LITHUANIAN CYNOLOGY SOCIETY SANCTIONED FOR THE PROHIBITED AGREEMENT

The Competition Council passed the Resolution whereby the authority recognised that the Lithuanian Cynology Society (LCS) infringed the requirements of Article 5 of the Law on Competition by establishing prohibition to its members to sell puppies with the documents issued by the LCS to natural or legal persons having an objective to resell the puppies. For this infringement of the Law on Competition the Lithuanian Cynology Society was subjected to the fine of LTL 32,300.  Also the LCS was obliged by the Competition Council to terminate the infringement of the Law on Competition where the infringement was still continued. The Competition Council also obligated the LCS to repeal the obligation set forth in the Regulations on dog breeding in respect of breeders within one month from the sale of a puppy to submit to the LCS’s Secretariat office copies of the documents certifying the sale of the puppy to a new owner.

The Competition Council initiated the investigation having received the application from the personal company Terra Animalis engaged in retail trading within the store network “KIKA“ to investigate the actions of the LCS and the compliance of such actions with the requirements of the Law on Competition.  In its application Terra Animalis indicated that in its internet website the LCS had publicly disseminated the prohibition to sell puppies holding the certificates of origin issued by the LCS in stores, – such puppies could be sold only directly from breeders. The applicant claimed that such prohibition is completely ungrounded as the documents of the International Federation of Cynology, whose member is the LCS, contain any prohibitions or restrictions concerning trading in puppies.

The LCS joins 37 dog breeder clubs whose members are dog owners, also persons breeding purebred dogs, also persons rearing dogs for pleasure.  Members of the LCS (clubs, as well as members thereof) are bound to follow the provisions of the Articles of Association of the Society, also internal regulations, and those members that do not follow the rules may be excluded from the Society. The LSC is the only organisation officially authorised to represent Lithuanian cynologists in the International Federation of Cynology – the largest in the world International organisation of cynologists the membership wherein is considered a matter of prestige. The LCS currently joins about 90 percent of all Lithuanian dog breeders.

With a view to properly assessing the actions of the LSC the investigation included the analysis of all legal acts governing the terms and principles of the sale of domestic animals, including dogs, in Lithuania.

Having analysed the collected information and assessed the relevant circumstances the conclusion was drawn up that when passing its decision (both at the meeting of the bodies of management, as well as in the breeding regulations) to prohibit selling puppies with certificates of origin issued by the LCS to natural or legal persons having an objective to resell the puppies the LCS was restricting competition in the Lithuanian market for the sale of purebred puppies with certificates of origin. The breeders whose puppies are issued certificates of origin in Lithuania, as well as other members of the LSC, being bound by the decisions of the LSC and having regard to the sanctions threatening for the failure to follow the regulations were not supplying their puppies to stores. This prevented the competitors (pet stores and other resellers) from operating in the market. Having established that breeders of the LSC will not supply to stores and other resellers any puppies, the LSC assured that the stores and other traders will not exercise any competitive pressure upon the breeders of the LSC, since the decision of the LSC essentially removed from the relevant market for the sale of puppies with certificates of origin any existing (or potential) competitors. Furthermore, such actions of the LSC restricted the freedom of the breeders to independently take decisions related to the sale of puppies to stores or other resellers, and thus eliminated their competition for selling the puppies to the undertakings concerned.

Although the LSC was substantiating its prohibition to sell puppies with certificates of origin referring to animal welfare concerns, the State Food and Veterinary Service has not provided for any prohibitions to sell animals in pet stores.

The Competition Council also noted that the LSC had created certain mechanism for control and supervision of the sale of the puppies with issued certificates of origin.  The investigation established that the obligation imposed by the LSC, within a certain period of time to submit to the LCS copies of agreements on the purchase-sale of puppies ensured the control over the prohibition established by the LSC, as the sale contracts, inter alia, had to specify to whom the puppy has been sold.

Having assessed the conclusions and findings of the investigation that covered the entire 2007-2009 period, the CC recognised the LSC by its actions infringed the requirements of Article 5(1) of the Law on Competition whereby all agreements restricting competition or having an objective to restrict competition are prohibited. When assessing the nature of the infringement the Competition Council considered that the actions of the LSC whereby the LSC prohibited its members to supply purebred puppies to undertakings and natural persons engaged in trading activities, i.e., those with the objective to resell the puppies, and the establishment of the quantities, actually constitutes a horizontal agreement. Agreements of the type are considered as the most severe infringements of competitions.

When imposing the sanction for the infringement of the Law on Competition the Competition Council assessed the economic situation in view of which the undertakings were incurring financial difficulties, and was following the principles of justice and proportionality in imposing the fines.