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THE COMPETITION COUNCIL EXPECTS THE OBSERVER TO BE PROACTIVE IN THE PRESS DISTRIBUTION MARKET

02 12 2008

The Competition Council hereby informs that in view of a number of issues that have arisen in the press distribution market the economic entities whose interest may be infringed should without delay apply to the appointed independent observer - KPMG Baltics, UAB.

To ensure the fulfilment of the obligations and conditions imposed upon the Finnish company Rautakirja Oy by the Competition Council following the acquisition by  Rautakirja Oy of the press distribution enterprise Impress Teva, UAB and kiosk network of the Lietuvos spauda and, with a view to facilitating the resolution of any possible disputes between the publishers and the distributors an efficient proactive performance of the independent observer and the timely performance of the functions imposed upon it have acquired a specific importance.

The supervisory function was assigned to the independent observer KPMG Baltics UAB with a view to facilitate an effective fulfilment of the obligations imposed by the Competition Council and a speedy resolution between publishers, publication houses, Impress Teva, UAB and (or) the Vilnius agency of Lietuvos spauda, UAB. An important requirement in this respect prohibited the parties from terminating the earlier concluded (valid) press distribution agreements pending the resolution of a dispute.

The observer is obligated, following an agreed schedule and procedure, to draw up reports on the fulfilment of the imposed obligations and the actions performed in that respect, also on the course of dispute resolution, and, where so requested by the publication suppliers, provide to them the reports in writing.

The Competition Council has been also monitoring the situation in the market and, where necessary, taken any required measures – thus this November Rautakirja Oy was subjected to a fine of LTL 70,000 for the infringement of some of the obligations and conditions attached to the concentration authorisation.

For reference, in December 2007, when granting the authorisation to  Rautakirja Oy  to acquire a 100 percent holding in Impress Teva, UAB, the Competition Council attached to the authorisation appropriate requirements and obligations thus seeking to control the operations of Rautakirja Oy in the wholesale publications distribution market and ensure that the entities in the market act following the competition rules.

One of the major obligations imposed in this respect was the requirement to ensure that the publication distribution activity and trade in kiosks are performed through two individual and independent enterprises. Enterprises of the Vilnius agency group of Lietuvos spauda, UAB were to engage in retail trade in kiosks, and Impress Teva, UAB was the entity to engage in the publication distribution business, while ensuring that the Vilnius agency of Lietuvos spauda UAB is open to all suppliers of publications irrespective of the publications distribution channel (directly, or via Impress Teva, UAB).

The relevant Resolution of the Competition Council obligated Rautakirja Oy to implement a system of commission remuneration that is non-discriminatory, transparent and equitable in respect of all publishers, and based on the criteria specified in the relevant Resolution of the Competition Council. Furthermore, publishers were to be granted a right at their own initiative to terminate the distribution agreements with the enterprises of the Vilnius agency of Lietuvos spauda, UAB or Impress Teva, UAB upon a prior one to three months notice without being subjected to any economic sanctions for the termination.

Enterprises of Rautakirja Oy were prevented by the Competition Council from including into the agreements with retailers and publishers any exclusive press distribution terms; the distribution network operated by Impress Teva, UAB  was to be open to all publishers irrespective of their size and distribution volumes; further conditions included an obligation not to discriminate publishers in respects of one another and ensure that other publishers are not discriminated in relation to  those that belong to Rautakirja Oy group.

The Competition Council has established the terms and conditions for the fulfilment of the obligations, the terms for the extension or amendment of such terms, and has indicated that the failure to fulfil the obligations or to comply with the terms of concentration may incur the liability provided in the Law on Competition.

Competition Council Spokesperson