1 of Article 52 of the Treaty of Accession representatives of the CC were delegated to the following advisory committees of the European Commission: Advisory Committee on Restrictive Practices and Dominant Positions, Advisory Committee on Agreements and Dominant Positions in the Air Transport, Advisory Committee on Agreements and Dominant Positions in the Maritime Transport, Advisory Committee on Restrictive Practices and Monopolies in the Transport Industry, Advisory Committee on Concentrations. The Committees deal with cases related to abuse of a dominant positions and prohibited agreements, cases of mergers between undertakings where conclusions are tabled to the Commission for the final decision, the Committees also consider draft regulations and other important issues of the competition policy. Of special significance for the CC experts was the participation in the meetings of the Advisory Committee on Restrictive Practices and Dominant Positions considering the draft legislation implementing Council Regulation No. 1/2003/EC.

Furthermore, in accordance with the Regulation of the Council on the application of Articles 92 and 93 of the Treaty an official of the CC was appointed as a representative to the Advisory Committee on State aid. The meetings of this committee deliberate draft legislation related to State aid and present conclusions to the European Commission, the Committee also devotes some time to the assessment of the notifications of Member States on the provisions of State aid.

Since April 2003 representatives of the CC attended nine meetings of the above Committees.

Special arrangements related to the implementation as of 1 May 2004 of the EU Council Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty. For the purpose of the implementation of the said Regulation the officials of the CC were extensively involved in the activities of the Implementation working group European Competition Network (ECN). Specialists of the CC attended six plenary meetings of the working group and six meetings of the sub-group of the ECN “Exchange of information” the agenda whereof included the discussion of issues related to the implementation of the new Council Regulation with special focus on the cooperation between national competition authorities and the European Commission.

Information required for the operation of the ECN group on the implementation of the LC, powers of the CC (imposition of sanctions, sanction reduction, and exemption from penalties in accordance with the LC, procedures established by the CC) was provided to the ECN management system on ECN Intranet (accessible via “CIRCA”) established by the European Commission.

In the same manner as in previous years exhaustive information on the investigations conducted during 2002, the deliberated competition cases as well as statistics on the provided State aid was being provided to the Directorate General for Competition. Similarly, as part of monitoring function, information on the implementation of the EU acquis in the area of competition was provided to the European Commission and the meeting of the EU-Lithuania sub-committee No. 2 on internal market issues held on 22 May 2003 in Brussels.

During the year 2003 the CC was continuing to provide information and the data to supplement and update the database on the progress of harmonization of national legislation with the European Community law operated by the TAIEX Bureau of the European Commission.

In October 2003, for the first time the European Commission and the Economic and Financial Committee called Lithuania to submit the National Report on Economic Reforms (the so-called Cardiff Report on Product and Capital Markets). The contribution in the preparation of the Report was the submission to the Competition policy and State aid chapter covering issues related to the fundamentals of policies of competition and monitoring of State aid and the enforcement thereof.

II. THE PRINCIPAL ACTIVITIES OF THE COMPETITION COUNCIL

During 2003, the activities of the CC were mainly focused upon its functions of the enforcement of the LC, the Law on Monitoring of State Aid to Undertakings and the Law on Advertising. The Graph below shows the breakdown of Resolutions passed by the CC by areas related to enforcement of the three said Laws. The most important investigations are given a more thorough review in further Chapters of the present Report.

1. Enforcement of the LC

During the year 2003, acting in accordance with the LC the CC initiated 72 investigations, including 4 initiated by the institution itself, while the remaining investigations were started against requests lodged by various undertakings. Having applied the relevant provisions of the LC the institution passed 73 decisions.

	Decisions reached	Initiated investigations
Total number of cases	73	72
Prohibited agreements	7	9
Abuse of dominance	6	3
Mergers	53	55
Restrictive actions of public and local authorities	7	5
Prohibited agreements
	Horizontal agreements	Vertical agreements
New cases opened	9	1
New notifications/applications	1	1
New own initiative procedures	4
New complaints	4
Decisions reached	7
Rejection of complaint decisions	5
Exemption decisions	1
Prohibition decisions
Prohibition with fines decisions	1
Court rulings
Abuse of dominance
New cases	3
New own initiative procedures
New complaints	3
Decisions reached	6
Rejection of complaint decisions	5
Prohibition decisions
Prohibition with fines decisions	1
Court rulings	2
Concentration
Decisions reached	53
Approvals	48
Conditional approvals	6
Prohibitions
Rejected notifications	1
Court rulings

The overview of the performance of the enforcement function by the CC proves significant improvement in the quality of the investigations conducted, as well as the legal completeness of such investigations. Some investigations were extensive, time consuming and complicated which in the first place holds true of the investigations conducted in the information technologies, transport fuels and service markets.

Prohibited agreements

Cartel agreement in the information technologies market

In March 2003, prompted by the information submitted by the Head of the Commission Delegation in Lithuania on the alleged agreement among enterprises participating in the PHARE tender the CC started an investigation on its own initiative. The objective of the investigation was to establish the compliance of actions of enterprises participating in the tender called in 2002 by PHARE "Procurement of information technologies designed to strengthen the capacity of the Ministry of Agriculture and related institutions to manage and administer EU aquis for agriculture and rural development” with Art. 5 of the LC. Bidders for the tender were four companies, competitors in the information technologies market UAB Aideta, UAB Blue Bridge, UAB Techna Orbis and UAB CompServis. The tender object, valued at EUR 499,094 (around LTL 1,723,000) is regarded a large tender object in the Lithuanian market for information technologies. The gross annual income of the three companies suspected as having concluded the agreement amounted to LTL 70,140,585. Two of the tendering companies were holding leading positions in the said market. Such agreements between companies distort competition in the market and deprive other competitors of possibilities to win tenders on fair terms, and thus operate in the market under equal competitive conditions.

Within the investigation the CC performed the analysis of parts of the tender bids, i.e. the technical specifications submitted by the bidders. It was established that the technical specifications submitted by three competing bidders, - UAB Blue Bridge, UAB Aideta and UAB Techna Orbis, were expressly similar, containing a number of identical items. The arrangement of the chapters of the technical specifications was identical, tables looked the same, contained identical mistakes, the three companies used the same font for the text, and it was also established that bids of the three companies specified hardware of the same names, types and models. The hardware offered by the three companies was identical, although the tender documentation specified only the minimum technical requirements thus leaving sufficient room for selection of the hardware by the bidders at own discretion. Only the hardware offered by the fourth company was entirely different. Such coincidences in the technical specifications of the tender bids could not have possibly occurred if the companies were preparing their bids independently and they gave sufficient grounds to suspect the bidders of an intention to submit coordinated bids for the tender. The similarities of the technical specifications of the bids submitted by three companies allowed a conclusion that the bids were executed and documented in one company, actually in one computer file. As it turned out, UAB Blue Bridge was the first to develop the technical specification which was later on, having adjusted some items of the specification and made some other insignificant changes were passed to the other two, i.e., UAB Aideta and UAB Techna Orbis. The findings were well proven by all facts established in the case: staff members of the competing UAB Aideta, UAB Blue Bridge and UAB Techna Orbis responsible for the preparation of the tender bids were corresponding by electronic mail thus coordinating the process of preparation of the tender bids and drafting documents for their competitors.

The investigation also established that the tenders submitted by the three companies contained identical mistakes basically related to the information on warranty clauses of their bids. The fact-finding actions established that UAB Blue Bridge drafted the application to participate in the tender, which later on was sent to its competitors UAB Aideta and UAB Techna Orbis, the task for the latter being just to sign and fax it at the specified fax number to the procuring organisation. Thus UAB Blue Bridge prepared the application to participate in the tender on behalf of its two competitors UAB Techna Orbis and UAB Aideta.

All these established actions produced sufficient evidence that UAB Blue Bridge, UAB Aideta and UAB Techna Orbis had agreed to submit coordinated bids in the tender concerned thus concluding an agreement prohibited by the LC. Furthermore, the companies agreed that the tender would be awarded to UAB Blue Bridge. The intended winner of the tender, upon the agreement of the three companies worked out the price calculations and offered the lowest price. The companies had concluded an agreement under which UAB Blue Bridge actually did not compete with UAB Aideta and UAB Techna Orbis that in their turn allowed the said company to win in the tender.

In the course of the investigation all the three companies made statements by which they actually confessed of having concluded the agreement in contradiction to Art. 5 of the LC. This was the first official statement made by undertakings to have ever been made in the history of investigations of prohibited agreements by the CC. Such voluntary cooperation on the part of the companies in the course of the investigation, the timely submission of the necessary information in addition to the requested explanations was extremely helpful to the authorised officials of the CC to rapidly complete the investigation and thus reduce its costs. The investigation of the prohibited agreement was completed in a record short time - 4 months. For the purpose of passing a final decision concerning the penalty such cooperation by the companies the actions whereof were subject to the investigation was considered, as provided in par. 2 of Art. 42 of the LC, extenuating circumstances.

Having regard to the fact that the companies confessed to have concluded prohibited agreement and rendered assistance to the officials of the CC, also that no aggravating circumstances were established as related to the infringements the CC imposed the following fines: to UAB Blue Bridge - LTL 50,000, to UAB Aideta and UAB Techna Orbis, respectively, LTL 20,000 and LTL 10,000.

Other investigations

Telecommunications

The CC carried out a full-scale investigation, which was initiated on the basis of a complaint filed by UAB Bitė GSM. The applicant claimed that rates applied to the calls from the fixed telephone line to the mobile telecommunications network of UAB Bitė GSM may be discriminatory as compared to rates effective for calls from the fixed telephone to UAB Omnitel mobile network.

The applicant stated that action of AB Lietuvos Telekomas whereby it transmits the domestic calls as international may be assessed as the imposition of unfair prices and terms by an operator dominating in the telephone calls transit market.

UAB Bitė GSM claimed that the difference in the rates for domestic call termination in the UAB Omnitel network and that of international call termination in the UAB Omnitel network maintained in the new network connection agreement concluded between AB Lietuvos Telekomas and UAB Omnitel may be regarded as an agreement between two related undertakings imposing unfair prices and terms for other market participants.

The CC examined the complaint lodged by UAB Bitė GSM and did not establish any infringements committed by AB Lietuvos Telekomas.

Dairy market

As ordered by the Prime Minister the CC carried out an investigation of the milk purchase market with a view to establishing a possible agreement between the dairy processing enterprises for fixing the milk purchase prices. The CC conducted a thorough analysis of all circumstances related to the reduction of the milk purchase prices. The objects of the analysis were the dates of price cuts, reduction rates, methods of fixing and adjustment of purchase prices by the dairy processing enterprises, as well as the operation of the milk purchase market. Officials of the CC did not establish any agreements or concerted practices by the major Lithuanian milk processing enterprises. The analysis showed that the reduction of the milk purchase prices were primarily caused by economic factors, such as the fall of such prices in foreign markets, the devaluation of the US dollar, severe competition on the domestic market which all in combination prevented the enterprises from the increase of the milk purchase prices. All these factors were basically pertinent to major milk processing enterprises, which sell most of their output in foreign markets.

The investigation, however, did not establish any evidence that milk processors had been engaged in some kind of agreement and/or concerted practices for the purpose of fixing the milk purchase prices.

Payment cards

An investigation carried out by the CC concerned the compliance of actions of AB Vilniaus bankas and AB bank NORD/LB Lietuva with the requirements of Art. 5 of the LC.

The investigation was initiated by the institution itself prompted by the information published in the press in April 2003 claiming that on 31 March 2003 AB Vilniaus bankas and AB bank NORD/LB Lietuva agreed on the joint network of cash dispensers (ATMs). The contract provided that all customers holding payment cards issued by AB Vilniaus bankas and AB bank NORD/LB Lietuva could withdraw cash or check the account balance in all ATMs operated by the contracting banks under the same terms as those established by the bank issuing the card.

Having analysed the contract of AB Vilniaus bankas and AB bank NORD/LB Lietuva it was established that the contract did not provide for the cash withdrawal charge, as this was established by each of the banks independently.

The investigation concluded that the agreement between AB Vilniaus bankas and AB bank NORD/LB Lietuva - the two competing operators of the financial services market - to fix identical terms for cash withdrawal in own ATMs and those of the contracting party was not capable of restricting the possibilities of each of the banks to unilaterally fix the charge for cash withdrawal in ATMs operated thereby, i.e., the agreement does not produce any restrictive affect upon the competition between AB Vilniaus bankas and AB bank NORD/LB Lietuva, hence the allegations on the infringement of Art. 5 of the LC were ruled out.

Goods carriage by motorcars

In March the CC conducted the investigation the purpose whereof being to establish the compliance of actions of Linava, the Lithuanian National Road Carriers Association and its members with the requirements of Art. 5 of the LC. The investigation was started by the CC on its own initiative on the basis of the information published by the Lithuanian News Agency ELTA and the address to the Lithuanian road carriers published in the website of Linava. The text of the address allowed a suggestion that the goods carriers were indirectly prompted to recalculate the costs of goods transportation and increase the rates for the goods transport services. This raised a suspicion that the Association Linava and its members seeking to establish new goods carriage rates intended to perform actions potentially in contravention of the LC.

It was established that the inducement by the Association Linava and its members to coordinate their business decisions in relation to the increase of the transportation rates (recalculation of goods carriage costs and the rates of the goods transportation services) had not been of the scope that could possibly produce a negative effect upon competition. The initiated investigation prevented Linava from putting its intentions into operation. Although the CC terminated its investigation, it continued to further observe the actions of Linava and its members to avert any attempts of coordinated price increase.

The Association Linava was invited to notify all its members that in accordance with par. 1 of Art. 5 of the LC all agreements which have as their object the restriction of competition or which may restrict competition shall be prohibited and are void from the moment of conclusion thereof.

Exemptions

Block exemption in the office paper market

The CC examined the notification filed by UAB Papyrus Distribution and UAB Mabivil on the vertical agreement qualifying for a block exemption. The office paper market is an extremely rapidly developing market in Lithuania including 10 wholesale operators, five of which are members of the Baltic Association of Paper companies, and about 50 retailers. It was established that the said notification complies with the requirements of par. 4 of Art. 7 of the LC which stipulates that undertakings must within an established time limit after the coming into effect of the agreement concluded according to the conditions of block exemption present information on the principal conditions of the agreement to the CC.

Block exemption in the maritime transport market

In 2003, upon the request of AB LISCO Baltic Service the CC carried out an investigation seeking to establish the compliance of the German-Lithuanian conference agreement between AB LISCO Baltic Service and the company Scandlines AG with the requirements of the Resolution of the C C “On granting of a block exemption to certain agreements between transport undertakings in individual branches of the transport sector in accordance with Articles 5, 6 and 7 of the LC of the Republic of Lithuania”.

It was decided to confirm that the German-Lithuanian conference agreement between AB LISCO Baltic Service and Scandlines AG as notified by the applicant complies with the terms laid down in Resolution No. 11 of 18 January 2001 of the CC “On granting of a block exemption to certain agreements between transport undertakings in individual branches of the transport sector in accordance with Articles 5, 6 and 7 of the LC of the Republic of Lithuania”.

Abuse of a dominant position

Sugar market

The object of the investigation initiated on the basis of the notification of the agricultural cooperative Kėdainių krašto cukriniai runkeliai was to establish on whether or not the clause of the interprofessional agreement of AB Danisco sugar Panevėžys and AB Danisco sugar Kėdainiai complies with provisions of Art. 9 of the LC. The agreement was concluded in 2002 among the said sugar factories and 5 cooperatives of sugar beet growers, and contained the provision, which prohibited the sugar beet growers to deliver the sugar beets for processing where the sugar beets were grown from the seeds acquired from other sources than the sugar factories. During the investigation it was established that Danisco factoring prohibiting the sugar beet growers from delivering for processing the sugar beets grown from the seeds acquired from elsewhere than the factories, were abusing their dominant position thus restricting the freedom of the economic activity of the sugar growers and restricting competition in the wholesale seed market. Being allotted certain sugar beet growing quotas and obliged to purchase the sugar beet seeds exclusively from the factories the sugar beet growers are made dependant upon the factories and the sugar processing factories are then able to unilaterally fix the price for sugar beet seeds. By imposing the obligation upon the sugar beet growers to purchase the seeds exclusively from the factories and providing that the payment for the seeds is effected upon the delivery of the sugar beets Danisco restricted the possibilities of the sugar beet growers to opt for other more acceptable payment terms or choose other seed suppliers.

In the course of the investigation Danisco factories submitted the data on the adjustments in the existing system for selling of sugar beet seeds to sugar beet growers proving that the liberalisation of trade in seeds is related to substantial costs, which would have an appreciable affect on the competitiveness of the sector. In addition, having regard to the findings of the investigation Danisco factories submitted the provisions of new agreement on the sale of sugar beet seeds intended to make part of the interprofessional agreement for the year 2004. In order to analyse the impact of the provisions of the produced agreements upon the liberalisation of the market for the sugar beet seeds and assess the compliance of such provisions with the LC, the investigation was extended until the completion of the negotiations concerning the conclusion of the interprofessional agreement between Danisco factories and the cooperatives of sugar beet growers.

Mortuary services

The investigation was initiated on the basis of the application lodged by UAB Kremata, which indicated that A. Jankauskas’ service and trade undertaking is the only company in the town of Biržai leasing the mortuary premises. According to the applicant the lessor of the mortuary premises also required the customer to acquire all related funeral articles exclusively from it in the opposite case the customers were refused the service.

The investigation established that such actions of A. Jankauskas’ service and trade company restricted the possibilities of other undertakings to operate in the mortuary article and services market thus violating the customers’ interests.

Taking into consideration the fact that A. Jankauskas’ mortuary services and trade enterprise having violated the provisions of the LC submitted all the information necessary for the investigation of alleged abuse of dominance and that no material or irretrievable damage to the interests of another undertakings or the society was incurred by prohibited actions under investigation, A. Jankauskas’ mortuary services and trade enterprise was subjected to a minimum fine of LTL 3,000.

Insurance market

In September 2002 an investigation was initiated with a view to establishing possible infringements of Art. 5 and 9 of the LC according to the notification presented by the insurance company AB Lietuvos draudimas on the allegedly prohibited agreement between AB Lietuvos žemės ūkio bankas and the AB Lietuvos žemės ūkio banko draudimas. In its notification AB Lietuvos draudimas was claiming that it was approached by UAB Lekėčiai with a request to terminate the livestock insurance agreement since the Šakiai division of the AB Lietuvos žemės ūkio bankas was crediting UAB Lekėčiai and one of crediting condition is to insure the livestock in UAB Lietuvos žemės ūkio banko draudimas .

The investigation established that in accordance with the provisions of the LC AB Lietuvos žemės ūkio bankas and UAB Lietuvos žemės ūkio banko draudimas should be treated as a single undertaking because they are interrelated by mutual control and do not operate in the market independently while organising their economic activities. Prohibitions laid down in par. 1 of Art. 5 of the LC are not applicable to agreements concluded by undertakings that are to be treated as a single entity.

Having assessed the compliance of actions of AB Lietuvos žemės ūkio bankas and UAB Lietuvos žemės ūkio banko draudimas with the requirements set forth in Art. 9 of the LC the CC concluded that AB Lietuvos žemės ūkio bankas isn’t dominating in the Lithuanian market of agricultural loans since no barriers for other undertakings to enter the market were established. From the banks’ point of view the agriculture sector is related to high risks, and crediting of agricultural activities is not a priority area of activity of the banks that therefore do not intend to significantly increase their market shares in this particular sector.

Goods carriage by motorcars

The CC examined the application presented by L. Karpavičius PE Talka concerning abuse of a dominant position. The applicant claimed that the National Road Carriers’ Association Linava was abusing its dominant position when charging different prices for TIR Carnets issues to members of the Association and the candidate members, thus placing them at a competitive disadvantage.

The Association Linava has been assigned an exclusive right to issue TIR Carnets as a guaranteeing association in accordance with the Customs Convention on the International Transport of Goods under Cover of TIR Carnets. It was established that by charging different prices for TIR Carnets for members of the Association and its candidate members Linava did not create different competitive conditions for national road carriers, because all undertakings have equal conditions to fulfil the relevant requirements and become regular members of the Association. The differentiation in the charges for the TIR Cornets is justified since according to the data of the Association Linava members and candidate members of the Association are considered not equally reliable. The risk assumed by the Association in respect of candidate members is higher than that in relation to its regular members. The difference in the prices for the TIR Carnets were established in view of different administrative costs incurred while issuing them to members and candidates of the Association.

Having examined the factual data the CCl resolved that under the provisions of Art. 9 of the LC there was no legal basis for the assumption that by establishing different prices for TIR Carnets issued to its members and candidate members the Association was abusing its dominant position in the market concerned. The applicant’s allegation that Linava was distributing the TIR Carnets to its members at the price below costs was also found groundless.

Concentration control

General overview

During the year 2003, the CC received 54 notifications concerning approvals to implement concentrations of market structures. On 52 occasions the concentrations were approved by appropriate resolutions of the CC. Those included 6 cases of conditional approvals seeking to avoid the creation or strengthening of a dominant position. The examination of 3 notifications is being continued throughout the year 2004. One undertaking withdrew its notification on the intended merger, in 5 cases, where the CC was seeking to expedite the decision making process, and where it was apparent that the implementation of the merger will not result in a creation of a dominant position or restriction of competition and pursuant to par. 3 of Art. 12 of the LC it was permitted to exercise individual actions of concentrations pending the adoption of final decision.

The 2003 recorded 10 approvals to implement the concentration to foreign entities, which is a reduction as compared to 15 such approvals in 2002. In 5 cases the mergers were enacted between undertakings registered abroad although operating in the Lithuanian product markets, and the mergers would raise the degree of concentration in Lithuania. In 5 cases foreign undertakings acquired undertakings registered in Lithuania, which included 4 cases of horizontal concentrations and 1 case of conglomerate concentration.

In other 42 cases, which were placed to the CC for examination, mergers were implemented by undertakings registered in Lithuania, including 6 approvals to Lithuanian undertakings controlled by foreign capital, and in 5 approved cases Lithuanian and the foreign capital jointly controlled the merging undertakings. In 23 cases the mergers were considered as horizontal mergers. These included 5 cases in the trade sector, 8 cases in industry sector, 3 cases in construction sector, and 2 cases were recorded in each of the finance, agriculture, information technologies sectors, 1 merger was approved in the energy sector. In 3 cases the mergers were considered bearing features of horizontal merger, in 5 cases mergers were vertical and in 9 cases the mergers were recognised as conglomerate.

Changes in the development of merger processes in Lithuania are very insignificant, as it is very obvious from the data presented in the Table below.

DEVELOPMENT OF CONCENTRATION CASES

Years	2000	2001	2002	2003
Notifications received	57	47	52	54
Approvals issued	48	43	48	52

However, the comparison of the number of horizontal concentrations effected in 2003 to that of the previous year showed an increase, concentrations have become more frequent in the industry, construction and agricultural sectors. Although notifications on concentration in the trade sector were fewer, concentrations among small trade companies not subject to the notification requirements under par. 1 of Art. 10 of the LC became more common.

In 2003, out of five major trade networks only UAB Baltishes Haus submitted one notification and was granted an approval to perform the concentration. Three mandatory notifications of concentration were submitted by network Aibė, which is related to UAB VP Market. The network Aibė, however, unites, on contractual basis, small traders mostly from regional areas, settlements, small towns, which benefit from larger rebates offered by the centralised procurement facilities. Major trade networks were expanding mostly through opening new modern trading outlets. The expansion of trade networks UAB VP Market and Aibė in Latvia promoted exports of products of Lithuanian producers, in particular, the food products, also facilitated the imports of Latvian products into Lithuania, which brought about some new stimulus into the level of competition in the Lithuanian markets. Trade networks in regions areas are expanding and now offering to relatively lower-income consumers staple goods at significantly lower prices.

It has increasingly often becoming a case where undertakings and legal firms representing them prior to submitting concentration notifications seek advise from specialists of the CC. Upon learning of a possibility in a particular case that a dominant position may be created and the consequent restriction of competition they, quite infrequently, abandon their intentions to effect concentration or withdraw their concentration notifications.

On a single occasion the CC approved the notified concentration despite certain restricting clauses in the contracts, i.e. the contracts contained the non-competing clauses effective for an established time period. The presence of the non-competing clauses is justified by the need to ensure that the acquired tangible and intangible assets (such as the company’s goodwill, experience, know-how), constituting a large part of the assets being acquired would not be devaluated immediately after the take over.

In certain cases while granting the approvals to perform concentrations due regard was given to the forthcoming EU membership which entails abolition of administrative barriers (customs duties, non-tariff measures and other barriers), and the possible redefinition of geographical markets.

In certain cases seeking to ensure transparency of accounting in the relevant markets, implement the principles of non-discrimination, and to prevent the cross-subsidising of goods (services), possible coordination of actions by competitors, increase of economic power, which may result in restricting effect, the CC granted conditional approvals for concentration. One of such cases was recorded in the alcoholic beverages market where UAB Mineraliniai Vandenys acquired AB Stumbras by way of privatisation.

Alcoholic beverages market

As early as 2002, while assessing the compliance of actions by AB Stumbras by granting rebates and arranging for settlement for advertising services with the provisions of the LC, the CC established the dominance of AB Stumbras in the market for strong alcoholic beverages. UAB Mineraliniai Vandenys was awarded the public privatisation tender called by the SE Turto Fondas. UAB Mineraliniai Vandenys was operating in the alcoholic beverages (imported, as well as locally produced) wholesale market. Besides, the CC established possible concerted actions in the relevant market on the basis that AB Stumbras was holding a 10% interest in UAB Artrio-2 and, accordingly, was participating in the management of the latter. At the same time a 10% holding of UAB Artrio 22 was held by AB Alita, which was also participating in the management of this company. AB Alita is the second largest producer of alcoholic beverages in Lithuania, being the largest producer of sparkling wines. UAB Artrio-2 was tendering in the privatisation tender relating to AB Anykščių Vynas privatisation announced by the SE Turto Fondas and was awarded the privatisation tender. AB Anykščių Vynas also produces strong alcoholic beverages and certain kinds of wine. Provisions of the Law on Alcohol Control established the State monopoly in the strong alcoholic beverages production market to be effective until 1 January 2004. Therefore any increase in competition in this market may be possibly expected only after the alcoholic beverages market is liberalised, after part of producers of alcoholic and non-alcoholic beverages will be able to launch the production of strong alcoholic beverages without the need to allocate substantial investment. Imported strong beverages can hardly substitute the supply of local producers, basically due to the substantial difference in prices, as well as quality standards, and, finally, the preferences on the part of Lithuanian consumers to local production. However, after the accession of Lithuania to the EU and the abolition of all trade barriers, AB Stumbras would have to face competition not only from the part of the EU producers, but also that from the neighbouring States enjoying a zero rate EU customs tariff.

Having regard to the circumstances as described above, the CC decided to approve UAB Mineraliniai Vandenys to effect concentration by acquiring up to 100% shareholding of AB Stumbras according to the submitted notification subject to the following terms and conditions of the concentration:

1. Having acquired the control of AB Stumbras and having taken over the management of the company, UAB Mineraliniai Vandenys is obligated to sell all shares of UAB Artrio-2 it currently owns;

2. The time limit for the above transaction is deemed confidential.

3. Having acquired the control of AB Stumbras and having taken over the management of the company, UAB Mineraliniai Vandenys is obligated to recall the representative delegated by AB Stumbras from the management board of UAB Artrio-2;

4. To sell the shares of UAB Artrio-2 to an undertaking deemed under the requirements prescribed by the CC not related to UAB Mineraliniai Vandenys.

The CC also imposed an obligation upon the parties to appropriately notify the CC of the performance and the course of any equity transactions, which shall be subject to the latter’s approval. Upon an individual request the CC may decide to extend the time limit for the sale transaction for a period duly grounded as necessary to complete the sales transaction.

In order to prevent discrimination and dissimilar competitive terms AB Stumbras was obligated in its contracts with other undertakings to establish prices and other terms, which are comparable to those established in the contracts with UAB Mineraliniai Vandenys.

Dairy sector

During the year 2003, the Lithuanian dairy sector (milk purchase and dairy products sector) was undergoing further concentration processes.

In this respect the most important case for the CC was the case of the concentration of AB Panevėžio Pienas and AB Rokiškio Sūris. This particular case investigated was challenging to the competition authority both in terms of establishing the type of concentration, and in terms of defining the markets. The notification of the intended concentration was submitted four times, in three cases it was withdrawn, where each time the applicant would indicate a different size of targeted shareholding, and emphasise that the main purpose of the concentration effected by AB Rokiškio Sūris is to acquire an interest in AB Panevėžio Pienas of the size ensuring a significant influence in the process of decision making while preventing any devaluation of shares.

In April the CC examined the notification submitted on 12 March 2003 by AB Rokiškio Sūris on intended concentration by acquiring up to 35.3% shareholding in AB Panevėžio Pienas. Acting in accordance with item 2 of par. 1 of Art. 14 of the LC the CC passed a decision of conditional approval permitting for AB Rokiškio Sūris to effect concentration by acquiring up to 35.3% shareholding of AB Panevėžio Pienas pursuing to avoid the creation of a dominant position:

1. AB Rokiškio Sūris is obligated to refrain from voting by all previously and additionally acquired voting shares of AB Panevėžio Pienas in the general AB Panevėžio Pienas meetings of shareholders on the following issues:

distribution of profit;

formation, distribution and liquidation of reserves not available for distribution;

sale, transfer, lease or mortgage of fixed assets the value whereof amounts to over 1/20 of the company’s authorised capital, as well as offering guarantee or surety for the discharge of obligations of other entities.

2. Any additional acquisitions of the shares of AB Panevėžio Pienas and (or) other actions of concentration (e.g. for the purpose of coordinating of business decisions between the shareholders of AB Panevėžio Pienas and the related undertakings) shall be approved by the CC.

The peculiarity of this particular case of concentration stems from the fact that the companies operate in the same market - milk purchase and dairy product markets. The concentration to be effected was assessed as horizontal concentration significantly affecting the degree of concentration in the relevant milk purchase and unskimmed milk product markets. Since in these relevant markets the share of AB Rokiškio Sūris and AB Pieno Žvaigždės would account for, respectively, approximately 61% and 60%, only AB Žemaitijos Pienas is a comparable competitor for them, and other participants of the relevant markets are rather small, the concentration could result in the creation of a dominant position which could have a restrictive affect upon competition in these relevant markets.

In the course of the assessment of this particular concentration the issues of acquisition of control were placed under particular scrutiny, inasmuch as the entity effecting the concentration had no objections as to the market definition, market shares held and the assessment of the impact of the intended concentration upon the market. Besides, account was taken of the fact that all three entities were operating in the same markets, i.e., the milk purchase and dairy products markets. This enhances the probability of the entities opting to pursue a joint strategy, or to otherwise coordinate their actions in the markets concerned, which may take the form of agreements on the settlement terms, sharing of milk purchase markets, dairy products marketing prices or application of trade rebates.

AB Rokiškio Sūris acknowledged the fact that the acquisition of the ”veto” right is commensurate to the acquisition of control. The CC took due regard of the clearly opposing position expressed by another major shareholder of AB Panevėžio Pienas, it being AB Pieno Žvaigždės, in respect of actions pursued by AB Rokiškio Sūris, and the possible challenges in the management of the acquired entity in view of significant conflict of interests. Therefore, the CC decided to approve the intended concentration, assessing the purpose of the concentration effected by AB Rokiškio Sūris as an investment (financial) measure with an objective to sell all the acquired shares of AB Panevėžio Pienas.

The decision making process also took into consideration the ever increasing share of AB Rokiškio Sūris in the milk purchase market, and although expressed in volumes of milk the company was exporting about 70% of its dairy products, the milk purchase prices were on the steady decline. In principle, AB Rokiškio Sūris, holding about 40% of the milk purchase market was capable of determining the low milk purchase prices in the entire milk purchase sector. As opposed to other States, in Lithuania support to the milk producers was insignificant, also export of dairy products was not supported at all, and the dairy products output in the country exceeded the consumption by nearly twice. For that reason, AB Rokiškio Sūris, exporting most of its output, in the same way as many other exporting milk producers were facing severe competition in foreign markets. Lithuanian milk producers are on competing terms with large milk producers from other countries (Sweden, Denmark, Finland, Portugal and the Netherlands) in which up to 60-90% of all purchased milk is produced.

Telecommunications sector

In December 2003, the CC examined the notification filed on 2 September 2003 by TeliaSonera AB on concentration by acquiring up to 90% shares of UAB Omnitel through its subsidiary Amber Mobile Teleholding AB. The CC resolved to authorise the intended concentration under the following terms and obligations:

1. UAB Omnitel is prohibited from effecting reorganisation through taking over or merging with AB Lietuvos Telekomas or any other undertaking directly or indirectly controlled by TeliaSonera AB without the prior notification of CC in the prescribed manner and within the established time limits, and having obtained an authorisation of the CC to perform such concentration actions.

2. AB Lietuvos Telekomas shall not, unless it obtains a prior authorisation of the CC, transfer its current operations (customer contracts) related to the provision of the fixed telecommunications market to UAB Omnitel. This obligation shall be revoked in case UAB Omnitel, in the manner prescribed by the laws, is subject to one or more regulatory obligations as an undertaking exercising a significant influence in the relevant telecommunications market.

3. Seeking to ensure the transparency of operations related to the provision of telecommunications services via the public fixed and the mobile telecommunications networks, UAB Omnitel is obligated to maintain separate accounting of all costs related to the provision of fixed telecommunications services. This obligation, in view of the segregated accounting of costs related to the access and the network interconnection must be fulfilled not later than within three months following the coming into effect of the Resolution of the CC authorising the concentration.

4. TeliaSonera AB is obligated to ensure that AB Lietuvos Telekomas and UAB Omnitel including all other directly or indirectly controlled undertakings providing the fixed telecommunications services in the Republic of Lithuania, acting in accordance with the effective domestic laws abide in their operations with the non-discrimination clause, in particular, when concluding contracts concerning the network interconnection and network access.

The decision of the CC was based on the data produced by telecommunications markets surveys and the liberalisation tendencies inherent to the fixed telecommunications markets. Since in this particular case of the examined concentration the joint control over UAB Omnitel exercised jointly by TeliaSonera AB and Motorola AB was actually being replaced by a unilateral control by TeliaSonera AB, the concentration was designated as horizontal and vertical concentration in the relevant telecommunications markets. In the course of the examination of this particular case of concentration it was established that the principle markets affected by the concentration in question are the fixed telecommunications services and the mobile telecommunications services markets. Besides, the data transmission and the Internet as well as related services markets are rapidly expanding, and, upon the liberalisation of the telecommunications markets, this trend is expected even to accelerate.

The investigation conducted by the CC concluded that AB Lietuvos Telekomas holds a dominant position in certain relevant service markets, such as public fixed telecommunications market, individual fixed telecommunications markets and the market for the dedicated lines services. AB Lietuvos Telekomas is holding a significant share in the market for data transmission, provision of the Internet or related services, while a large share of the same markets is held also by UAB Omnitel. Furthermore, UAB Omnitel share in the mobile telecommunications market and the international mobile inter-network services market is also significant. The degree of concentration would be affected in the relevant telecommunications markets, which could lead to a creation or strengthening of a dominant position and severe restriction of competition. Furthermore, TeliaSonera AB, by enhancing its control over UAB Omnitel would secure a possibility to exercise a complete coordination of actions of AB Lietuvos Telekomas and UAB Omnitel . For that reason TeliaSonera AB would enhance its capacity through its economy of scale and the volumes of its investment into the development of new technologies, integration of the existing and the developed telecommunications networks, it could rearrange its organisational management structures. It is credible that in the future both AB Lietuvos Telekomas and UAB Omnitel would be able to strengthen their positions in the relevant markets.

While passing the decision the CC also made allowance for the fact that TeliaSonera AB undertook to initiate and encourage AB Lietuvos Telekomas to consider the issue of a gradual replacement of the NMT-450 technology by a cable network which would open new opportunities for a more diversified range of telecommunications services in areas where it is considered expedient in view of consumer needs and economic substantiation of such upgrading operations.

Actions of public and local authorities restricting competition

Resolution of the Government on export insurance

The CC examined the complaint lodged by the insurance company UAB Lietuvos Draudimo Kreditų Draudimas in which the complainant claimed it was not receiving allocations for partial compensations of actual costs of the insurance of non-marketable risk of exporters which placed the company to some competitive disadvantage as compared to that of the competing insurance company UAB Lietuvos Eksporto ir Importo Draudimas.

The conducted investigation established that UAB Lietuvos Draudimo Kreditų Draudimas and UAB Lietuvos Eksporto ir Importo Draudimas competing in the relevant market are placed at different competitive conditions. Such difference in the competitive conditions stems from the Resolution of the Government to provide for partial compensation of actual costs of insurance of non-marketable risk of exporter only in respect of the insurance company UAB Lietuvos Eksporto ir Importo Draudimas. The CC appealed to the Government of the Republic of Lithuania with a proposal to amend the procedure established by the Government and thus abolish privileges to UAB Lietuvos Eksporto ir Importo Draudimas where the company is able to engage in the insurance of non-marketable risks and benefit from partial compensation of insurance premiums from public funds.

Decree of the Municipality of Vilnius concerning advertising

The CC conducted with a view to assessing the actions of the Vilnius Municipality when the authority refused the permit to UAB United Media to set up new advertising stands.

During the investigation it was established that UAB United Media repeatedly applied to the Urban Development Department of the Vilnius Municipality and submitted document packages seeking to obtain permits by the Vilnius Municipality to set up new sites for outside advertising stands. The company, however, was notified that the issuance of permits for setting up of outdoor ads was suspended until the new decree of the Municipality on outdoor advertising is passed. In the meantime other companies operating in the same market as UAB United Media encountered no restrictions in respect of their actions and could pursue in setting up new outdoor ads. The Vilnius Municipality informed that companies in the city of Vilnius were setting up outdoor stands on buildings and structures owned or managed by the Vilnius Municipality on the basis of previously concluded agreements and in locations allocated for this purpose specified by such agreements.

Even before the conclusion of the investigation conducted by the CC the Vilnius Municipality passed a decision to obligate the Urban Development Department to issue permits for setting up of new advertising stands.

Order of the Ministry of Agriculture concerning vegetable oil for human consumption

The investigation carried out by the CC sought to establish the compliance of Order No. 155 of 15 April 1999 of the Minister of Agriculture “On mandatory quality requirements for vegetable oil for human consumption” with provisions of Art. 4 of the LC. The Order established standard quality requirements for all vegetable oils used for human consumption, which, in the opinion of the applicant UAB Palnik is inherent to oils produced by cold compression. In Lithuania, only AB Obelių aliejus employs cold compression to produce rape oil. Most of the imported oil is produced by method of hot compression, therefore, in the opinion of the applicant the said Order of the Ministry of Agriculture creates preferential terms for AB Obelių aliejus and is discriminatory in respect of importers of oil.

The investigation established that the Order being challenged did not create any exclusive terms in respect of AB Obelių aliejus and was not discriminatory in respect of importers of vegetable oil.

As early as 2002, the State Food and Veterinary Agency tested 100 samples of imported oil produced from different raw materials both by cold and hot compression methodology and established that 77 samples complied with the quality requirements. The expert examination of legal acts regulating the mandatory quality requirements applicable to vegetable oil for human consumption established that by setting forth the quality requirements the Minister of Agriculture was acting in accordance with the provisions of the Law on Food of the Republic of Lithuania. The investigation was discontinued. The investigation, however, prompted the Ministry of Agriculture to specify the mandatory quality requirements applicable to vegetable oil for human consumption.

Market research

Retail trade

For the purpose of fulfilment of the Action plan approved by Resolution No. 702 of the Government of the Republic of Lithuania, the CC conducted an investigation seeking to establish the position of major trade networks in the retail trade market. The objective of the investigation was to determine the share held by major trade networks in the turnover of retail trade market of individual towns and regions, and assess the position of such companies in the retail trade markets. The analysis disclosed that trading in food products represented the largest share of the activity of major trade networks. While in 2002, the gross retail turnover in goods of the 5 trading networks accounted for 47% of retail turnover in goods of undertakings the main area of activity whereof is retail trade, in the food products group the trade networks’ market share was 72.7%. The turnover of UAB VP Market in the food product group accounted for 81% of the company’s retail turnover in goods, while that of IKI was 86%, Rimi Lietuva - 80%, Norfos Mažmena - 85%, and Aibė network - almost 80%.

The findings of the said investigation were made use of by the Ministry of Economy of the Republic of Lithuania for the purpose of drawing up its conclusions on the status in the Lithuanian retail trade markets.

Vocational training

Another research had an objective to assess the market of vocational training of the unemployed persons and the employees notified of the termination of their employment agreements. Such vocational training activities are funded form the Employment fund resources and other sources of funding.

Having regard to the findings of the said market research and seeking to ensure the publicity and transparency of selection of vocational train gin institutions, as well as the compliance of operations of such institutions with the provisions of the Law on Public Procurement and the principles of fair competition, the CC submitted proposals to the Ministry of Social Security and Labour and the Public Procurement Service under the Government of the Republic of Lithuania.

2. Monitoring of State aid to undertakings

Drafting of State aid legislation

It is quite justified to maintain that the successful completion of the negotiations between Lithuania and the EU concerning the Competition Chapter including State aid issues is in essence a proof that the principal requirements of acquis concerning State aid were transposed into the national law. Therefore the accounting period was mainly the time for the revision and harmonization of the said requirements already contained in the relevant Lithuanian legislation. On 16 January 2003 seeking harmonisation between the EU and the national law the CC repealed the previously approved “Rules on State aid to synthetic fibre industry”.

Having regard to the provisions of the European Commission directive 80/723/EEC "On the transparency of financial relations between Member States and public undertakings” (and the subsequent supplements thereto) and acting as a coordinating authority in the area of State aid, the CC, in conjunction with the Ministers of Finance, Economy and Transport defined the stages for the implementation of the directive in Lithuania and outlined the relevant implementing regulations. In May 2003, the CC drew up the draft of the Resolution of the Government of the Republic of Lithuania “On the approval of the decision of the EU and the Republic of Lithuania Association Committee on the regional aid map to be used as a basis for the assessment of State aid granted in Lithuania”.

Enforcement of State aid monitoring

For the purpose of exercising its supervisory authority in the area of State aid during the period under review the CC devoted considerable attention to the assessment of intended State aid to enterprises. The report on the progress of Lithuania in the implementation of State aid provisions of Article 64 of the Treaty establishing the EU which was presented to the meeting of the EU-Lithuanian sub-committee No.2 on internal market issues held on 22 May 2003 described in detail the progress attained by Lithuania in the area during the accounting period.

During the period under review the CC assessed 48 cases of State aid granting including legal acts drafted by various public authorities, as well as notifications on State aid. In certain cases the CC passed appropriate decisions, it also, on numerous occasions, submitted its proposals and comments. During the period concerned, acting in accordance with the procedure for the monitoring of the provision of State aid State aid providers submitted 16 notifications on intended State aid. In three cases the CC approved the State aid unconditionally, while on two occasions the intended State aid was approved subject to certain conditions. It was only in a single case that the authorisation of the intended State aid was refused. The CC initiated the assessment of one case of State aid, which is to be completed by the time Lithuania accesses the EU. In certain other cases it was concluded that the State aid notification provided for State aid measures, which do not constitute State aid, or that the notified aid was actually de minimis aid which is not subject to the authorisation by the CC. The Table below summarizes the data on the assessed State aid projects during the year 2003.

Notifications on State aid received and projects assesses during 2003:	48
of which:
Decisions passed by the CC:	7
of which:
State aid authorised	3
State aid authorised subject to certain conditions	2
Authorisation of State aid refused	1
Investigation by the CC is in progress during 2004	1
Other legal acts examined in respect of which the CC submitted comments and proposals, also other inquiries by State aid providers and recipients, other cases examined	41

According to the notifications submitted in 2003, the most frequent type of intended aid was aid to the restructuring of enterprises and regional development by promotion of investment and creation of new jobs. Cases of State aid assessed by the CC are further discussed in detail.

Notification on State aid to AB Laivitė

On 12 February 2003, the CC approved the State aid according to the notification on State aid filed by the Klaipėda Region State Tax Inspectorate. The purpose of the State aid - regional aid for promotion of investment and creation of new jobs. According to the information supplied by the State aid provider, AB Laivitė intends to allocate the investment for the development of the enterprises and take over of new technologies. As indicated by the State aid provider, the State aid will favourably affect the development of Klaipėda and the entire region of Western Lithuania. In the course of 2003-2005 investments by AB Laivitė will lead to the creation of 325 jobs.

While assessing the intended State aid account was taken of the fact that the intensity of the aid granted to the company under the said project will amount to 2%, which is within the permissible intensity limits. In addition, the State aid recipient - AB Laivitė ensured the viability of the investment project by financing over 25% of the entire investment project costs.

The Resolution of the CC concerning the approval of the State aid to the enterprise indicates that the State aid provider - Klaipėda County State Tax Inspectorate must ensure that the newly created jobs and investments into AB Laivitė will be maintained at least five years following the implementation of the investment project. The State aid provider is also obligated to monitor the course of the implementation of the investment project according to the provided investment schedule.

Notification on State aid to UAB Marijampolės Statyba undergoing restructuring

On 15 July 2003, the CC approved State aid to UAB Marijampolės Statyba in accordance with the consolidated notification on State aid filed by the Marijampolė Region State Tax Inspectorate. On 3 January 2003, Kaunas County Court initiated the restructuring proceedings in respect of the company. Financial measures in respect of the company under the restructuring were designed to facilitate the company to discharge its liabilities to Marijampole Region State Tax Inspectorate and the Marijampolė division of the State Social Insurance Fund. The time limits for the discharge of the liabilities to the institutions concerned will be extended for the period of restructuring of the enterprise, besides the institutions will waive part of tax liabilities.

The conducted investigation established that upon the implementation of the measures stipulated by the restructuring plan which cover the restructuring of the company’s financial liabilities and the forthcoming investment would create realistic assumptions for the restoration of the long-term viability of the company. The measures envisaged for the financing of the restructuring measures is proportional to the restructuring costs, and contribution of owners is deemed significant.

Notification on State aid to UAB Panevėžio Aurida

On 28 February 2003, the CC received the notification of the Board of the State Social Insurance Fund on State aid to UAB Panevėžio Aurida. State support measure involving the exemption of the aided enterprise from late interest is considered to constitute State aid. The purpose of the State aid in question, as provided in the notification submitted by the State aid provider, is regional development by promotion of investment and creation of new jobs.

As indicated in the material provided, UAB Panevėžio Aurida through the implementation of the investment project intends to create 74 new jobs in Panevėžys town, which will be beneficial for the development of the region. The intensity of the aid provided to UAB Panevėžio Aurida would be maintained within the permissible limits, as set forth by Art. 6 and 11 of the Law on Monitoring of State Aid to Undertakings, and the “Rules on State Aid for Regional Development” approved by the CC.

Resolution of the CC of 3 September 2003 approved the State aid to UAB Panevėžio Aurida, however, subjecting it to certain conditions. One of the conditions provided that the jobs in the enterprise must be created not later than within 3 years after the implementation of the project and must be related to the activity benefiting from the investment. Another condition obligated the Board of the State Social Insurance Fund to ensure that the State aid recipient maintain the jobs and the investment for a period not shorter than 5 years, and will monitor the course of the implementation of the investment project in accordance with the submitted investment schedule.

Notification on State aid to AB Statybos Apdailos Mašinos

On 17 July 2003, the institution started the assessment of the State aid notified by the Board of the Social insurance Fund. The notified aid was intended to AB Statybos Apdailos Mašinos, a company suffering from economic difficulties. According to the provisions of the Law on Monitoring of State Aid to Undertakings and “The Rules on State Aid for the rescue and restructuring of enterprises” approved by the CC Resolution No. 55 of 10 May 2001, State aid may be authorised provided the enterprise’s restructuring plan is developed and submitted, and other provisions of the said legal acts are complied with.

The conducted investigation concluded that the plan for restructuring of AB Statybos Apdailos Mašinos did not contain a detailed analysis of the financial and economic standing of the enterprise, neither it provided a marketing and production development plan, besides, the restructuring plan did not provide for any measures aiming at restructuring of the management structure and risk avoidance. The State aid provider failed to provide information on forecasts on changes in demand, prices and production capacities within the next five years in the EU and Lithuania or a thorough market survey. The State aid provider also failed to provide sufficient evidence that the implementation of the restructuring plan is feasible and that State aid will ensure a long-term viability and solvency of the company, within the meaning of item 1 of par. 2 of Art. 9 of the Law on Monitoring of State Aid to Undertakings. Furthermore, no information was provided on the costs of restructuring of AB Statybos Apdailos Mašinos, or the sources of such funding and the contribution of the beneficiary. No information was submitted as to the implementation by the company of Resolution of the Government of the Republic of Lithuania of 10 October 2000 which provided for restructuring of the capital of the company by public funds without initiating the bankruptcy proceedings, Having considered all the above considerations the CC refused the authorisation of State aid to AB Statybos Apdailos Mašinos by passing to that effect its Resolution on 11 September 2003.

Notification on State aid to the Lithuanian-Russian UAB Gargždų Mida

Meeting of the CC of 9 October 2003 assessed the notification of the Ministry of Finance on State aid to the Lithuanian-Russian UAB Gargždų Mida undergoing restructuring. The material provided by the Ministry of Finance indicated that on 30 May 2003 the Klaipėda County Court initiated restructuring proceedings in respect of the Lithuanian-Russian UAB Gargždų Mida. The notification indicates that the State aid will be provided through the implementation of financial measures and restructuring of the company’s operations. The plan of the restructuring of the company suggested that the implementation of the investment project is an underlying condition for the successful restructuring of the company. Substantial investments into share capital of the company as well as loans extended by Technonikol were indicated as the source of funding of the program in question. The company is planning to increase the production and marketing volumes, and introduce some cost-cutting measures. Within the restructuring period substantial efforts will be dedicated to increase the sales in the CIS markets. Upon the implementation of the plan, the company’s profitability, liquidity, capital return and other financial indicators (ratios) would be positive. The thorough examination of the relevant material allowed a conclusion that implementation of the measures targeted at the restructuring of the company’s operations will create realistic condition for the restoration of the long-term viability of the company, while the contribution of owners, accounting for 60% of the restructuring costs is deemed significant. Having assessed the restructuring plan and the material provided in the notification of the Ministry of Finance the CC decided to authorise the State aid to the Lithuanian-Russian UAB Gargždų Mida.

Notification on State aid to Šiauliai enterprise of the Lithuanian Association of the Blind and the Visually Handicapped people

The examination of the notification filed by the Ministry of Finance on State aid to Šiauliai enterprise of the Lithuanian Association of the Blind and Visually Handicapped People (further - Šiauliai enterprise of LASS) was started in October 2003. In November 2002, the main creditors of the Šiauliai enterprise approved the restructuring of the enterprise and the guidelines of the enterprise‘s restructuring plan. On 26 November 2002, Šiauliai County court initiated restructuring proceedings in respect of the enterprise. The Ministry of Finance and the Board of the State Social Insurance Fund, acting in accordance with the Law on Restructuring of Enterprises of the Republic of Lithuania, had provided for financial measures to be applied to Šiauliai enterprise of LASS. It was established that the support measures stipulated in the notification on State aid comply with the criteria of State aid within the meaning of the Law on Monitoring of State Aid to Undertakings, and are considered to constitute State aid.

The Lithuanian Association of the Blind and Visually Handicapped People with an objective to address the social and employment issues in relation to the blind and the visually handicapped persons established the Šiauliai enterprise of LASS. The enterprise engaged 53 persons suffering from disability. Judging from the information provided in the State aid notification and the additionally obtained information the Šiauliai enterprise of LASS is an enterprise in difficulty. The examination of the notification allowed a conclusion that the plan drafted by the Šiauliai enterprise of LASS provides for the rescheduling of the debts of the enterprise and measures aimed at the restructuring of its operations. While assessing the notified aid the CC took account of the fact that the main purpose of economic activities of the Šiauliai enterprise LASS is not profit seeking, but implementation of social programs designed to handle the problems of unemployment among the blind and the visually handicapped people. In this particular case the State aid recipient was providing for all measures it is capable of implementing, and the State aid in this case will not exceed additional costs incurred due to employing of handicapped persons. Having considered all the arguments presented by the State aid provider the CC decided to authorise the State aid to the Šiauliai enterprise of LASS.

Other cases of State aid examined by the CC

While implementing its supervisory authority as empowered by the Law on Monitoring of State Aid to Undertakings the CC examined the Report on State support to undertakings in 2001 submitted by the Board of the State Social Insurance Fund. The CC established that State support granted to undertakings in accordance with Art. 36 and 38 of the Law on State Social Insurance of the Republic of Lithuania, and items 21, 23 and 25 of the „Rules on the formation and execution of the budget of the State Social Insurance Fund“ may be considered as constituting State aid. Therefore the CC initiated the assessment of the said measures, which is still in progress during the year 2004.

Also, in the period being reviewed the CC started the assessment of intended State aid to AB Vingriai and the producer of decorative ceramics AB Jiesia notified by the Ministry of Finance.

During the year 2003, the CC also carried out the assessment of several notifications on State aid to individual enterprises submitted by Kaunas County State tax Inspectorate. The enterprises in respect of which aid was intended were medium-sized, independent enterprises within the meaning of par. 14 of Art. 2 of the Law on Monitoring of State Aid to Undertakings. Local tax administrators are authorised to provide State aid to enterprises pursuant to the requirements of the provision of State aid to small and medium-sized enterprises in the form of tax incentives approved by Resolution No. 113 of 31 October 2002 of the CC of the Republic of Lithuania.

The CC allocated substantial efforts for the assessment of draft legal acts submitted for expert examination by Ministries of Finance, Economy, Justice, Foreign Affairs, Transport, Education and Science, and Social Security and Labour. Specialists of the CC examined 29 draft legal acts, which were later on accordingly amended and supplemented, and presented their views and comments on 5 draft legal acts.

The CC examined the draft of the Resolution of the Government of the Republic of Lithuania „On the approval of the plan for rehabilitation of public company Alytaus Tekstilė; draft Resolution of the Government “On the approval of draft contracts with the public company of the Russian Federation Yukos Oil Corporation, the limited liability company of the Netherlands Yukos Finance B.V.” and the public company Mažeikių nafta and granting of relevant authorisations”; the draft Law on the amendment and supplement of Articles 3, 8, 15, 16 and 27 of the Law on the Fundamentals of Kaunas Free Economic Zones of the Republic of Lithuania; and the draft Law on the rehabilitation of operations of the public company Alytaus Tekstilė, submitted by the Ministry of Economy. Experts of the Competition Council presented their expert comments to these legal acts.

The Competition Council examined the draft Resolution of the Government of the Republic of Lithuania “On the approval of the supplement to the rules on formation and execution of the State social insurance fund budget” prepared by the Ministry of Social Security and Labour, and the draft Resolution of the Government “On the approval of the plan of measures to ensure the guaranteed level of reception of programs of the National Lithuanian radio and television in the territory in Lithuania” prepared by the Telecommunications Regulatory Authority under the Government of the Republic of Lithuania.

During the year 2003, officials of the CC participated in the meetings hosted by the Ministry of Economy, the agenda whereof included the analysis and assessment of problems faced by industry and business, also issues related to the free economic zones. The CC expressed its views on State aid to the promotion and development of the small and medium-sized business as provided in the National development plan of the Strategic Planning Document. On a regular basis, the CC was submitting proposals concerning intended State to the State Loan Commission.

State Aid Register, its Compilation, Annual State Aid Report

For the CC enforcement of the Law on Monitoring of State Aid to Undertakings has been an important tool in its pursuit to ensure the monitoring and transparency of the provided State aid. Throughout the year 2003 the CC continued to compile and systemize the State aid Register, currently containing the data of Sate aid granted to Lithuanian undertakings during 1996-2002.

The data accumulated in the State Aid Register was used as an information source in drafting the annual report for the European Commission. According to the data currently available in 2002 the State aid granted in Lithuania totals LTL 258,8m (EUR 74.96m).

In 2002, the national State aid accounted for 0.51% of the national GDP (at current prices), i.e. in average LTL 184.09 per one working person. In 2002, the GDP of Lithuania grew by 6.8% (at current prices) as compared to the level of 2001, given the decline in the level of inflation from 2.0% in 2001 to a deflation of 1.0% in 2002. The data presented in the Tables of the Annex clearly show that provision of State aid during 1996-2002 was diminishing. In 1996 the granted State aid amounted to LTL 904.42m, the volumes further decreasing to amount to LTL 258.8m in 2002. Accordingly, the indicator of national State aid per one working person fell from LTL 545.04 in 1996 to LTL 184.09 in 2002.

The development of State aid to the manufacturing industry and services during the period referred to displayed a rather fluctuating trend. In 2002, State aid to the manufacturing industry and services constituted the largest part of the total national State aid, accounting for as much as 58.74%. In 2002, the main objectives sought while providing the State aid in the areas concerned were the promotion of research and development, innovations, trade, rescue and restructuring of enterprises, ship-building and regional development. Aid for the rescue and restructuring of enterprises accounted for as much as 91.35% of the total aid to the manufacturing industry and services. The data on the breakdown of the State aid by main sectors are presented in the Annex to this Report.

3. Enforcement of the Law on Advertising

During 2003, the CC examined 13 cases related to the use of misleading and comparative advertising. Infringements of the Law on Advertising were established in 8 cases, which led to the infringing undertakings being obligated to cease the use of the advertising, in 2 more severe cases the undertakings were subjected to pecuniary sanctions. Two investigations were discontinued on the basis that the undertakings voluntarily ceased the infringing activities, 3 investigations are still in progress. In certain cases due to the small significance of the infringements sanctions were limited to preventive measures where four undertakings were warned in writing to cease the use of misleading advertising.

Misleading advertising

The Lithuanian-American UAB Bennet Distributors filed a petition claiming that the alcohol cocktail “Dozė” produced by AB Stumbras, contrary to what is claimed does not contain the alcoholic drink “Campari”. Newspaper ads and the label on the drink read “Campari+orange”. The specialists of the CC examined the advertisements carefully and concluded that the mode of presentation of the ads was suggestive to the consumer of the drink containing the drink “Campari”. The substance used for the production of the cocktail is the rectified ethyl alcohol, while adding “Campari” and the aromatic substances derives the flavour. For the advertising of the cocktail “Dozė” AB Stumbras used the well known trade mark of “Campari” for the aromatic substance “Campari” 01332 “Campari”. AB Stumbras was obligated to cease the use of the misleading advertisement; furthermore, it was warned of the possibility to be subjected to fines where it fails to cease or decides to renew the use of such misleading advertising.

During June-July 2003 ads of the mobile telecommunications company UAB Tele2 placed in the press, outdoor advertising structures and the company’s flyers promoted the “Joker” service by announcing “Become a user of “Joker” by July 20, and throughout July, August and September our special gift to you is free calls for LTL 20 to any network”. The advertising text, however, contained no indication that such rebates were available only to new subscribers of UAB Tele2.

The CC started the investigation on its own initiative, which lead to the conclusion that in its ad the company failed to present exhaustive information; in other words, part of the information necessary to avoid the misleading of the consumers was missed. Since the information, which was missed in the advertising text, could influence the economic decision of the consumer’s choice to become a user of “Joker”, the advertising was recognised as misleading.

Investigation carried out on the initiative of the CC aimed at the establishing whether or not the advertising of the body weight regulating preparation “Slim Caps” by UAB Biogloba constituted an infringement of Art. 5 of the Law on Advertising. Since the provider of advertising UAB Biogloba failed to produce grounded evidence of the capability of the preparation “Slim caps” to regulate the body weight in kilograms as indicated in the advertisement in question, the advertising was recognised as misleading. In this particular case the CC, referring to the amendments of the Law on Advertising adopted in late 2002 substantially modifying the procedure for economic sanctioning, imposed upon UAB Biogloba a fine of LTL 5,000 for the use of misleading advertisements.

The Lithuanian branch of the company providing banking services Nordea Bank Finland PLC was adverting the cash withdrawal at ATMs of Vilniaus bankas and branches of the bank as follows: “From now on for holders of Maestro and EC/MC credit payment cards of Nordea Bank Lietuva cash withdrawal at Vilniaus bankas ATMs for only LTL 1.00, and for our special clients withdrawal at no charge”. A client of the bank, holder of an EC/MC payment card with interest-free credit and enjoying a special client’s status tried to avail himself of the terms advertised by the bank, and found out that cash withdrawal at Vilniaus bankas ATMs was charged at the rate of 2.5% of the amount withdrawn.

The investigators found out that the advertising by the Lithuanian branch of Nordea Bank Finland PLC did not contained any indication that the terms for cash withdrawal advertised were available only for holders of Maestro and EC/MC Standard payment cards (the bank was issuing EC/MC cards of three types). The information provided by the bank was incomplete as missing part of the information necessary to avoid the misleading of the clients. The advertising was thus recognised as misleading, the bank was obligated to cease the use of the advertising in question and notify all customers in writing of the terms of cash withdrawal available to special clients.

The CC initiated the investigation of the advertising used by the public undertaking Vėjo Sala, when the undertaking in question was distributing tickets to the concert of an American singer Marilyn Manson. The objective of the investigation was to establish whether or not the activities of the undertaking were in compliance with provisions of Art. 5 of the Law on Advertising. Vėjo Sala, as the organizer of the concert in Vilnius, was promoting the concert by advertising of the so-called “fan zone”, in which the audience will be provided best seats and more favourable terms. During the concert, however, the promoted “fan zone” simply did not exist. Those who had purchased tickets for LTL 80 at the concert were provided exactly the same conditions as those holding less expensive tickets. The misleading advertising incurred damage to each holder of a “fan-zone” ticket was valued at LTL 20-50, since the price for regular tickets was LTL 30-60. Having assessed the damage incurred to the consumers the CC subjected the public undertaking Vėjo Sala to a fine of LTL 8,000 for the use of misleading advertising.

UAB Omnitel, the mobile telecommunications services provider was promoting its pre-paid mobile communications service Ekstra, which was heavily advertised on TV and radio channels. The advertising of Ekstra service could mislead potential users of the service, since the advertising statement, which read “Throughout the summer for all talking for longer than a minute, - Ekstra - for 7 cents only, day and night, and for SMS messages”. An important piece of information that the availability of such tariffs was made conditional upon certain additional factors was omitted. This could have determined a potential client’s choice of the mobile telecommunications service provider, and, on that basis, the advertising was recognised misleading. For the first time ever in the practice of the Competition Council the appropriate warning was issued not to the provider of the advertising, but to the producer of the advertisement message UAB Brand Sellers DDB Vilnius, through whose fault the misleading advertising was published.

Another investigation concerned the compliance of the advertising by AB Lietuvos Telekomas with Art. 5 of the Law on Advertising. The investigation was prompted by a compliant received from a subscriber of AB Lietuvos Telekomas. The subscriber maintained that from the information provided in the advertising leaflet she understood that the call forwarding offered was provided at no charge, and availed herself of the services while being away from home for a longer time. However, the bill for the telecommunications services showed that the calls forwarded from her telephone number to another telephone number were charged at the same rates as local calls.

The investigation examined the text of the advertising presented in the leaflet which read “Free services… Call forwarding”. It turned out that although the statement cannot be considered as directly misleading users of such services, it nevertheless missed certain explanations that the user of the service will be charged at rates established by AB Lietuvos Telekomas subject to the location of the telephone. This advertising was recognised misleading on the basis that it omitted an important part of the information necessary, in view of other information presented in the same ad, in order to avoid misleading of the consumer.

The National Association of drink producers submitted a request to examine whether or not the advertising disseminated by UAB Baltijos Mineralinių Vandenų Kompanija on television and bottles of the lemonade “Gaja” was capable of misleading consumers and be contradicting to Art. 5 of the Law on Advertising. The advertisement read: “The only in Lithuania soft drink with sugar made of natural mineral water TICHĖ. Contains no sweeteners not recommended for human health ”. The investigation concluded that the advertisement of the lemonade “Gaja” containing a statement “Contains no sweeteners not recommended for human health” is capable of misleading consumers, because the mode of presentation of the advertising could lead to consumers understanding that all sweeteners are harmful for human health. However, according to the hygiene standards approved in Lithuania certain sweeteners, such as food supplements are permitted in the production of aromatised drinks. On that basis, the advertisement was recognised as misleading. The company was obligated within 15 days to cease use of the advertisement and warned that in case it fails to act upon the obligation or renews the use of the advertisement, it will be subject to fines set forth in the Law on Advertising.

4. Legal practice

During the year 2003, the courts of the Republic of Lithuania investigated 11 cases related to the decisions passed by the CC. At the end of the year the legal proceedings in respect of one case were still in progress. During the period under review courts having passed the final rulings closed 9 cases. In all those cases the appeals were dismissed and resolutions of the CC were upheld. On a single occasion the appeals of the claimants were partly upheld.

For the first time in the practice of litigation concerning the resolution passed by the CC, an inquiry was lodged to the Constitutional Court of the Republic of Lithuania. The courts awaited conclusions of the Constitutional Court so that they could complete their proceeding. The litigation proceedings lasted for nearly three years, but the conclusions announced were of considerable significance both for the legal expertise of the CC and its prestige, as they have proved that the competition authority managed to accurately and very professionally assess the restricting practices disclosed in the course of the investigation.

Resolution No. 11/b of 10 July 2000 of the CC “On the infringement of item 3 of par. 1 of Art. 9 of the LC by AB Mažeikių Nafta established that the dominant undertaking AB Mažeikių Nafta was abusing its dominant position by applying dissimilar (discriminating) rebates and other purchase conditions to equivalent agreements with other purchasers, thus infringing item 3 of par. 1 of Art. 9 of the LC. The Vilnius District Administrative Court was examining the appeal lodged by AB Mažeikių Nafta, by its decision of 18 June 2001 suspended the proceedings and applied to the Constitution Court of the Republic of Lithuania with a request to decide whether or not the provision of par. 4 of Art. 3 of the Law on the Reorganisation of Public Companies Būtingės Nafta, Mažeikių Nafta and Naftotiekis passed on 29 September 1998 was in compliance with the principles of the just civil society and law-governed State enshrined in the Preamble and provisions of pars. 1 and 2 of Art. 5 and pars. 3, 4 and 5 of Art. 46 of the Constitution of the Republic of Lithuania.

On 17 March 2003, the Constitutional Court of the Republic of Lithuania, by its resolution, established that regulation as stipulated by par. 4 of Art. 3 of the Law on the Reorganisation of Public Companies Būtingės Nafta, Mažeikių Nafta and Naftotiekis creates a legal situation where the public and municipal authorities are not in position to place even those demands which they are obligated to place in fulfilling the functions assigned to them by the Constitution and the law, and recognised that provisions of par. 4 of Art. 3 of the Law on the Reorganisation of Public Companies Būtingės Nafta, Mažeikių Nafta and Naftotiekis which stipulates that “after the strategic investor acquires the shares under item 1 of par. 1 of this Article public and municipal authorities will not be entitled to place any demands to the public companies AB Mažeikių Nafta and its subsidiaries concerning the actions or omissions of AB Mažeikių Nafta or its subsidiaries, or other events that have taken place prior to the acquisitions of the shares by the strategic investor”, contradicts parts 3, 4 and 5 of Art. 46 of the Constitution of the Republic of Lithuania, the principles of constitutional law-governed State and to the extent which establishes that additional demands referred to in the provisions shall also not be placed by municipal authorities, contradicts part 2 of Art. 120 and Art. 122 of the Constitution of the Republic of Lithuania.

The Vilnius District Administrative Court renewed the proceedings and by its decision of 23 April 2003 dismissed the appeal as ungrounded. The Supreme Administrative Court of Lithuania dismissed the appeal by its decision of 11 July 2003 and resolved that the CC, by its resolution No. 11/b of 10 July 2000, correctly defined the relevant market and the dominance held by AB Mažeikių Nafta therein, justifiably acknowledged the terms applied by AB Mažeikių Nafta in equivalent agreements with undertakings as discriminatory and passed a legitimate and duly grounded decision.

Likewise, court rulings passed in other cases will have a tremendous importance to the strengthening of the legal capacity of the CC and its ability to draw up qualified legal conclusions. The experience acquired through the assessment by courts of the quality of the investigations carried out by specialists of the CC, helps the CC specialists enhance their professionalism and effectiveness.

Another Resolution appealed to court was Resolution No. 2S-9 of 26 June 2003 of the CC “Concerning the compliance of actions of AB Lietuvos Telekomas with the requirements of Art. 5 of the Law on Advertising. The CC established that the advertisement published in the leaflet “Linija plius” which read “Free service… Call forwarding” is incomplete and due to its misleading character could have determined the economic behaviour of consumers in their selection of the service provider, and recognised the said advertisement as misleading. Having examined the appeal of AB Lietuvos Telekomas the Vilnius District Administrative Court, in it’s ruling of 7 November 2003, resolved that the decision of the CC to recognise the advertisement of AB Lietuvos Telekomas as misleading was duly grounded.

On 18 July 2003, the CC in writing responsded to UAB Žalmargės Pienas by presenting its view concerning inquiries of the enterprise in its letter of 30 June 2003, and proposed that concerning the problems encountered by the enterprise it appeals to the Ministry of Agriculture. UAB Žalmargės Pienas appealed the letter of 18 July 2003 of the CC to the Vilnius District Administrative Court requiring to recognise that actions of the CC whereby it responded by the letter of 18 July 2003 are unlawful, and obligate the CC to pass a resolution to initiate an investigation concerning the facts laid down in the letter of 30 June 2003 of UAB Žalmargės Pienas, or to refuse to initiate the investigation.

The Vilnius District Administrative Court, by its decision of 8 December 2003, dismissed the appeal by resolving that the decision concerning the requirement laid down in the letter of the applicant to obligate the Ministry of Agriculture to include UAB Žalmargės Pienas into Annex 1 of “The Rules on the provision of support to milk processing enterprises at maintaining milk purchase price” approved by Order No. 3D-236 of 16 June 2003 of the Minister of Agriculture was not within the remit of the CC, which, therefore, did not infringe any legal acts or the rights of the applicant and was under no obligation to pass a decision set forth in Art. 25 of the LC.

Resolution No. 80 of 18 July 2001 of the CC “Concerning the anti-dumping duty imposed upon Portland cement of Belarusian, Russian and Ukrainian production and imported into Lithuania” imposed an anti-dumping duty upon Portland cement produced in the Ukraine and imported into the customs territory of Lithuania.

On 29 November 2001, the Chief Administrative Disputes Commission (VAGK), having examined the appeal of AB Specializuota Komplektavimo Valdyba concerning the annulment of Resolution No. 80 of 18 July 2001 of the CC, decided to recognise the part of the Resolution related to the Ukraine as unlawful and obligate the CC to eliminate the infringements established by the decision of VAGK. The CC appealed to the Vilnius District Administrative Court with a request to invalidate the decision of the VAGK. On 4 April 2002 the Vilnius District Administrative Court upheld the appeal of the CC.

Decision of 17 March 2003 of the Supreme Administrative Court of Lithuania dismissed the appeal filed by AB Specializuota Komplektavimo Valdyba . The Court resolved that the CC had justly, without circumventing the requirements of the Law on Anti-Dumping and other legal acts, established the fact of dumping and passed a legitimate and duly grounded decision.

By its Resolution No. 110 of 10 October 2002 “On the refusal to start investigation concerning possible restrictive actions of AB Kalnapilis, AB Ragutis and AB Kauno Alus by bottling and marking the beer “Ledo” the CC refused to start the investigation of restrictive practices. The CC motivated its decision by pointing out that the applicant AB Gubernija did not provide any evidence that restrictive practices could have damaged the interests of a number of undertakings or consumers.

The decision of 1 April 2003 of the Supreme Administrative Court of Lithuania dismissed the appeal and upheld the decision of the Vilnius District Administrative Court that the CC, acting in accordance with par. 4 of Art. 17 of the LC justifiably refused to start the investigation of possibly restrictive actions by AB Kalnapilis, AB Ragutis and AB Kauno Alus .

By its Resolution No. 10/b of 31 October 2002 “On the compliance of actions of UAB Novaturas in advertising the recreation terms in the hotel Pirate’s Beach Club with the requirements of Art. 5 of the Law on Advertising” the CC recognised that advertisement published in the leaflet “Atostogos 2002” of UAB Novaturas describing the terms of the use of the safe-box and the information about the bar on the beach as misleading advertisement. The Vilnius District Administrative Court partly upheld the appeal lodged by G.Balnis, whereby the applicant requested to invalidate the said resolution of the CC, refer the case for additional investigation and obligated the CC to carry out additional investigation and consideration of the case.

The Supreme Administrative Court of Lithuania, by its decision of 24 April 2003, upheld the appeal of the CC by resolving that the CC, acting on the appeal filed by the appellant, carried out a an exhaustive investigation, correctly assessed the evidence and applied the legal forms, and the Vilnius District Administrative Court had no legal basis to obligate the CC to perform additional investigation and place the issue for additional consideration.

Resolution No. 2/b of 21 February 2002 of the CC “On the compliance of actions of AB Lietuvos Telekomas with requirements of item 2 of Art. 9 of the LC” established that AB Lietuvos Telekomas had blocked the ISDN flow and telephone lines leased by UAB Interprova thus preventing UAB Interprova from providing the Internet telephony services, and squeezing the company out if the Internet telephony services market. Similarly, AB Lietuvos Telekomas blocked access to the lines in respect of another 35 companies.

Decision of 11 June 2003 of the Supreme Administrative Court of Lithuania dismissed the appeal lodged by AB Lietuvos Telekomas. The Court ruled that decision of the CC to asses the actions of AB Lietuvos Telekomas whereby it blocked the ISDN flow and telephone lines leased by UAB Interprova and another 35 companies as limitation of expansion of the Internet telephony services and market monopolisation was well grounded, and that the CC rightfully qualified the actions as constituting an infringement of par. 2 of Art. 9 of the LC.

Resolution No. 78 of 9 July 2002 of the CC “On the compliance of item 1.2.3 of Decree No. 152V of 31 January 2002 of the Board of the Vilnius Municipality with the requirements of Art. 4 of the LC” established that by item 1.2.3 of Decree No. 152V of 31 January 2002 the Board of Vilnius Municipality granted privilege to the district heating operator to provide heat to premises at Žvejų str. 9, thus discriminating the provider of heat from the alternative heat source, the gas. This decision brought about differences in the condition of competition for competing undertakings operating in the market for heat energy sources. The CC concluded that item 1.2.3 of Decree No. 152V of 31 January 2002 of the Board of Vilnius Municipality constituted an infringement of the requirements of Art. 4 of the LC.

Upon renewal of the proceedings, the decision of 18 July 2003 of the Supreme Administrative Court of Lithuania, established, inter allia that the CC had correctly interpreted the contents of the exemption set forth in Art. 4 of the LC, and the Board of Vilnius Municipality, by adopting item 1.2.3 of Decree No. 152V of 31 January 2002, implemented powers authorised to it in violation of the prohibition established in Art. 4 of the LC. The appeals, on that basis, were dismissed.

Resolution No. 2S-6 of 27 March 2003 of the CC “Concerning the compliance of actions of UAB Baltijos Mineralinių Vandenų Kompanija with the requirements of Art. 5 of the Law on Advertising” recognised the advertisement published by UAB Baltijos Mineralinių Vandenų Kompanija whereby it claimed “contains no sweeteners not recommended for human health” as misleading advertising.

On 23 October 2003, the Supreme Administrative Court of Lithuania dismissed the appeal and resolved that the said statement was not correct and that it could be recognized as correct only provided it contained references related to recognised findings on the harmfulness of certain concentration of sweeteners to human health, or harmfulness of sweeteners to people of certain groups. The Court pointed out that the advertisement “contains no sweeteners not recommended for human health” by the mode of its presentation might invoke an ordinary consumer’s incorrect presumption that all sweeteners in all cases are harmful for human health, and concluded that Resolution No. 2S-6 of 27 March 2003 of the CC was lawful and duly grounded.

Resolution No. 8/b of 18 May 2001 of the CC “On the compliance of actions of AB Mažeikų Nafta and undertakings engaged in oil product marketing with the requirements of Art. 5 of the LC” established that agreements concluded by AB Mažeikų Nafta and UAB Lukoil Baltija, UAB Lukoil Baltija Servisas, UAB Lietuva Statoil, UAB Pakrijas, UAB Uotas and UAB Vaizga contained vertical restrictions whereby they constituted an infringement of par. 1 of Art. 5 of the LC.

Vilnius District Administrative Court, by its decision of 11 September 2003, upheld the appeal of AB Mažeikų Nafta, and revoked the imposition of the fine, while the appeal of UAB Lukoil Baltija , UAB Lietuva Statoil, UAB Pakrijas , UAB Uotas and UAB Vaizga were upheld partly, and pecuniary fines imposed by the CC were reduced.

On 26 January 2004, the Supreme Administrative Court of Lithuania dismissed the appeal and upheld the ruling of the Court of 1st instance. The Court resolved that agreements concluded by AB Mažeikų Nafta and UAB Lukoil Baltija, UAB Lukoil Baltija Servisas, UAB Lietuva Statoil, UAB Pakrijas, UAB Uotas and UAB Vaizga whereby they established a prohibition to import and market the imported oil products constituted an infringement of Art. 5 of the LC. However, the Court maintained that in the view of the continuous character of the infringement, Resolution No.8/b of 18 May 2001 subjected AB Mažeikų Nafta to a repeated sanction for the same infringement; therefore the pecuniary sanction in respect of the violator was revoked.

By its Resolution No. 1S-110 of 9 October 2003 “On the termination of the investigation of the compliance of Resolution No. 857 of 30 June 2003 of the Government of the Republic of Lithuania ‘On the amendment of the Resolution No. 851 of 7 June 2002 of the Government of the Republic of Lithuania “On the approval of the list of sugar and products containing sugar manufactured in the Republic of Lithuania or imported” with the requirements of Art. 4 of the LC” the CC resolved to discontinue the investigation of the compliance of the Resolution of the Government with the provisions of the LC. The CC resolved that the said Resolution of the Government was passed for the purpose of fulfilling the requirements of the Law on Sugar, therefore in this particular case the exemption set forth in Art. 4 of the LC applies.

The Vilnius District Administrative Court is currently investigating an appeal lodged by UAB Lavisos Agrogrupė concerning the annulment of Resolution No. 1S-110 of 9 October 2003 of the CC.

1. Bilateral cooperation

The CC has been actively implementing policy targeted at the strengthening and developing the relations with foreign competition authorities and international organisations.

Particularly close relations have been maintained with the DG Competition of the European Commission and the competition authorities of the EU Member States. Regular professional contacts and consultations were related to the investigations being conducted, as well as the issues of formation of competition policy.

During the year 2003, both the officials and experts of the CC were regular attendees of meetings organised by the European Commission.

On 3 December 2003, Mr. Philip Lowe, the Director General of the DG Competition, together with Mr. Janne Kankanen, an official of the Directorate, paid official visit to the CC. During the visit the officials of the European Commission met with the Chairman of the CC, the Council members and other staff members. The subject matter of the discussions held during such meetings was mostly related to the forthcoming EU membership of Lithuania and the related qualitative changes in the activity of the CC.

The Chairman of the CC attended the meeting of the Directors General of the European competition authorities held on 4-5 September 2003 in Oslo and the meeting of Directors General of national competition authorities held on 19 November 2003 in Brussels.

On 26-28 November 2003, the Chairman of the CC, together with colleagues from Denmark and Sweden was invited by the Swedish University of Umea to hold a seminar on issues of competition law and its implementation for the public servants of Vietnam and discuss the draft LC of Vietnam.

During the period being reviewed close relations were maintained with competition authorities of other States. In March, the CC was visited by Mr. I. Yuzhanov, Minister of the Russian Federation for Antimonopoly Policy and Support of Entrepreneurship. The visit offered a convenient occasion to exchange the experience related to the enforcement of competition law both in Lithuania and Russia.

The CC also participated in the Canadian-Ukrainian-Baltic States economics management-training program. Within the framework of this program, on 3 June and 1-3 December 2003, the CC was visited by six public servants of the Ukraine who were familiarised with the Lithuanian competition law and its enforcement, and participated in the exchange of information on the experience of negotiations on the accession of EU in the area of competition.

2. Multilateral cooperation

OECD

During 2003, the CC devoted special attention to the development of cooperation with OECD (Organisation for Economic Cooperation and Development). Members of the CC were regular participants in meetings of the OECD Competition Committee and its working group No.2 “Competition and regulation” and the working group No.3 “International cooperation”, as well as in the global forum on competition issues in Paris. Specialists of the CC were making presentations on objectives of the competition legislation, optimisation of the structure of the competition authority, harmonisation of procedures for merger control, commented on some most important issues of competition policy.

Within the framework of the OECD Baltic Regional Program, a workshop “Competition policy” was held on 11-13 June 2003 in Vilnius. The agenda of the workshop included a range of issues, such as “Cartels, and “Cooperation among competition authorities”. At the workshop specialists of the CC made three presentations on issues of cartels and cooperation between the competition authorities.

On the request of the OECD Competition Committee the CC drew up a Report on Lithuanian competition policy development in 2003 in which it outlined the principal changes in the competition law and policy, most important aspects of the activities of the CC and the description of most important investigations.

Furthermore, in 2003 two officials of the CC attended a two-weeks’ training session on competition issues organised by the OECD and held at Joint Vienna Institute in Vienna.

ICN

Over the year 2003, the institution continued cooperation with the ICN (International Competition Network) - the informal information network, which enables the competition authorities of developed, and developing countries to cooperate in the enforcement of competition policy and the implementation of common interests in the area of application of the competition rules. The CC has supplied this organisation with abundant information on legal acts governing competition law effective in Lithuania, also on enforcement of competition rules, while attaching special attention to the enforcement of merger control and development of competition culture in Lithuania.

Chairman of the CC participated in the Second International Conference of the ICN, which was held on 23-25 June in Merida, Mexico. The principal objective of the Conference was to familiarise the participants of the Conference with the future plans and address the issues currently in focus of competition authorities, such as concentration control and development of competition culture.

WTO

One member of the CC participated in the workshop organised by the WTO, the subject matter whereof was “Competition policy and multilateral trading system”, held on 17-18 June 2003, in Budapest, Hungary.

Also officials of the CC attended two meetings of the Informal-working group on trade and competition set up by the European Commission to discuss issues related to the WTO Agreement on Competition.

UNCTAD

Traditionally, on the request of the United Nations Conference on Trade and Development (UNCTAD) the CC provided information for the documents being developed by this organisation in the area of competition law and policy.

OTHERS

On 10 February 2003, a meeting with NATO experts carrying out the general assessment of the situation in Lithuania was held in Vilnius, in which the CC officials presented the general overview of the competition policy in Lithuania.

3. Participation in international seminars and conferences

During the year 2003, representatives of the CC attended various seminars, training courses and conferences on issues of competition law and policy, arranged by the European Commission, authorities of other Member States and international organisations.

Two representatives of the CC attended the regular annual 11^th International Conference on Competition held on 18-20 May 2003 in Bonn, Germany.

Two representatives of the CC were invited to participate in the training courses on EU Competition Policy, organised by the Institute of Public Administration of Ireland and held on 24 March -2 April 2003 in Dublin and Brussels. The training courses were specifically designed for the States acceding the EU. Participants of the courses were offered a presentation on the Irish competition law and its enforcement, and the activities of the Ireland Competition Authority in the implementation and enforcement of the EU competition rules. The officials of the European Commission presented a brief overview on the necessity to modernise the EU competition law and the essence of such undertaking, also the main changes introduced in the competition law and its enforcement. The courses served as a valuable possibility to learn more on the process of the EU enlargements and the experience of Ireland after its accession to the EU.

In 2003, in the same way as in previous years, the DG Competition of the European Commission and TAIEX (Technical assistance and information exchange bureau) provided technical assistance by organising training, seminars, and conferences on the issues of EU Competition Policy and State aid. On the invitation of TAIEX three officials of the CC were participating in training sessions on competition issues arranged on 19-23 October in Brussels. The main subjects covered by the agenda of the training sessions were telecommunications, concentration, cartel agreements and the European Competition Network (ECN). Officials of the DG Competition of the European Commission made a presentation on the modernisation and decentralisation of competition rules, the forthcoming changes in the EU merger control regulations, other updates in the enforcement of competition rules, also significant time was devoted to discussions in issues of competition policy enforcement.

On 11 January - 6 April 2003 the TAIEX bureau organised training course on State aid in the European Commission, which was attended by one official of the CC.

Head of the Administration of the CC attended the IV session of the VIII International competition policy seminar “Prospects for multilateral agreement on competition policy and law” held on 29 April - 2 May in Seoul, Korea, where the representative of the Competition Council made a presentation.

On 16-19 September 2003 the Chairman of the CC participated in the Open Session of Interstate Antimonopoly Council of CIS countries devoted to Celebration of 10th Anniversary “Globalisation, Integration and Competition Policy” held in St. Petersburg. Representative of the CC presented and overviewed of integration process and development of national competition policy in Lithuania.

On 12-17 October 2003, two staff members of the CC participated in the workshop on State aid held in Brussels. The agenda of the workshop covered issues on State aid policy in the EU, State aid for the restructuring of enterprises, also aid to environmental protection and energy conservation.

4. Technical assistance

During the year 2003, technical assistance in the area of development of competition policy was rendered by experts from Denmark who contributed to the drafting of amendments of the LC and other legal acts (Explanations of the CC on block exemptions to vertical and horizontal agreements, imposition of fines, etc.).

The Twinning Light project under the PHARE technical assistance program “Reinforcement of the Competition Council (Anti-trust)” was prepared back in 2002, but in view of lengthy negotiations with the project partner who was awarded the project and with an intermediation of the Central Project Management Agency the contract with the German Federal Ministry of Economic and Labour was signed only late in 2003. The implementation of the project will start early in 2004. The main purpose of the project is to ensure the preparedness to operate in the EU environment, to directly enforce the relevant EU competition rules, and cooperate with the European Commission and National Competition Authorities of Member States in the investigation of competition cases falling within the scope of the EU competition legislation.

Late in 2003, a Twinning Light project “Reinforcement of the Competition Council (State aid)” was concluded with the German Federal Ministry of Economic and Labour. The purpose of the project is to strengthen the institution authorised to enforce the monitoring of State aid in Lithuania. The implementation of the project will extend until May 2004.

IV. ADVOCACY AND PUBLIC RELATIONS

Harmonisation of legislation

During 2003, the CC continued to make its active contribution in the legislation process by presenting proposals and comments in respect of various draft legal acts prepared by a range of institutions. By assessing the new drafts of legal acts in the light to requirements of the LC and presenting relevant comments the CC fulfils a very important mission of consolidation of the principles of fair competition in legal acts.

Of special significance were the comments presented in respect of the draft Law on Water Services. The CC opposed to the provision set forth in the draft law assigning a single operator in the market by granting it exclusive rights to operate for an unlimited period of time. Other provisions, which were opposed by the CC, concerned an inducement to take over the operations of the previously active undertakings, and other provisions of the draft law eliminating competition by legalising local monopolies, and creating conditions for possible abuse of the dominant position. Such provisions would come in contradiction of the principle of fair competition enshrined in the Constitution of the Republic of Lithuania. The procedure for designation of water services provider as proposed in the draft law would prevent any competition whatsoever, therefore a proposal was made to designate the water services providers by way of public tenders, also introduce licences of limited duration which would ensure possibilities for new more efficient operators to enter the market and maintain at least minimum conditions for competition in this specific sector.

The CC also disapproved off the Draft Law on the Publicity of Financial Activities and ensuring of Fair Competition of Retail Trade Enterprises the Annual Sales Net proceeds whereof exceed LTL 50 m., and the limitations set forth therein. In the opinion of the CC the attempts to relate the limitations set forth in the Draft Law with the prohibition of unfair competition are unjustified. Also some doubts were expressed as to criteria under which the said limitations are related to the threshold of LTL 50 m., without referring to the market power of the specific enterprise in the relevant market. Having regard to the comments presented by the CC and other institutions, the meeting of Ministers threw out the said Draft Law.

The draft Resolution of the Government “On the approval of the Rules on licensing of trade in explosives” included a proposal to empower the Weaponry fund which itself as independent enterprise operate in the market for trade in explosives, to issue licences to competing undertakings and to carry out a control over trade in explosives; such provisions would grant privileges to the Weaponry fund which will ensure its competitive advantage in respect of other undertakings. The CC experts proposed to the authors of the draft law ways and methods to ensure equal conditions for competition.

The CC commented in the Draft Law on The mandatory insurance against civil liability in respect of the use of motor vehicles. The provisions of the Draft Law concerned foresees the possibility to the Bureau - the association of insurance companies authorised to engage in the mandatory insurance against civil liability in respect of the use of motor vehicles - to access the data accumulated in the information data base at no charge, while to all other undertakings this service is provided for a fee. In the opinion of the CC such provisions of the Draft Law could grant a competitive advantage to the Bureau in respect of other undertakings.

One of the objectives of the Law on Electronic communications is to ensure effective competition in the electronic communications markets. Therefore the Law should make a clear distinction of the competences of the Telecommunications Regulatory Authority and the CC. The Draft Law does not resolve the issue of the currently existing problem of the division of competence in the telecommunications area, but, rather, transfers it to the area of electronic communications. The CC presented its comments concerning the division of competences, function overlapping, unjustified additional restrictions of the operations of undertakings, and proposed amended wordings of the relevant provisions of the new Law.

Important comments were offered in respect of the Draft Law on Public Information, which provided for a function to be assigned to the Lithuanian Radio and Television Commission to control the compliance of broadcasters and re-broadcasters with the provisions of legislation governing competition and concentration processes. The authors of the Draft Law were offered to renounce this provision on the basis that the CC exercises such control. Furthermore, the CC commented on the provision concerning the assignment of supervision of political advertising to the CC, since such provision is viewed as contradicting the mission of the institution.

During the year 2003, significant efforts were dedicated to the approximation of two Treaties of special importance to Lithuania. First, - the CC actively participated in the process of technical adaptations of the text of the Treaty of Accession in the negotiation chapter “Competition Policy”.

In the course of approval of the text of the EEA Enlargement Agreement the CC also presented comments within the limits of its competence.

Public relations

Invariably, considerable attention was being paid to dissemination of information and development of public relations, which has become extremely instrumental in enhancing of public awareness in competition issues. The society is becoming increasingly aware of the benefits of passed decisions, and the positive impact of such decisions not only on the situation in individual markets, but also on the well-being of consumers. Targeted and consistently presented information on the activities of the institution and explanations of the passed decisions in the news media enhances the awareness of benefits of competitive markets and the peculiarities of competition policy both among representatives of business community and the public at large.

News media interests

The activities of the CC, the course of investigations and their outcome have always been in the focus of interest of journalists of both national and regional publications, television and radio. As compared to previous years, the volume of information provided on the activities of the institution has increased by nearly 30% basically due to the new initiative of the CC to place more abundant information in the Internet website which made this information much easier accessible to regional news media. Information of issues discussed and decisions passed in meetings of the CC is being promptly disseminated via the Internet websites of Information agencies BNS and ELTA and would reach the news media mass faster. Electronic communications means facilitate efficient provision of information to news media which, in its turn, becomes better enabled to draw up higher quality analytical publications, and obtain the comments of experts in competition area on current issues.

Information to the news media was being provided via the means of communication with the Press Office of the Government of the Republic of Lithuania and the Public Relations Office of the European Commission’s Delegation to Lithuania.

Scope of public relations

During the year 2003 the CC prepared and presented to the news media 64 press releases about the decisions passed by the institution and investigations in progress. Members and specialist of the CC drew up six analytical articles for specialised publications which mostly covered the peculiarities of applications of the LC and Advertising, and emphasized the importance of investigations conducted by the CC for the implementation of the competition policy requirements, as well as the significance of amendments to the LC proposed by the CC. On 31 occasions officials of the CC were interviewed by TV and radio journalists, they also participated in numerous TV programs focusing on competition issues, and in total in four press conferences on the specific issues related to the investigations carried out by the CC.

Due to the strengthening contacts with editors on economic issues and representatives of regional news media, in 2003 the number of published articles and press releases on issues related to the activities of the institution has considerably increased and reached as many as 420. The news media showed invariable interest in investigations conducted by the CC and the situation and topicalities in retail trade, fuels, telecommunications, milk purchase and processing markets. The CC also published abundant information on investigations concerning misleading advertising.

The news media devoted considerable attention to visits to the CC of high rank officials, namely, the visit of Mr. I. Yuzhanov, Minister of the Russian Federation for Antimonopoly Policy and Support to Entrepreneurship in March, and the visit of Mr. Philip Lowe, the Director General of the Directorate General for Competition of the European Commission in December. News media representatives were invited to the meetings with these high rank guests of the CC.

Internet website

After the Government of the Republic of Lithuania approved the general requirements for the Internet websites of public authorities, the Internet website of the CC was updated to bring it in line with the said requirements. The structure of the website was reorganised, and some updates were introduced in the contents of the website. The website has been made more convenient for visitors to access to the most updated information on the activities of the CC and get acquainted with the draft resolutions of the institution. A new word search facility has been implemented in the website making it more convenient for the visitors of the website to address the officials of the CC and receive responses to their inquiries. The Internet website in English has also been significantly updated and modernised.

Provision of information to different sources

The CC submitted updated information in response to the questions presented by the annual publication on competition policy and regulation issued in London “Global Competition Review - The International Journal of Competition Policy and Regulation”.

Image formation

Development of public relations and increasingly close cooperation with news media pose new requirements, primarily in respect of quality and relevance of presentation of information. It has been increasingly important to present information to the TV audience and readers of publications in a condensed and relevant manner, thus press officers of different public authorities have been attending training courses designed to convey special skills to that effect. During May, October and November officials of the CC were attending workshops covering the issues on public relations and marketing, formation of image of the institution, as well as crisis management. The acquired skills and knowledge facilitates the strengthening of the public repute of the CC as highly qualified and efficiently operating institution.

V. ORGANISATIONAL STRUCTURE AND RESOURCES

The Competition Council of the Republic of Lithuania is a public authority empowered to implement the State competition policy and monitor over the compliance with the provisions of the LC, also performing other functions assigned to it by the Law on Monitoring of State Aid to Undertakings, the Law on Advertising and the Law on Prices. The activities of the Competition Council are funded form the budget of the Republic of Lithuania, and appropriations of the State budget 2003 amounted to LTL 2.5 m.

Staffing of the Competition Council and its Divisions

The LC defines the powers of the CC composed of the Chairman and four Members. The most important powers of the institution include the control over the compliance by undertakings, public and local authorities with the requirements of the LC, investigation and establishment of infringements of the Law and imposition of sanctions upon the violators in cases and following the procedure established by the law, and adopt legal acts within the limits of its competence, and others.

In fulfilling its functions the CC is assisted by the Administration of the institution the structure and positions whereof is approved by the CC. The functions of the Administration and its members are defined in the Regulations, approved by the CC.

At the end of the year 2003, the Administration of the CC consisted of 58 employees, 40% of them being men, and women accounting for the remaining 60%. Majority of the employees are graduates of the university level law or economics studies.

The Head of the Administration of the CC is in charge of its operations, and deals with issues of organisation of operations and discipline, selection of employees and improvement of qualifications, financing and other important issues related to the activities of the institution. The Administration of the CC is composed of Divisions each performing the functions delegated to it by individual areas of activity. An appointed Member of the CC is co-ordinating activities of each individual sector.

During 2003, considerable efforts were devoted to the enhancement of efficiency of operations of individual Divisions of the CC by introducing amendments to their functions or strengthening their capacities by involving highly qualified specialists.

Archive and records management

During 2003, the archive files of the CC were compiled and maintained in the procedure established by the Rules on preparation and recording of documents approved by the Department of Archives of the Republic of Lithuania. The archive of the CC has been moved to the premises fully conforming to all relevant requirements.

The computer-aided system for registration of the incoming and outgoing documents facilitates the management of correspondence of the institution by the so-called “one stop-shop” principle, under which the incoming and outgoing documents are registered and immediately forwarded to specialists according to their competence. The computerised record management system is not only an efficient tool in the management of accounting, enforcement of control, it facilitates the monitoring of the flows of documents and enables a more efficient servicing of persons applying to the CC.

VI. ANNEXES

Decisions passed and sanctions imposed by the Competition Council in 2003

Enforcement of the LC
Concerning legal acts passed by public and local authorities (7)
Refusals to initiate investigations (4)
Discontinued investigations (3)
Concerning prohibited agreements (7)
Established infringements (1):
15-07-2003 No.2S-10	Concerning the compliance of actions of enterprises participating in the tender called in 2002 by PHARE "Procurement of information technologies designed to strengthen the capacity of the Ministry of Agriculture and related institutions to manage and administer EU aquis for agriculture and rural development" (Project LT 0004-01) with items 1 and 6 of par. 1 of Art. 5 of the LC UAB Blue Bridge UAB Aideta UAB Techna Orbis	LTL 50,000 LTL 20,000 LTL 10,000
Exemptions (1):
06-11-2003 No.1S-128	Confirmation that the conference agreement between AB Lisco Baltic Service and Scandlines AG qualify for granting of a block exemption
Refusals to initiate investigations (1)
Discontinued investigations (4)
Concerning abuse of a dominant position (6)
Established infringements (1):
08-05-2003 No. 2S-8	On the compliance with the requirements of Art. 9 of the LC of A. Jankauskas service and trade enterprise A. Jankauskas service and trade enterprise	LTL 3,000
Refusals to initiate investigations (4)
Discontinued investigations (1)
Concerning merger control (58)
Permissions to implement merger (52):
06-02-2003 No.1S-8	E.ON AG to acquire 100% holding of Ruhrgas AG
27-02-2003 Nr.1S-13	UAB Vinvesta to acquire 100% holding of AB Sema
20-03-2003 No.1S-19	AB Alna and AS Microlink to establish a new joint venture UAB DoclogixOCLOGIX SoftwareOFTWARE by each acquiring a 50% block of shares
28-03-2003 No.1S-23	UAB KuusametUUSAMET to acquire 100% holding of UAB AlumedasLUMEDAS
28-03-2003 No.1S-24	UAB Baltijos ALTIJOS F inansųINANSŲ VystymoYSTYMO G rupėRUPĖ to acquire up to 100% holding of AB S anitasANITAS
03-04-2003 No.1S-29	AB RokiškioOKIŠKIO S ūrisŪRIS to acquire up to 35.3% holding of AB P anevėžioANEVĖŽIO PienasIENAS
17-04-2003 No.1S-35	UAB KremiREMI to acquire up to 100% holding of AB SanitasANITAS
24-04-2003 No.1S-37	UAB NCC FegdaEGDA to acquire 100% holding of AB KlaipėdosLAIPĖDOS KeliaiELIAI
24-04-2003 No.1S-38	V. Saldžiūnas company Baltvita, UAB Bennet Distributors, UAB Birštono Mineraliniai Vandenys and Ko., UAB Biržų Alus, UAB Coca-Cola Bottlers Lietuva, Latvian company Colgate-Palmolive, UAB Daiga, UAB Elmenhorster Vilnius, Finish company Elopak Oy, UAB Eugesta, AB Kalnapilis, UAB Kappa Packaging Baltic, AB Kauno alus, AB Klaipėdos kartonas, UAB Mineraliniai vandenys, V. Adutavičiaus, A. Juozeliūno, J. Tučinsko TŪB Nemuno Banga, UAB Neptūno vandenys, UAB Nestle Baltics, UAB Palink, AB Pieno žvaigždės, Latvian company Procter & Gamble Marketing Latvia, Ltd, UAB Putokšnis, AB Ragutis, Čygas-Kalkis TŪB Rinkuškiai, AB Rokiškio sūris, A.Gricevičius Lithuanian confectionery Rūta, Joint Lithuanian-American venture Sanitex, UAB Šiaulių tara, AB Švyturys-Utenos alus, UAB Tetra Pak Lietuva, UAB TEW Baltija, UAB Trojina, UAB Unilever Lietuva, AB Vilniaus Tauras to establish UAB Žaliasis taškas.
02-05-2003 No.1S-41	UAB LimarkoIMARKO and UAB VB R izikosIZIKOS KapitaloAPITALO V aldymasALDYMAS to acquire up to 100% holding and the joint control over AB KlaipėdosLAIPĖDOS TransportoRANSPORTO LaivynasAIVYNAS
08-05-2003 No.1S-43	UAB VičiūnaiIČIŪNAI to acquire up to 100% holding of UAB VičiūnaiIČIŪNAI and Ko
08-05-2003 No.1S-44	UAB PlungėsLUNGĖS K ooperatinėOOPERATINĖ PrekybaERKYBA to acquire up to 100% holding of UAB KaunoAUNO S aulėtekisAULĖTEKIS
08-05-2003 No.1S-45	UAB Plungės Kooperatinė PrekybaUAB PLUNGĖS KOOPERATINĖ PREKYBA to acquire up to 100% holding of UAB V ičiūnaiIČIŪNAI
08-05-2003 No.1S-46	BalticALTIC InvestmentNVESTMENT FundUND IIII L.P. to acquire up to 87.34% holding of UAB KraitenėRAITENĖ
29-025-2003 No.1S-54	AB GrigiškėsRIGIŠKĖS to take over AB NaujiejiAUJIEJI VerkiaiERKIAI
05-06-2003 No.1S-57	UAB MegrameEGRAME, UAB V irataIRATE and UAB PlasmetaLASMETA to establish a joint venture UAB ASF
05-06-2003 No.1S-58	UAB ComlietOMLIET to acquire 100% holding of UAB SonexONEX KomunikacijosOMUNIKACIJOS
12-06-2003 No.1S-61	UAB MilsaILSA to acquire up to 100% holding of AB GranitasRANITAS
20-06-2003 No.1S-63	Lithuanian-American UAB IteraTERA L ietuvaIETUVA to acquire up to 100% of AB S uskystintosUSKYSTINTOS DujosUJOS
26-06-2003 No.1S-66	UAB BiovelaIOVELA to acquire up to 100% holding of UAB UtenosTENOS MėsosĖSOS CentrasENTRAS
03-07-2003 No.1S-69	AB PanevėžioANEVĖŽIO K eliaiELIAI to acquire 100% of UAB SkanskaKANSKA StatybaTATYBA
03-07-2003 No.1S-70	A. Vyšniauskas to acquire up to 85.37% holding of UAB Š altuvaALTUVA and up to 49.63% holding of AB V ilniausILNIAUS MėsosĖSOS K ombinatasOMBINATAS and in cooperation with UAB Š altuvaALTUVA to acquire a joint control of AB V ilniausILNIAUS MėsosĖSOS K ombinatasOMBINATAS
10-07-2003 No.1S-71	UAB BaltijosALTIJOS FinansųINANSŲ VystymoYSTYMO GrupėRUPĖ and UAB KremiREMI to acquire a joint control over AB SanitasANITAS
28-08-2003 No.1S-84	YIT CorporationORPORATION to acquire 100% holding of UAB ABB TechnikaECHNIKA
28-08-2003 No.1S-85	UAB IrvingaRVINGA and UAB B altlantaALTLANTA to acquire 100% holding of AB L aivitėAIVITĖ and acquire a joint control
28-28-2003 No.1S-86	ŽŪB DžeiranaŽEIRANA to acquire up to 100% holding of AB GrąžtaiRĄŽTAI
28-08-2003 No.1S-87	BP p.l.c., AlfaLFA F inanceINANCE HoldingsOLDINGS SA, AI PetroleumETROLEUM HoldingsOLDINGS LLC, ArsanRSAN HoldingOLDIG S ar 1 to establish a joint venture
03-09-2003 No.1S-88	AB Mažeikių AŽEIKIŲ N aftaAFTA to acquire 100% holding of UAB U otasOTAS
11-09-2003 No.1S-92	AB KaunoAUNO GrūdaiRŪDAI to acquire up to 85% AB VilniausILNIAUS P aukštynasAUKŠTYNAS
11-09-2003 No.1S-93	SobieskiOBIESKI DystrybucjaYSTRYBUCJA Sp.z.o.o. to acquire 82.27% holding of AB VilniausILNIAUS DegtinėEGTINĖ
25-09-2003 No.1S-100	Sobieski DystrybucjaSOBIESKI DYSTRYBUCJA Sp.z.o.o. to acquire 100% holding of AB Vilniaus Degtinė AB VILNIAUS DEGTINĖ
25-09-2003 No.1S-101	UAB BetonetaETONETA to acquire up to 100% holding of AB MarkučiaiARKUČIAI
25-09-2003 No.1S-102	UAB ArtrioRTRIO-2 to acquire up to 100% holding of AB AnykščiųNYKŠČIŲ V ynasYNAS
02-10-2003 No.1S-107	UAB MineraliniaiINERALINIAI V andenysANDENYS to acquire up to 100% holding of AB S tumbrasTUMBRAS
09-10-2003 No.1S-112	UAB FinansųINANSŲ SpektrasPEKTRAS to acquire up to 100% holding of KIB InvetexNVETEX
23-10-2003 No.1S-118	AB RokiškioOKIŠKIO S ūrisŪRIS to acquire up to 100% holding of UAB K aloraALORA
23-10-2003 No.1S-119	UAB LiteskoITESKO to lease the assets of SP UAB BiržųIRŽŲ ŠilumosILUMOS TinklaiINKLAI
30-10-2003 No.1S-121	ProcterROCTER&GambleAMBLE GermanyERMANY ManagementANAGEMENT GmbH to acquire up to 100% holding of WellaELLA AG
06-11-2003 No.1S-125	UAB LiteskoITESKO to lease SP UAB D ruskininkųRUSKININKŲ ŠilumosILUMOS TinklaiINKLAI
06-11-2003 No.1S-126	UAB BaltischesALTISCHES H ausAUS to acquire up to 100% holding of UAB P asidarykASIDARYK PatsATS
06-11-2003 No.1S-127	UAB AibėsIBĖS MažmenaAŽMENA conclude service agreements with AB PasvalioASVALIO Ž emtiekimasEMTIEKIMAS, UAB KilminėILMINĖ
13-11-2003 No.1S-131	AB BankasANKAS "HansabankasANSABANKAS" to acquire up to 100% holding of UAB LietuvosIETUVOS DraudimoRAUDIMO GyvybėsYVYBĖS DraudimasRAUDIMAS
04-12-2003 No.1S-134	TchiboCHIBO HoldingOLDING AG to acquire a 51.46% holding of BeiersdorfEIERSDORF AG, granting 57.01% of voting rights
11-12-2003 No.1S-140	TeliaELIA SoneraONERA AB to acquire up to 100% holding of UAB OmnitelMNITEL through a subsidiary AmberMBER MobileOBILE TeleholdingELEHOLDING AB
11-12-2003 NO.1S-141	UAB KonversbankONVERSBANK and AB IncorionNCORION InvestmentNVESTMENT HoldingOLDING CompanyOMPANY to acquire up to 66.7% holding of AB BankasANKAS SnorasNORAS and acquire a joint control
11-12-2003 No.1S-142	A.Bosas to acquire up to 100% holding of AB KlaipėdosLAIPĖDOS KranaiRANAI
18-12-2003 No.1S-145	UAB TelivestaELIVESTA to acquire up to 100% holding of UAB LietuvosIETUVOS KinoINO StudijaTUDIJA
18-12-2003 No.1S-146	UAB AibėsIBĖS MažmenaAŽMENA to conclude a service agreement with UAB ŽiburysIBURYS
18-12-2003 No.1S-147	UAB Aibės Mažmena UAB AIBĖS MAŽMENA to conclude a service agreement with UAB SkibalėKIBALĖ
18-12-2003 No.1S-148	UAB LekėčiaiEKĖČIAI, UAB JosvainiųOSVAINIŲ BekonasEKONAS, ŽŪB ŠešupėEŠUPĖ, AB MarijampolėsARIJAMPOLĖS GrūdaiRŪDAI, A. Matusevičius and G. Kateiva to establish a joint venture ŽŪB KalvarijųALVARIJŲ BekonasEKONAS
18-12-2003 No.1S-149	UAB JosvainiųOSVAINIŲ BekonasEKONAS, UAB LitagrosITAGROS ChemijaCHEMIJA, M. Matusevičius, P. Matusevičius, D. Grigaliūnas and G. Kateiva to establish a joint venture ŽŪB ParšeliųARŠELIŲ GausaAUSA
18-12-2003 No.1S-150	UAB NDX EnergijaNERGIJA to acquire up to 100% holding of AB VakarųAKARŲ SkirstomiejiKIRSTOMIEJI TinklaiINKLAI

Permissions to perform individual actions of concentration (5):
06-03-2003 No. 1S-16	UAB Baltijos Finansų Vystymo Grupė by acquiring a 100% holding of AB Sanitas
17-04-2003 No. 1S-36	Baltic Investment Fund III L.P. by acquiring up to 87.34% holding of UAB Kraitenė
29-05-2003 No. 1S-53	Lithuanian-American UAB Itera Lietuva to acquire up to 100% holding of AB Suskystintos Dujos
18-09-2003 No. 1S-99	Sobieski Dystrybucja SP.z.o.o. by acquiring up to 100% holding of AB Vilniaus Degtinė
24-12-2003 No. 1S-152	UAB MG Baltic Investment by acquiring 100% holding of UAB Marieberg Media

Refusal to initiate investigations (1)

Enforcement of the Law on Advertising
Concerning misleading and comparative advertising (21)
Established infringements (9):
16-01-2003 No. 2S-1	AB Stumbras advertising of the strong drink "Dozė"
16-01-2003 No. 2S-2	UAB Tele 2 advertising of the discount to users of "Joker" services
06-02-2003 No. 2S-3	Comparative advertising of UAB Rubikon Apskaitos Sistemos
27-03-2003 No. 2S-5	Nordea Bank Finland PLC Lithuanian branch advertising of the cash withdrawal from Vilniaus Bankas ATM and branches of the Bank
27-03-2003 No. 2S-6	UAB Baltijos Mineralinių Vandenų Kompanija advertising of the lemonade "Gaja"
08-05-2003 No. 2S-7	UAB Biogloba advertising of the preparation "Slim Caps"	LTL 5,000
26-06-2003 No. 2S-9	AB Lietuvos Telekomas advertising of the call forwarding service
13-11-2003 No. 2S-12	SE Vėjo Sala advertising of the acquisition of tickets to Marilyn Manson concert SE Vėjo Sala	LTL 8,000
13-11-2003 No. 2S-13	UAB Brand Sellers DDB advertising of the pre-paid mobile telecommunications service "Extra"
Refusals to initiate investigations (9)
Investigations closed (3)


Penalties imposed in 2003 LTL 96,000

TOTAL NATIONAL STATE AID IN LIETHUANIA IN 2002

Methods of State aid Sector	A1	A2	B1	C1	C2	D1	Total (LTL m)	Total (MEUR)
1.1. Agriculture, *	4.93						4.93	1.43
1.2. Fisheries
2. Industry/services	88.16	127.19			38.45	0.07	253.87	73.53
2.1. Horizontal aid	3.73	106.51			38.14		148.38	42.97
2.1.1. Research and development and innovations	1.25						1.25	0.36
2.1.2. Environmental protection
2.1.3. Small and medium-sized enterprises		5.82					5.82	1.69
2.1.4. Trade	2.42						2.42	0.7
2.1.5. Energy efficiency
2.1.6. Investment
2.1.7. Employment programs
2.1.8. Improvement of qualifications
2.1.9. Privatisation
2.1.10. Rescue/restucturing	0.06	100.69			38.14		138.89	40.22
2.2. Sektoral aid	83.97	17.63			0.21	0.07	101.88	29.51
2.2.1. Steel industry
2.2.2. Ship-building		0.03					0.03	0.01
2.2.3. Transport	83.97	17.6			0.21	0.07	101.85	29.5
2.2.4. Coal industry
2.2.5. Synthetic fibre
2.2.6. Other sectors
2.3. Regional aid	0.46	3.05			0.1		3.61	1.05
TOTAL :	93.09	127.19			38.45	0.07	258.8	74.96
Manufacturing industry and services	4.19	109.59			38.24		152.02	44.03

*The Table includes the data on State aid granted from the State and municipal budgets

**The data on State aid to agriculture are not broken down by methods of the State aid

SYMBOLS:

A1 - grants, subsidies

A2 - tax exemptions, tax reductions, write-off of late interest and penalties, other exemptions

B1 - equity participation

C1 - soft loans

C2 - tax deferrals

D1 - State guarantees

TOTAL NATIONAL STATE AID IN LITHUANIA IN 1996-2002 *

MEUR

Years Indicators	1996	1997	1998	1999	2000	2001	2002
Total national State aid	173.28	114.98	99.05	45.47	68.70	39.73	74.96
Including:
- manufacturing industry and services	162.02	63.55	56.00	8.68	42.07	17.26	44.03
- agriculture*	0.03	0.78	0.77	0.20	0.43	0.82	1.43
- financial services	0.17	6.63	5.17	0.83
- transport	11.06	44.02	37.11	35.76	26.20	21.65	29.50

*The Table includes data on State aid granted from the State and municipal budgets excluding the funds of the Rural support program.

NATIONAL STATE AID IN LITHUANIA IN 1996-2002 *

Years Indicators	1996	1997	1998	1999	2000	2001	2002
MEUR	173.28	114.98	99.05	45.47	68.70	39.73	74.96
EUR per one employee	104.43	68.88	59.82	27.60	43.32	26.11	53.31
% of GDP (at current prices)	2.86	1.36	1.03	0.43	0.57	0.29	0.51
% of national budget expenditures	12.04	6.05	4.49	2.02	2.81	1.36	2.22
% of national budget deficit	114.00	139.00	83.00	147.00	66.50	13.21	23.50
Residents (m)	3.71	3.70	3.70	3.69	3.70	3.48	3.47

*The Table includes data on State aid granted from the State and municipal budgets excluding the funds of the Rural support program.

METHODS OF STATE AID GRANTED IN 1996-2002

	A1	A2	B1	C1	C2	D1	Total (LTL m)	Total (MEUR)
State aid in 1996	48.29	556.28	98.16	57.32	8.37	136.00	904.42	173.28
State aid in 1997	109.94	40.52	250.50	0.78	2.80	116.10	520.64	114.98
State aid in 1998	109.08	51.73	11.75	2.77	1.83	267.80	444.96	99.05
State aid in 1999	159.59	2.17	11.01	1.82	0.04	9.46	184.09	45.47
State aid in 2000	225.55	7.45	0.06	0.01	0.07	22.48	255.62	68.70
State aid in 2001	87.99	24.50	0.00	0.07	27.54	0.00	140.10	39.73
State aid in 2002	93.09	127.19			38.45	0.07	258.8	74.96

SYMBOLS:

A1 - grants, subsidies

A2 - tax exemptions, tax reductions, write-off of late interest and penalties, other exemptions

B1 - equity participation

C1 - soft loans

C2 - tax deferrals

D1 - State guarantees

NATIONAL STATE AID IN LITHUANIA IN 1998-2002, MEUR

STATE AID ASSESSED BY RESOLUTIONS OF THE COMPETITION COUNCIL IN 2003

Notification received	Aided enterprise	No. of Resolution of the CC, date	Decision
22-10-2002		No. 1S-9 12-03-2003	Conditional approval
23-06-2003	UAB Marijampolės Statyba	No. 1S-73 15-07-2003	Approved
28-02-2003	UAB Panevėžio Aurida	No. 1S-89 03-09-2003	Conditional approval
28-02-2003	AB Statybos Apdailos Mašinos	No. 1S-91 11-09-2003	Disapproved
30-09-2003	Lithuanian-Russian UAB Gargždų Mida	No. 1S-109 09-10-2003	Approved
31-07-2003	Šiauliai enterprise of Lithuanian Union of the blind and the visually handicapped people	No. 1S-135 04-12-2003	Approved
Initiated by CC	Aid by Sodra to 10 enterprises	No. 1S-56 29-05-2003	To open the state aid case

Total letters received - 6, approved - 3, conditional approvals - 2, disapproved-1, State aid case opened - 1.