COMPETITION COUNCIL FINED AB KAUNO GRŪDAI FOR UNNOTIFIED MERGER

The Competition Council found that having acquired about 51 per cent of Vievio paukštynas shares and gained control over the company, Kauno grūdai implemented unnotified merger. For the infringement of the Law on Competition, the Council fined Kauno grūdai EUR 947,700.

The Council opened the investigation on 21 April 2015 in accordance with the ruling of 15 October 2014 of the Court of Appeal of Lithuania. The Court found that by entering into fictitious transactions, on 12 April 2011 Kauno grūdai acquired about 51 per cent of Vievio paukštynas shares. As a result of these transactions, the real party of the transaction – Kauno grūdai – was concealed in order to avoid merger control procedure set by the Law on Competition.

During the investigation the Council found that having acquired about 51 per cent of Vievio paukštynas shares, Kauno grūdai gained the right to appoint the majority of board members of Vievio paukštynas, ability to make strategic decisions related to the economic activity of the undertaking, actions undertaken by the company‘s governing bodies and the composition of personnel. In addition, Kauno grūdai retained the acquired control during the bankruptcy proceedings of Vievio paukštynas.

According to Šarūnas Keserauskas, Chairman of the Council, when imposing the fine, the fact that Kauno grūdai concealed the committed infringement, was considered an aggravating circumstance.

The courts found that by making fictitious transactions Kauno grūdai seeked to avoid merger control procedure. The protégés signed the share acquisition agreements only formally, however, by doing so Kauno grūdai became the real acquirer of the rights and duties of the shareholder

Šarūnas Keserauskas

The Chairman noted that some business representatives still treat merger notifications as a formal procedure: “Even if the transaction had not had any considerable influence on the market or if, as in Vievio paukštynas case, the acquired undertaking would be later subject to bakruptcy proceedings, merger notification is not just a formality. Companies are often trying to avoid merger control procedure and fail to notify mergers, however, as the competition culture gets stronger, unnotified mergers are more and more difficult to conceal. Irrespective of whether the Council would clear the merger or not, failing to notify a merger in time is a serious infringement.“

The intended merger must be notified to the Competition Council prior to its implementation and its permission must be obtained if the combined aggregate income of the undertakings concerned in the business year preceding the merger exceeds EUR 14.5 million, and the aggregate income of each of at least two undertakings concerned in the business year preceding the merger exceeds EUR 1.45 million. A merger notification must be submitted to the Council prior to the implementation of the merger. The merger shall not be implemented without the Council‘s permission.