THE COUNCIL OF THE PALANGA MUNICIPALITY WILL AMEND THE PROVISION CONTRADICTING THE LAW ON COMPETITION

The Competition Council in its meeting examined the findings of the completed investigation and recognised that item 1.2. of Resolution No. T2-122 of 26 July 2007 “On the fee for the lease of the State-owned land in 2007“ of the Council of the Palanga Municipality constitutes an infringement of the requirements of Article 4 of the Law on Competition. This Article of the Law on Competition establishes the duty of public and local authorities to ensure the freedom of fair competition. The Competition Council obligated the Palanga Municipality, within a period of one month, to amend the relevant provision of the Resolution by bringing it into line with the requirements of Article 4 of the Law on Competition.

The Competition Council initiated the investigation upon receipt of an application from Arja UAB. The applicant expressed a suspicion that the Resolution of the Palanga Municipality of 2007 establishing the framework for charging the rentals for the State-owned land, by virtue of its provisions eventually results in the creation of different competitive conditions for the undertakings operating in the same markets.

Having analysed the information and the explanations provided by the Palanga Municipality and the companies leasing plots of land in the territory of the Municipality, also the legal acts relevant for the investigation, the Competition Council resolved that the actions of the Palanga Municipality infringed the requirements of Article 4 of the Law on Competition. Item 1.2. of Resolution No. T2-122 of 26 July 2007 “On the fee for the lease of the State-owned land in 2007“ of the Council of the Palanga Municipality establishes in respect of the corporate land lessees different rates depending on whether or not the registered office of the lessee is within the territory of the Palanga Municipality. The different land lease rates (lower for the undertakings with the registered office within the territory of the Palanga Municipality) are based solely on the formal venue of the place of registration of the undertaking causes the ungrounded differences in the land lease rates for the undertakings operating in the same markets (e.g., accommodation services, catering and other services markets). Accordingly, as a result of the provision of the Resolution the undertakings whose registered offices are located outside the territory of the Palanga Municipality incur significantly higher costs irrespective of the nature of the activity of the company, seasonality, number of employees, and other quality and quantity criteria.

The land lease fee due according to the rates established in the Resolution is a constituent of the financial expenses of a legal person and affects its competitive abilities. When differentiated, the fee ensures advantageous conditions for operations for the companies registered in the territory of the Palanga Municipality. The assessment performed in the course of the investigation allowed a conclusion that the undertakings operating in the same market are charged different fees for the lease of the comparable value land, and that directly affects the economic status of the companies and, as a result, the conditions of competition between the undertakings registered within and beyond the territory of the Palanga Municipality.