THE EUROPEAN COMMISSION AWAITS EXPLANATIONS FROM LITHUANIA REGARDING THE ADOPTED AMENDMENTS TO THE LAW ON COMPETITION

The European Commission (EC) has officially contacted several Lithuanian institutions, informing them that the amendments to the Law on Competition, which entered into force on 1 May of this year and significantly reduce fines for violations of competition law, may be contrary to the provisions of European Union (EU) law. The institutions have been asked to indicate within the next two months what actions the Republic of Lithuania intends to take to remedy the current situation.

The Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 (Directive) aims, among other things, to ensure that competition authorities under national law can impose effective, proportionate, and deterrent fines on undertakings that infringe EU competition rules. The Directive requires authorities, when calculating fines, to consider the gravity and duration of the infringement (so that the sanctions reflect the economic significance of the violation), while the maximum fine must not be less than 10% of total worldwide revenue.

As of 1 May, this year, amendments to the Law on Competition initiated by several business associations entered into force. Under these amendments, the basic amount of the fine calculated after the first stage for infringers is reduced to 50% of the maximum possible fine, i.e. from 10% to 5% of annual worldwide turnover.

In the EC’s opinion, following the changes to the national legal framework, the Competition Council may be hindered from exercising the powers granted to it under EU law to determine fines, namely to impose effective, proportionate, and deterrent fines.

Since, under the amendments to the Law on Competition, the new upper limit of the fine must be applied immediately after assessing the gravity and duration of the competition law infringement, these factors will no longer carry the same weight in the calculation. Therefore, according to the EC’s assessment, there is a risk that fines will no longer reflect the economic significance of competition law infringements, as required by the Directive. It is likely that, in many cases handled by the Competition Council, fines will be imposed that do not meet the requirements of effectiveness, proportionality, and deterrence. In addition, the deterrent effect normally ensured by the maximum statutory fine will be reduced. According to the EC’s preliminary assessment, such provisions of Lithuania’s legal framework may be incompatible with the Directive.

The EC has requested that the institutions provide responses within the next two months and indicate what actions the Republic of Lithuania intends to take to remedy the current situation.

It should be recalled that, during the consideration in 2025 of the aforementioned draft amendments to the law , the Competition Council warned lawmakers that reducing fines by half for serious infringements of competition law – such as agreements between suppliers and distributors on the prices of goods of significant importance to consumers, or cartel agreements between competitors – would limit the institution’s ability to apply the fine calculation criteria established under EU law and to impose deterrent sanctions. The Government also proposed that the Seimas not adopt the amended regulation.