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COMPETITION COUNCIL: THE AGREEMENT AMONG BREWERS WAS NOT BASED ON CONCERNS ABOUT THE PUBLIC HEALTH ONLY

04 03 2014

On 4 March, the Competition Council (the Council) announced that the Lithuanian Guild of Breweries, AB Gubernija, UAB Kalnapilio – Tauro grupė, UAB Restoranas Apynys, TŪB Rinkuškiai, UAB Švyturys – Utenos alus, AB Volfas Engelman (the Lithuanian Guild of Breweries and its members or parties to the agreement) entered into a prohibited agreement restricting the production of beer and, thus, infringed Article 5 of the Law on Competition and Article 101 of the Treaty on the Functioning of the European Union.

The Council found that in 2004 – 2013 the Lithuanian Guild of Breweries and its member in the Brewers‘ Code of Honour agreed not to produce beer of certain strength.

The Council concluded that the agreement by the Lithuanian Guild of Breweries and its members infringed the requirements of competition law. The agreement created possibilities to avoid competition in a certain segment within the beer market, predict the behaviour of competitors and foresee their actions related to the volume of beer production.

During the investigation all the circumstances related to the suspected infringement were examined. The established facts lead to conclusion that the agreement among brewers was not based on concerns about the public health only.

The Council found that publicly announced obligation to restrict the production of strong beer was repeatedly amended with regard to the interests of the brewers: the restrictions of beer production were set pursuant to the brewers‘ production plans and the fact that the production of certain strength beer failed to bring the desirable profit.  The Council‘s experts draw attention to the fact that arguments in the internal correspondence among the members of Lithuanian Guild of Breweries differed from publicly declared aims to promote responsible use of alcohol as they   mainly specified profit and self-advertising  as key benefit of the agreement.

When evaluating the agreement concluded between the Lithuanian Guild of Breweries and its members, the Council acknowledged that the arguments for potential benefits to society are ungrounded.

Having evaluated all the circumstances established in the course of the investigation, the Council determined that the Lithuanian Guild of Breweries and its members infringed Article 5 of the Law on Competition and Article 101 of the Treaty on the Functioning of the European Union whereby companies are prohibited from concluding agreements that restrict competition.

However, the Council decided not to sanction the Lithuanian Guild of Breweries and its members as in the course of the investigation the parties to the agreement terminated competition restricting actions.  While taking the decision the Council also took into account the fact that in 2008 the authority had approved in writing the former version of the Code.

The Council notes that the agreements on prices, production volume, application of innovations and other conditions may infringe competition law.

The Council has prepared a notice for associations wherein basics of participation in associations with regard to competition law are detailed.

Notice:

Belonging to an association may be beneficial: companies may organise regular meetings, discuss processes and changes within a market, discuss the relevant problems and share knowledge, experience and specific information. However Article 5 of the Law on Competition prohibits companies from concluding agreements that aim to restrict competition, restrict or may restrict competition including:

1. agreements that directly or indirectly set (fix) prices of certain goods or other conditions of purchase or sale;

2. agreements that set market shares on a territorial basis, according to groups of buyers or suppliers or in any other way;

3. agreements that fix production or sale volumes for certain goods as well as restrict technical development or investment;

4. agreements that  apply dissimilar (discriminating) conditions to equivalent contracts with individual economic entities, thereby placing them at a competitive disadvantage.

Competition Council Spokesperson