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THE ADDITIONAL INVESTIGATION DID NOT CHANGE THE OPINION OF THE COMPETITION COUNCIL – THE MAŽEIKIAI COMPANY WAS ABUSING ITS DOMINANT POSITION

16 12 2010

Having examined the findings of the additional investigation the Competition Council acknowledged that AB Orlen Lietuva (former AB Mažeikių nafta) did infringe the requirements of Article 9, Article 9(3) of the Law on Competition of the Republic of Lithuania and Article 102 of the Treaty on the Functioning of the European Union.  AB Orlen Lietuva was obligated to terminate the actions constituting the infringements of the Law on Competition and Article 102 of the Law on the Functioning of the European Union. For the infringements concluded as a result of the investigation AB Orlen Lietuva was subjected to the fine of LTL 8,231,000.

Having considered the scope of aspects pointed out by the Supreme Administrative Court of Lithuania in its ruling obligating the conduct of an additional investigation the Competition Council repeatedly examined and substantiated the conclusions of its Resolution of 2005. As a result of such additional investigation the competition authority revised the definition of the relevant market by narrowing the geographic market to the territory of the Republic of Lithuania substantiating its decision by a number of extensive arguments, and provided additional substantiations for the definition of the product market. Having considered the evidence collected in the course of the investigation the Competition Council concluded that AB Mažeikių nafta had committed certain restricting actions, i.e., was abusing its dominant position in the market for the ex works sale of gasoline, and, accordingly, the ex works sale of diesel in the territory of the Republic of Lithuania. The anti-competitive actions by the company included the economically unsubstantiated, discriminative pricing policy, annual loyalty and non-competing obligations, imposition of restrictions upon parallel import and resale possibilities which constituted infringements of Article 9, Article 9(3) of the Law on Competition and Article 102 of the Treaty on the Functioning of the European Union. The restricting actions by AB Mažeikių nafta significantly limited the possibilities of other undertakings to operate in the market and inflicted damage upon them and, eventually, consumers.  Therefore, in establishing the amount of the fine to be imposed the Competition Council duly considered the severity of the infringement committed by AB Mažeikių nafta, and the fact that in terms of its scope the abuse of the dominant position covered the entire territory of the Republic of Lithuania and affected trade between Member States.

The investigation primarily concerned the compliance of the pricing policy applied by AB Mažeikių nafta with the requirements of the Law on Competition. The investigation concluded and provided the findings in the Resolution that the pricing policy employed by AB Mažeikių nafta was designed to restrict the entry of competitors into Lithuanian market, i.e., to avoid import competition:  diesel fuel – from the East, and gasoline – from the West.  Certain discounts granted to companies acquiring fuels were economically ungrounded, and the rebate system itself actually meant the application of dissimilar conditions in agreements of identical character. The rebate system applied by AB Mažeikių nafta actually resulted in the discrimination of certain undertakings (UAB Rekolas, UAB Skulas, UAB Saurida, UAB Hydro Texaco, KB Tiltoilas) in respect of selected others (UAB Lukoil Baltija, UAB Lukoil Baltija servisas, UAB Lietuva Statoil and UAB Neste Lietuva) actually operating in the same market.

Furthermore, having considered the market power exercised by AB Mažeikių nafta in the Lithuanian territory and the conduct of AB Mažeikių nafta in establishing the gasoline and diesel fuel consumer prices the Competition Council concluded that AB Mažeikių nafta, by imposing some loyalty obligations sought "tying up" its consumers and restricting their free behaviour in the market in respect of changes of oil product prices or other factors, rendering them free to choose other producers only in the cases when AB Mažeikių nafta was not able to supply them with oil products. This actually resulted in a foreclosure of the Lithuanian gasoline and diesel markets from other producers, thus significantly restricting competition therein.

The Competition Council changed the amount of the fine imposed upon AB Orlen Lietuva having, during the resumed investigation, narrowed the definition of the geographic market to the national territory of the Republic of Lithuania, also having reconsidered as non-infringing actions of AB Mažeikių nafta related to discrimination of undertakings on territorial basis and sale of arctic diesel fuel to corporate undertakings. It should be noted that in relation to imposing the fine the Competition Council took into consideration the circumstances aggravating the liability of the infringer that is sanctioned for infringements of the Law on Competition for the third time.

Competition Council Spokesperson