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THE COMPETITION COUNCIL FINDS AB MAŽEIKIŲ NAFTA TO HAVE VIOLATED LAWS

22 12 2005

The Competition Council pronounced its resolution adopted following the completion of the investigation on the compliance of actions of AB Mažeikių nafta with the requirements of the Law on Competition of the Republic of Lithuania and Article 82 of the Treaty establishing the European Community. Having examined the facts and circumstances established in the course of the investigation the Competition Council recognised that AB Mažeikių nafta had violated Article 9 of the Law on Competition on the prohibition to abuse a dominant position. The Competition Council also concluded the infringement of Article 82 of the Treaty establishing the European Community. This is the first ever case after the accession of Lithuania to the European Union in May 2004 and the enforcement therein of the European competition rules, that a Lithuanian company has been acknowledged to have abused its dominant position in a part of the common market of the European Union and by its actions affected trade between Member States. AB Mažeikių nafta was obligated to discontinue the restrictive practices. In view of the established infringements and acting according to the Rules concerning the setting of the amount of a fine, the Competition Council imposed upon AB Mažeikių nafta a fine of LTL 32 million.

The investigation was initiated in July 2004 with a view to establishing whether actions of AB Mažeikių nafta in the period between 2002 and 2004 could have caused the gasoline and diesel fuel prices in Lithuania to be higher than those in other Baltic States, also whether the differences in fuel prices in Lithuania, Latvia and Estonia could have resulted from the possibly restrictive actions of the company.

The investigation established that the Lithuanian fuel prices higher than those in Latvia and Estonia were caused by objective reasons stemming from different conditions in different territories of the Baltic States market (excise conversion differences, the fuel reserve accumulation requirement effective in Lithuania, etc.), as well as the abuse of the dominant position by AB Mažeikių nafta in the market. Being a monopoly producer and the main supplier of oil products in the Lithuanian, Latvian and Estonian market in 2002-2004 AB Mažeikių nafta was dominating in the Baltic states gasoline and diesel fuel markets and was able to exert a unilateral decisive influence therein while concluding contracts and selling oil products. The company has not made operational any clear-cut and transparent pricing system or a uniform discount system applicable for identical fuel purchases in Lithuania, Latvia and Estonia. This affected the fuel purchasers in the three Baltic States who were placed at different competitive conditions. The trade between the Member States was affected because AB Mažeikių nafta was marketing the major part of its production in the Baltic States, besides, the Lithuanian purchasers would acquire fuels at higher prices than Latvian and Estonian buyers. Since the fuels were marketed in Lithuania at higher prices, damage was also incurred to Lithuanian oil product consumers.

The Competition Council concluded that AB Mažeikių nafta was abusing the dominant position by discriminating, while concluding similar contracts, the Lithuanian, Estonian and Latvian purchasers on territorial basis. AB Mažeikių nafta could affect the trade between Member States also by forcing the undertakings operating in the Lithuanian, Latvian and Estonian markets to conclude contracts concerning the purchase of the amount of oil products meeting the major demand of undertakings in oil products.

A range of actions restricting trade performed by AB Mažeikių nafta was also recognised as evidence of abuse of dominance. Those included restricted possibilities of the buyers to freely choose amounts of purchases and discounts, and efforts to protect the gasoline and diesel fuel markets from import and potential importers, by granting some inadequate rebates to UAB Lukoil Baltija, UAB Lietuva Statoil and UAB Neste Lietuva thus eventually discriminating other minor purchasers-wholesalers. AB Mažeikių nafta was operating some economically ungrounded rebate system under which minor wholesalers found it unsound to purchase oil products from AB Mažeikių nafta, since they could acquire the same products at lower costs from Lukoil, Statoil and Neste.

Having examined and assessed the above and other facts and circumstances established during the investigation the Competition Council concluded the infringement of both Article 9 of the Law on Competition of the Republic of Lithuania and Article 82 of the Treaty establishing the European Community. This is the third time during the recent years that the Competition Council is sanctioning AB Mažeikių nafta. In 2000, the company was sanctioned for the abuse of the dominant position, and in 2001 AB Mažeikių nafta was recognised to have infringed the requirements of Article 5 of the Law on Competition (prohibited agreements); in both cases the authority imposed sanctions upon the company. Although appealed by AB Mažeikių nafta, following the long-last litigation proceedings the court upheld the resolutions of the Competition Council.

Competition Council Spokesperson