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THE VILNIUS CITY MUNICIPALITY OBLIGATED TO REPEAL THE RESOLUTION INFRINGING THE LAW ON COMPETITION

01 04 2010

The Competition Council passed the Resolution whereby the authority recognised that Items 1 and 3.1 of Resolution No. 1-1342 of 20 September 2006 of the Council of the Vilnius City Municipality "On the obligation to the private company Grinda to provide the mandatory services" infringe the requirements of Article 4 of the Law on Competition. The Vilnius City Municipality was obligated within the established period (3 months) to repeal the Items of its Resolution recognised as infringing the requirements of the Law on Competition and terminate the contracts on the provision of compensated services concluded between the Vilnius Municipality and UAB Grinda.

The Competition Council initiated the investigation in response to the application of the Special Investigation Service of the Republic of Lithuania to assess the compliance of the Resolution of the Council of the Vilnius Municipality with the requirements of the Law on Competition.

The investigation established that the Resolution of the Municipality obligated UAB Grinda to provide the services referred as mandatory services – street maintenance in winter, maintenance and operation of rain discharge networks, localisation of emergency situations on streets, operation of sand, snow and soil landfills, mechanised cleaning and washing of part of streets, care for stray animals, organisation of quarantine and euthanasia, and the provision of special sanitary services.

The Competition Council concluded that the Vilnius Municipality, having decided, without announcing a tender or other procedure ensuring competition between undertakings, to procure public services from UAB Grinda, distorted competition conditions in the relevant markets and created dissimilar competition conditions for undertakings operating in the markets concerned.  By its Resolution the Municipality placed one undertaking in an advantageous position in respect of others, as the undertaking concerned was provided conditions without any competition to occupy certain share of the relevant markets and receive regular revenues.

Article 4 of the Law on Competition prohibits discrimination that creates or may create different competition conditions for undertakings competing in a relevant market.

The granting of exclusive rights to a single undertaking within the territory of the city of Vilnius deprived other undertakings to enter the market or forced them to withdraw from such markets. Thus the undertakings that had been granted the exclusive rights faced virtually no competition. Furthermore, such undertaking is expressively privileged in respect of other undertakings, as it is provided the exclusively advantageous conditions to operate in the relevant markets, although more undertakings operate or could/would operate in the same markets and had confirmed to the Competition Council their interest in providing such services.

Thus, the Resolution and the subsequent contracts concluded on the basis thereof prevented other undertakings from operating in the relevant markets to offer their services. When passing the decision the Municipality failed properly assess the fact that the service markets able to meet the Municipality‘s needs were competitive and undertakings should complete for the right to provide the services procured by the Municipality. The Municipality could not produce to the Competition Council any evidence that the Municipality had assessed the possibilities of other undertakings to provide the services, which led to the conclusion that the Municipality failed to fulfil its duty to ensure that the decision passed thereby would not restrict competition.

The investigation included a thorough analysis and assessment of legal provisions governing the area and the alternative solutions available to the Municipality when organising the provision of public services provided for in the Law on Local Self-Government. The Competition Council also took into consideration the new version of Article 10(5) of the Law on Public Procurement that had come into effect on 2 March 2010. In the opinion of the Competition Council when performing its functions the Municipality is to follow the provisions of not only the Law on Self-Government, but equally those of other laws, including the Law on Competition and the Law on Public Procurement. No legal acts entitle the Municipality, in circumvention of other laws at its own discretion and unilaterally to select any single undertaking to carry out the public areas maintenance works.

Competition Council Spokesperson