Antitrust law in Estonia

The European legal systems do not commonly use term antitrust law; instead it defined as competitive law. Rules and regulations on competition in Estonia are provided in the Competition Act adopted in 2001. This, however, is not the only legislation regulating on the competition law as the European Union also has primary and secondary legislation on the matter. Most importantly, the issue is regulated in the Articles 101, 102 and 107 of the Treaty on the Functioning of European Union (TFEU). Secondary legislation includes regulations such as Council Regulation (EC) No 1/2003 and 139/2004. The competition law regulations can be divided to four pillars: Anti-competitive agreements, Abuse of dominant position, Mergers and State Aid. It should be noted, that the Estonian legislators working on the Competition Act were following the EU competition legislation and guidelines issued by the European Competition board were also partly implemented and are applied while handling specific competition violation cases.

Prohibition on agreements, concerted practices and decisions by associations of undertakings (i.e. anti-competitive agreements)

Prohibition concerns agreements, concerted practices and decisions by associations of undertakings that have as their object, purpose or effect any restriction of competition. The following activities are objects of such prohibition, having a negative effect on competition:

  • Directly or indirectly fixed prices or any other trading conditions, including prices of goods, tariffs, fees, mark-ups, discounts, rebates, basic fees, premiums, additional fees, interest rates, rent or lease payments applicable to third parties;
  • A limitation of production, provision of services, goods markets, technical development or investments;
  • Share of relevant goods markets or sources of supply. Also included here are restrictions on access for the third party to a goods market in question or any other attempt to exclude the person from such access;
  • Exchange on crucial information that might be restrictive to competition;
  • Agreeing on the application of dissimilar conditions to equivalent agreements, thus placing other trading parties at a competitive disadvantage;
  • Enhance an agreement that is subject to acceptance by the other parties, with supplementary obligations having no genuine connection to the subject of such agreement.

It shall be noticed that Estonian legislation is in accordance with European Union legislation the abovementioned prohibitions, with exception of price fixing, do not apply to agreements and practices of agricultural producers unless competition is substantially restricted by such agreements, practices or decisions. Furthermore prohibition on the basis of exchange of information, application of dissimilar conditions and supplementary non-relevant provisions do not apply to agreements, practices and decisions that can be considered to be of minor importance. The term “minor importance” can be taken into consideration if the combined market share of the total turnover of the undertakings in question does not exceed:

  • 15% for each party in the case of a vertical (undertakings operate at different levels of the production or distribution chain) agreement, practice or decision;
  • 10% in total for all parties of a horizontal (undertakings operate as competitors at the same level of the production or distribution chain) agreement, practice or decision;
  • 10% in the case of an agreement, practice or decision that includes concurrently the characteristics of vertical and horizontal agreements, practices or decisions.

Besides aspect of “minor importance” there are a number of exceptions regarding prohibitions of commercial activity with regard to distortion of completion. In the list below some of those exceptions including also a block exemption are stated:

  • Agreement, decision or activity contributes to improvement of the production or distribution of goods or to promoting technical or economic progress or to protecting the environment, while allowing consumers a fair share of the resulting benefit;
  • Agreement, decision or activity that does not impose on the undertakings which enter into the agreement, engage in the concerted practices or adopt the decision any restriction which are not indispensable to the attainment of the objectives specified in abovementioned clause
  • Agreement, decision or activity that does not afford the undertakings which enter into the agreement, engage in concerted practices or adopt the decision the possibility of eliminating competition in respect of a substantial part of goods market
  • Block exemption is a general permission granted by the regulation of the Government of the Republic on the proposal of the Minister of Economic Affairs and Communications to enter into certain types of agreements (most of them specified in the previous points) without a danger of restricting the competition.

An undertaking which enters into an agreement, providing a decision or an activity which might be restrictive to competition, can be subject to exemptions but shall also present proof concerning compliance with all the conditions set forth. In the case that an agreement or a decision or part thereof do not fulfill the conditions for exemptions and can be found as restrictive to competition shall be admitted as void.

Dominant position of the undertakings

In accordance with Estonian legislation an undertaking can be considered to have a dominant position if its position on the market enables it to operate to a considerable extent independently of competitors, suppliers and buyers. Thus a dominant position may be presumed if such an undertaking stands for at least 40% of the turnover in the relevant market. Furthermore, the situation of a dominant position may include several undertakings operating on the same market thus jointly creating an independent environment and accounting for at least 40% of the relevant market. 

The state or a local government may grant special and exclusive rights to an undertaking which enable the undertaking to have a competitive advantage over other undertakings in a goods market or to be the only undertaking in the market. The procedure of granting an artificial dominant position such as this is granted by the Government of Estonia. 

Furthermore, the dominant position of an undertaking might be determined by its ability to control an essential facility. This means that where an undertaking possesses or operates a network, infrastructure or any other essential facility without access to which or the existence of which it is impossible to operate in the relevant market and this essential facility cannot be or is substantially difficult or costly to duplicate, the undertaking can be considered to have a dominant position.

Having a dominant position itself is not prohibited, but the abuse of such dominant position on the other hand is. This abuse can be direct or indirect abuse. Such an abuse may often include the following:

  • Directly or indirectly establishing or applying unfair purchase or selling prices or other unfair trading conditions;
  • Limiting production, service, goods markets, technical development or investment;
  • Offering or applying dissimilar conditions to equivalent agreements with other trading parties thereby placing some of them at a competitive disadvantage;
  • Making the entry into agreements subject to acceptance by the other parties of supplementary obligations which have no connection with the subject of such agreements
  • Forcing an undertaking in a disadvantageous position to enter into agreement;
  • Unjustified refusal to sell or buy goods or provide services.

Control of mergers

Pursuant to Estonian legislation mergers (Estonian legislation has a slight linguistic difference using the term concentrations) usually arise in the cases where one or several undertakings jointly acquire control over whole or a part of another undertaking. Furthermore, it is possible for a natural person already being a part of an undertaking to acquire control through an enhanced partnership. Legal aspects of mergers are governed by the provisions in the Estonian Commercial Act. 

Competition legislation requires that a merger is subject to a Competition Board control. Yet the merger shall not be a subject of the Competition Board control in case it is controlled pursuant to Council Regulation 139/2004/EC on the control of mergers between undertakings unless appointed otherwise. 

Estonian competition legislation sets out the requirement to notify the Competition Board of the relevant merger procedure before entry into force of the latter in case the conditions in the previous paragraph are fulfilled. Such a notification shall be submitted in writing and shall contain the following:

  • Information on parties of the merger;
  • A description of the merger;
  • Data concerning turnovers;
  • Information concerning exercised control or owned holdings;
  • Information concerning relevant markets;
  • Objective description of the effect of merger on the relevant market;
  • Information concerning associations of undertakings (where parties are members);
  • Restraint of trade clauses;
  • List of other competition authorities notified;
  • Any other necessary information concerning aspects of the merger in question.

Finally it is important to bear in mind that the Director General of the Competition Board or his or her deputy may decide to revoke a decision to give permission to merge if false or misleading information is found in the submitted documents, or if legal provisions are violated during the merging procedure. Yet it does not deprive the parties of the right to submit a new application or appeal the decision of the Director General.

Unfair competition

There is a clear and definite prohibition of unfair competition in Estonia. Legislation dictates that unfair competition arises in cases of dishonest trading practices and acts which are contrary to good morals and practices. This may also include the following:

  • Publication and presentation of misleading information;
  • Disparagement of a specific competitor or its goods or services;
  • Misuse of confidential information obtained;
  • Misuse of an employee or a representative of a competitor.

It might be useful to observe that in cases where misleading, offensive or derogatory information is applied as a method of advertising, prosecution shall follow in accordance with the Advertising Act. Otherwise the existence or absence of unfair competition shall be determined in a dispute between parties in accordance with civil procedure.

To find out more about antitrust law in the Baltics, please contact our lawyers at info@gencs.eu.

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