THE COMPETITION COUNCIL CHANGES ITS SANCTIONING PRACTICE FOR UNREPORTED BUSINESS TRANSACTIONS

A merger or acquisition transaction executed without the approval of the Competition Council is a serious breach of competition law, for which the company implementing the concentration is held liable. In order to ensure that the fines more proportionately reflect the financial capabilities of the offender benefiting from the unreported transaction, the Competition Council has decided to change the practice of calculating sanctions.

Until now, the Competition Council used to calculate the fine based on the revenue of the company the offender acquired. Having considered the peculiarities of the previous practice and the principles of calculation of fines applied by the European Commission, the Competition Council has decided that in the future it will calculate the fines for the unnotified concentration based on the total annual worldwide turnover in the preceding business year of the undertaking that infringed the Law on Competition.

It is expected that by changing the practice within the current legal framework, the imposed sanctions will be more proportionate to the revenues of the companies violating the law and will deter dangerous competition law infringements. These violations have been increasing recently – in 2023 alone, the Competition Council conducted four investigations into transactions that were suspected of being executed without the Authority’s approval.

The Supreme Administrative Court of Lithuania has stated that one of the objectives of a fine is to deter the infringement, and therefore the imposition of an extremely low fine (or exemption from sanctions) would not achieve this objective. So far, the fines imposed by the Competition Council for non-notified concentrations have been relatively small – 0.003–0.8% – of the revenues of the undertaking that implemented the transaction, as the revenues of the acquired company are usually significantly lower than those of the company that takes control of the business.

Under the Law on Competition, an undertaking may be fined up to 10% of its total annual worldwide turnover for implementing a concentration that was subject to notification without the authorisation of the Competition Council. 

The Authority will continue to assess the severity of each infringement on an individual basis, as well as other circumstances relevant to the determination of the fine (duration of the infringement, aggravating or mitigating circumstances, etc.). The courts have ruled that the Competition Council, having assessed all the individual circumstances of the case, has a wide discretion to choose the most appropriate amount of the fine provided for in the Law on Competition.

The intended concentration must be notified to the Competition Council and cleared if the combined total revenues of the undertakings involved in the concentration in the last year before the merger exceed EUR 20 million and the combined total revenues of each of at least two undertakings involved in the concentration in the last year before the merger exceed EUR 2 million.