THE LITHUANIAN ASSOCIATION OF COMMUNICATION AGENCIES AND ITS MEMBERS SANCTIONED FOR THE PROHIBITED AGREEMENT

The Competition Council adopted the resolution concerning the compliance with the requirements of Article 5 of the Law on Competition (on prohibited agreements) of actions of 25 private companies providing advertising and media planning services and the Lithuanian Association of Communication Agencies (KOMAA). Having considered the findings of the accomplished investigation and assessed the arguments presented by the companies suspected of the infringement the Competition Council acknowledged the actions by KOMAA and its members whereby they coordinated and applied a tender fee charged on companies announcing tenders for the procurement of advertising and media services to constitute an infringement of the Law on Competition and imposed upon them the appropriate sanctions.

The infringing companies were subjected to the following sanctions: the Lithuanian Association of Communication Agencies (KOMAA) – LTL 2,500, UAB Adell reklama – LTL 120,300; UAB AGE reklama – LTL 54,900, UAB Aukštaitijos reklama – LTL 11,100, UAB Baltic FCB – LTL 226,100, UAB Carat  – LTL 176,800, UAB Creative Media Services – LTL 307,100, UAB DDB Vilnius -  LTL 190,400, UAB Euro RSCG MIA – LTL 46,100, UAB Inorek & GREY – LTL 46,800, UAB Kredo R – LTL 25,400, UAB Leo Burnett Vilnius – LTL 7,500, UAB Media Bridge Vilnius & CO –LTL 88,900, UAB Media House – LTL 481,000, UAB Mediapool – LTL 188,500, UAB Milk Agency - LTL 60,600, UAB MPG Lietuva – LTL 150,500, UAB Not Perfect – LTL 134,500, UAB Omnicom Media Group – LTL 164,300, UAB Reklamos vizija – LTL 22,500, UAB SAN Vilnius – LTL 29,200, UAB Star Communications Worldwide – LTL 26,700, UAB Tarela – LTL 76,600, UAB VIA media – LTL 276,300, UAB Videvita Vilnius – LTL 60,300 and  UAB VRS grupė – LTL 417,200. The total amount of the fines imposed upon the undertakings was LTL 3.4 m. The Competition Council also obligated KOMAA and other companies that had committed the infringement to cease the illegal activity where such was still continued.

The investigation was initiated in February 2008 by the Competition Council on an ex officio basis with a view to analysing the activities of a number of companies related to the provision of advertising and media planning services. Having thoroughly assessed the findings of the accomplished investigation the Competition Council concluded that the common agreement (achieved during their meetings) of the members of KOMAA that unites the undertakings engaged in the relevant activities concerning a fixed-amount tender fee (LTL 3,000 plus VAT) could have possibly restricted competition between the thirteen major advertising companies, the nine major companies engaged in the media planning activity, as well as the three major agencies providing the services of both types. It was established that in 2003 KOMAA had introduced a fee for the participation in the tender in respect of the advertising agencies, and starting with 2004, the application of the fee was also agreed by the companies providing media planning services. The fixed tender fee was charged on the organisers of tenders for the procurement of advertising and media planning services. The Competition Council established that KOMAA and the companies, present or past members of the association in the period under investigation were coordinating their actions in relation to the participation in the tenders and the application of the relevant tender fee. In case of a refusal by a tender organiser to pay the required tender fee, with KOMAA intermediating and coordinating the actions of its members such tender organiser would be put under pressure in an attempt to force it to pay the fee. KOMAA was inviting all its members to act unanimously and indicate to tender organisers that KOMAA members may participate in the tender only provided they adhere to the established procedure and charge the tender fee upon tender organisers. The Competition Council noted that such fee could serve as guidance to other companies engaged in comparable activities. The tender fee was introduced and applied in relation to various tenders for the procurement of advertising and media planning services. In this connection an important factor is that even companies that joined KOMAA as members already after the agreement on the tender fee was made, did not express any disagreement with the specific decisions of the Association.

The essence of competition lies in the possibility for each undertaking acting independently to decide concerning its behaviour in the relevant market. Prices are to be considered one of the most important factors in competing therefore any decisions in this relation should be taken independently. In this particular case it is obvious that the companies acting as competitors in two relevant markets and the association established by them were communicating on the issue of the tender fee and stabled the fee at the meetings of the board of the association and the general meetings, therefore the decisions concerning the tender fee could not be passed independently. Furthermore, the established LTL 3,000 fee was applied in connection to tenders for advertising and media planning services irrespective of the type, scope, duration of the tender and any costs incurred by the agencies for the preparation of such tenders. On the basis of these and other relevant considerations the Competition Council concluded that the members of KOMAA being competitors in the relevant market for the provision of advertising and media planning services had directly imposed the tender fee with a view to establishing equal conditions for the participation in the tenders for the agencies which constitutes an infringement of the requirements of Article 5 of the Law on Competition. Article 5 of the Law on Competition stipulates that all agreements which have as their object the restriction of competition or which may restrict competition shall be prohibited and shall be void from the moment of conclusion thereof, including agreements to directly or indirectly fix prices of certain goods or other conditions of sale or purchase.

By adopting the resolution the Competition Council has no intent to suggest that undertakings are entirely prohibited to charge tender organisers a fee for the prepared tender proposals. Undertakings are entitled to protect the intellectual product they create and are under no obligation to give it away for no consideration, which, however does not mean they have a right to concert their actions in establishing a tender fee.

Having concluded an infringement of the Law on Competition and imposing the fines the Competition Council took into consideration certain circumstances extenuating the liability of the undertakings concerned. Due account was taken of the duration of the actions that constituted an infringement in respect of each individual entity. Another factor considered by the Competition Council was that in this particular case the competitors in the relevant market had agreed (and KOMAA was the organiser of the agreement and monitored its enforcement) not in respect of the final price for the provided advertising and media planning services, but rather in respect of the proposals submitted to the tenders, i.e., part of the total price of the tender. The amount of the established fine constitutes 1 percent of the total annual income of the undertakings for the year 2007, and in consideration to the extenuating circumstance the fine was reduced by 10 percent for some of them. Considering the complicated economic situation and being guided, in relation to the imposing of the fines, by principles of justice and proportionality, also assessing the amount of the fine established for the severity and the duration of the infringement the Competition Council additionally reduced the amount of the fine by 10 percent in respect of all infringing undertakings.