THE COMPETITION COUNCIL HAS DENIED LIT EGG'S ACQUISITION OF GIRELĖS PAUKŠTYNAS

The company Lit Egg will not be able to acquire the egg production business of the Girelės paukštynas poultry farm and the agricultural company Nematekas, along with the real estate necessary to administer the business. The Competition Council did not grant permission for this transaction, determining that implementing the concentration would create or strengthen a dominant position or significantly impede competition in the market for the production and sale of eggs from hens kept on litter and in cages to supermarkets in Lithuania.

The main activities of the merging companies are the production and sale of hens' eggs, trading in hens and organic fertilisers. Balticovo, a Latvian company related to Lit Egg, is active in egg production in Latvia and sells part of its eggs in Lithuania.

The Authority received the notification of the proposed concentration between Lit Egg and Girelės paukštynas on 18 August 2023, but the companies planning the transaction failed to provide the Competition Council with all the requested information relevant for the assessment of the impact of the merger. Therefore, the notification of the proposed concentration is considered to have been received on 25 January 2024, when all the necessary information was submitted.

In order to determine whether the implementation of the transaction would lead to negative effects on competition in the egg production and wholesale markets, the Competition Council carried out a detailed economic analysis: it assessed the market shares and competitive closeness of the parties to the transaction, the ability of customers to switch suppliers, the ability of competitors to increase supply, the buyer's compensating power, whether the merger eliminates an important competitive force, etc.

The Authority sought and received comments not only from the merging parties and their competitors, but also from the retailers who buy and sell products supplied by the merging parties to end users.

Having analysed the responses received and the data collected, the Competition Council has found that the egg production and wholesale market in Lithuania is highly concentrated, and that the parties to the transaction are important competitors. The merger would have an adverse effect on competition as Girelės paukštynas is a significant competitive force and the fastest growing company in the market. The acquisition of such a competitor would further increase the concentration in the sector, with the merged companies becoming the largest player with a market share of more than 50 % in the cheapest egg segment, at least one and a half times higher than its nearest competitor.

An analysis conducted by the experts of the institution revealed that both Girelės paukštynas and Balticovo actively compete by offering egg sales price proposals in tenders announced by major retail chains in Lithuania. In the absence of Girelės paukštynas participation in these tenders, other companies would experience reduced competitive pressure, potentially leading to an increase in the overall level of egg prices in the tenders. This would ultimately result in higher prices for consumers.

"Our experts collected data from retail networks confirming that price is the most important criteria for the majority of consumers when choosing eggs. We see a risk that if two market participants, one of whom offered possibly the lowest prices, merge, competition could significantly decrease, leading to potential increase in egg prices. Additionally, entering the market as a new player would be challenging due to the high investment requirements," said Jolanta Ivanauskienė, Chairwoman of the Competition Council.

The parties to the transaction, upon reviewing the conclusions regarding potential adverse effects on competition, provided feedback and additional arguments to the Competition Council. However, the institution did not change its conclusions.

Having assessed all the gathered information and circumstances, the Competition Council decided not to grant permission for the concentration whereby Lit Egg would acquire the egg production business of Girelės paukštynas and gain sole control over it, along with acquiring the real estate of the agricultural company Nematekas necessary for operating and administering the business.

A non-confidential version of the Competition Council's decision (in Lithuanian) is published on the institution's website.

The decision can be appealed to the Regional Administrative Court within one month from the date of its delivery or publication on the institution's website.