INTERIM MEASURES ON THE ESTONIAN COMPANY OPERATING A CINEMA CHAIN EXTENDED FOR ONE YEAR

The Competition Council has decided to extend the interim measures imposed on the Estonian company MM Grupp, which include an obligation to manage all the assets and business of Forum Cinemas, which was allegedly taken over without the Authority's approval, in a way that does not harm its economic viability, saleability or competitiveness, by a further one year.

The Competition Council is currently investigating a possible breach of the Law on Competition following a suspicion that MM Grupp had implemented a concentration without the Authority's approval. Until the investigation is concluded, the Competition Council considers that it is necessary to prolong the interim measures to avoid serious and irreparable harm to effective competition in the cinema market.

As of 7 April 2023, the interim measures have suspended the further division and takeover of the assets and activities of Forum Cinemas and the transfer to unrelated parties. In the preliminary assessment of the Competition Council, the interim measures have effectively limited the potential negative impact of MM Grupp on Forum Cinemas' business and are effective and important in protecting and preserving the volume, value, viability, and competitiveness of the business, as evidenced by the periodic reports on the implementation of the interim measures submitted by MM Grupp. The extension of the provisional measures should continue to ensure that no new integration actions are implemented, that the acquired business is not divested and that the viability and competitiveness of Forum Cinemas' business is preserved.

The courts, having examined the complaints by MM Grupp, have affirmed that temporary measures are necessary and proportionate.

The decision of the Competition Council to extend temporary measures for another year may be appealed to the Regional Administrative Court within 10 days from the date of its notification.

It is worth reminding that on March 8, 2021, the Competition Council received a notification from MM Grupp regarding a concentration. The Estonian company intended to acquire 51% (and together with existing shares – 100%) of the shares of another Estonian company, Forum Cinemas Lithuania, and thereby indirectly take over control of the latter's subsidiary in Lithuania.

At that time, MM Grupp, engaged in holding company activities, had affiliated companies operating in various business sectors. One of them held the Apollo trademark and operated cinemas in Panevėžys, while others distributed Hollywood studio (The Walt Disney, Paramount, Universal) films and independent filmmakers' movies. The planned acquisition target, Forum Cinemas Lithuania, operated cinemas in Vilnius, Kaunas, Klaipėda, and Šiauliai.

As the companies planning the transaction did not timely provide all necessary information, the review period for the notification was suspended. On October 14, 2021, the Competition Council terminated the merger review procedure, in accordance with the Law on Competition, which stipulates that when the review period for a merger notification is suspended for more than 3 months, the assessment process is terminated, and it is deemed that no merger notification has been submitted. The merger could not be carried out by the companies planning the transaction because they had not received clearance.

The data held by the Competition Council raised suspicions that, although permission for the merger was not obtained, MM Grupp decided to proceed with the transaction by effectively splitting the assets of Forum Cinemas Lithuania and transferring them in separate parts to economic entities related to MM Grupp.

According to the assessment of the Competition Council, it was necessary to take appropriate measures to ensure the economic independence among the investigated economic entities, halt further merger actions and integration, and ensure the possibility of applying effective impact measures if the institution were to find that the requirements of the Competition Law had been violated.

The data held by the Competition Council raised suspicions that, although permission for the merger was not obtained, MM Grupp decided to proceed with the transaction by effectively splitting the assets of Forum Cinemas Lithuania and transferring them in separate parts to economic entities related to MM Grupp.

According to the assessment of the Competition Council, it was necessary to take appropriate measures to ensure the economic independence among the investigated economic entities, halt further merger actions and integration, and ensure the possibility of applying effective impact measures if the institution were to find that the requirements of the Law on Competition had been violated.

In view of the above, the Competition Council has decided, inter alia, to impose the following interim measures from 7 April 2023:

• oblige MM Grupp to manage and operate all the assets and business owned by Forum Cinemas that it has taken over, independently of the business of the MM Grupp group of companies, for the exclusive benefit of the relevant business (and not of MM Grupp). MM Grupp must refrain from any decision or conduct that may adversely affect the economic viability, saleability or competitiveness of the business taken over.
• Require MM Grupp not to transfer control of any assets or business of Forum Cinemas (including any rights to such assets, business, or any parts thereof) to any other economic entities or individuals, including related entities of MM Grupp, without clear prior approval from the Competition Council.
• Oblige MM Grupp to suspend and refrain from any other actions directly or indirectly involving the acquisition of assets or business belonging to Forum Cinemas, including the transfer of contracts, agreements, employees, or any other rights.
• Require MM Grupp and Forum Cinemas not to share any confidential business information unless disclosure of such information is necessary to comply with legal requirements.