THE COMPETITION COUNCIL AUTHORISED THE CONCENTRATION BY RAUTAKIRJA OY SUBJECT TO OBLIGATIONS AND CONDITIONS

The session of the Competition Council examined the notification of 2 June 2005 submitted by the Finish company RAUTAKIRJA Oy concerning the intended concentration by acquiring a 100 percent shareholding of the Vilnius agency of UAB Lietuvos spauda (“Lithuanian Press”). Seeking prevent the creation of a dominant position the Competition Council decided to authorise the concentration in question in accordance with the submitted notification while having established specific obligations and defined the terms of the concentration transaction.

The intended concentration was assessed by the Competition Council as the horizontal and vertical concentration in the relevant markets. The degree of concentration in the retail consumer goods market would be affected just to a negligible extent. Meanwhile, the degree of concentration in the wholesale publications distribution market would increase by up to 45-50 percent, with an estimated increase in the number of distribution of certain publications, in particular, dailies. In a number of regions the entire wholesale publications distribution markets are being operated exclusively by undertakings participating in the concentration. Entry into the wholesale publications is restricted and the effected concentration would to a further extent impede the possible entry attempts.

Having considered the potentially enhancing market power of RAUTAKIRJA Oy and capacities of other publishers the Competition Council concluded that following the concentration deal the Finnish company would be enabled to operate independently from its competitors and service buyers. The Competition Council also thoroughly examined and assessed the commitments declared by RAUTAKIRJA Oy assumed with a view to ensuring a transparent and non-discriminating publications distribution system in the market, and designed to facilitate the entry into the market and prevent cross-subsidising or exclusive press distribution provisions in relation to retailers and publishers, etc. Having examined the contents of the submitted commitments and assessed the possible impact thereof as well as the forms of control, the Competition Council decided to issue the authorisation to the applicant to acquire a 100 percent shareholding of the Vilnius agency of UAB Lietuvos spauda subject to obligations and having established the terms for the implementation of concentration.

One of the major obligations concerns the requirement to organise the publications distribution and sale in newsstands through two independent separate companies. Having thus segregated the activities, companies of the Vilnius agency of UAB Lietuvos spauda group will be in charge of the retail trade in newsstands, and the distribution branch will be transferred to UAB Impress Teva that will continue the operations. This obligation must be fulfilled in six months’ period.

The Resolution obligates RAUTAKIRJA Oy (via UAB Impress Teva) to implement a commission-based compensation system that is non-discriminating, transparent and ensuring equal terms in respect of all publishers based on the criteria specified in the Resolution of the Competition Council. Furthermore, publishers must be granted the right to terminate, at their own initiative and at any time, distribution agreements concluded with the Vilnius agency group of UAB Lietuvos spauda or the company Impress Teva upon a three months’ notice without being subject to any economic sanctions in that connection.

RAUTAKIRJA Oy companies were obligated by the Competition Council not to include in the agreements with retailers and publishers any exclusive press distribution clauses; UAB Impress Teva distribution network must be open to all publishers irrespective of their size and scope of distribution activities; publishers may not be discriminated in respect of each other and the applicant shall also ensure that publishers will not be discriminated in respect of publishers belonging to RAUTAKIRJA Oy group.

The Competition Council also obligated RAUTAKIRJA Oy, within an established period of time, to submit to the authority the candidate for the independent observer responsible for securing the fulfilment of the established obligations by RAUTAKIRJA Oy, and the draft contract on the engagement of such observer. The responsibilities of the independent observer are to be charged to a recognised audit or consulting company. The observer shall in the established manner draw up reports on the course of the fulfilment of obligations and actions undertaken for the purpose of segregation of distribution and retail trade activities, and, where requested by the publishers, notify them in writing of the observations concerned.

The resolution passed by the Competition Council has established the terms for the fulfilment of the obligations, time limits and the possibilities to extend or modify them, followed by an indication that failure to fulfil the obligations defined in the resolution and comply with the terms of the concentration transaction may incur liability established in the Law on Competition.

The resolution was passed having duly considered the approval declared by publishers of Lietuvos rytas, Respublikos leidiniai, Verslo žinios, Lietuvos žinios and some other regional publications, as well as the Lithuanian Confederation of Industrialists to the obligations being imposed upon the economic entity implementing the concentration operation.