COMPETITION COUNCIL TERMINATES INVESTIGATION ON THE ACTIONS OF FRAGRANCES INTERNATIONAL

On January 30, the Competition Council (the Council) terminated the investigation on the actions of UAB Fragrances International (Fragrances International) whereby the latter had acquired 49 per cent of SIA Douglas Baltic shares.

On July 2012, Fragrances International notified the Council about its intention to acquire 49 per cent of SIA Douglas Baltic shares. In November 2012, the company refused the merger after the Council‘s experts had determined that the merger could substantially lessen competition in the relevant market. The Council opened the investigation having suspected that after the examination of merger notification had been terminated in 2012, Fragrances International was registered at the Register of Enterprises of the Republic of Latvia as the owner of SIA Douglas Baltic shares in February 2013, and, thus, gained control over this company.

During the investigation the Council determined that the board of SIA Douglas Baltic had registered Fragrances International as the owner of the acquired shares. However, being registered as the owner of SIA Douglas Baltic shares, Fragrances International did not exercise any shareholder‘s rights or somehow otherwise participate in controlling SIA Douglas Baltic. The company also took actions to amend the situation, i.e. sold the acquired 49 per cent of SIA Douglas Baltic shares to Douglas Investment B.V. that was later registered as the only owner of SIA Douglas Baltic. Having regard to these circumstances and the fact that Fragrances International is no longer a shareholder of SIA Douglas Baltic as well as taking into consideration the established principles of enforcement priorities, the Council terminated the investigation as continuing it would determine irrational usage of resources.

Notes

(1) Mergers (Concentrations) are cases when two independent undertakings merge or when one undertaking gains control over another. As these changes may restrict effective competition in a relevant market, mergers involving firms that exceed turnover limits established in the Law on Competition must be cleared by the Council. The Council authorises only such mergers that will not have significant adverse effects on the conditions of competition.

(2) A merger notification must be submitted to the Council prior the implementation of a merger. The merger notification shall be submitted after the submission of the proposal to conclude an agreement or acquire shares or assets, an instruction to conclude the agreement, conclusion of the agreement, acquisition of the right of ownership or the right to dispose of certain assets. The merger notification may also be submitted in case of a good faith intention to conclude the agreement or to make a public bid to buy up shares.

(3) When deciding whether an investigation falls within the established enforcement priority, the Council follows three principles:

§ the potential impact of an investigation on effective competition and consumer welfare,

§ the strategic importance of such an investigation,

§ the rational usage of resources.