Merger Control In Lithuania 2010

Article by Marius Juonys and Laura Slepaite Legislation and jurisdiction 1 What is the relevant legislation and who enforces it? The first legislation establishing merger control in Lithuania was the 1992 Law on Competition (the Law on Competition). By the amendment of 15 April 2004, which entered into force on 1 May 2004, the Law on Competition has brought the merger control regime, found in section III (articles 10 to 15), closer to the EC model. The latest amendments to section III adopted on 9 April 2009 did not bring any material changes to the Lithuanian merger control regime but rather clarified some wording used in the Law. A more detailed regulation of concentrations is in Resolution No. 45 of 27 April 2000 of the Competition Council on the approval of the procedure for submission and examination of notification on concentration and of calculation of aggregate turnover (the Merger Regulation).

The authority responsible both for implementing the Law on Competition and for overall competition policy is the Competition Council (the Council). In addition, the Council can perform state aid monitoring and other functions assigned to it by other legislation. The Council undertakes control of concentrations, conducts investigations into concentration cases and can either prohibit or permit concentrations.

The Council's resolutions in merger cases may be challenged before the Vilnius district administrative court. Decisions of the latter may be appealed to the Supreme Administrative Court of Lithuania.

2 What kinds of mergers are caught? The Law on Competition introduces a concept of 'concentration' that includes, but is not limited to, mergers. Article 3 of the Law on Competition defines a 'concentration' as:

a merger, in which one or more undertakings which terminate their activity as independent undertakings are joined to the undertaking that continues its operation, or when a new undertaking is established from two or more undertakings that terminate their activity as independent undertakings; or acquisition of control, when one and the same natural person, or the same natural persons, that exercise control over one or more undertakings (or an undertaking or several undertakings), acting on the basis of an agreement, jointly create a new undertaking or gain control over another undertaking by acquiring an enterprise or a part thereof, or all or a part of the assets of an undertaking, or shares or other securities, voting rights, or by concluding contracts or in any other manner. 3 Are joint ventures caught? The creation of a joint venture (both full-function and non-full function) resulting in a joint acquisition of control over an existing or newly established undertaking on a long-lasting basis is covered by the second part of the definition of the concept of 'concentration'.

4 Is there a definition of 'control' and are minority and other interests less than control caught? Under the provisions of the Law on Competition the term 'control' means any rights arising from laws or contracts that entitle a legal or natural person to exert a decisive influence over the activity of the undertaking, including:

ownership or the right to use all or part of the assets of the undertaking; and other rights that confer a decisive influence on the decision-making or the composition of the undertaking's managing bodies. According to the Law on Competition, a 'decisive influence' exists where the controlling person implements, or is in the position to implement, its decisions regarding the economic activity or the decision- making or the composition of the managing bodies of the controlled undertaking.

Following the accepted interpretation of the Law on Competition, the acquisition of 25 per cent or more of votes or assets in an undertaking may be considered an acquisition of control. However, this presumption may be rebutted on a case-by-case basis. On the other hand, acquisition of less than 25 per cent of votes or assets might also fall within the definition of control, if such a minority interest holder could be shown to have a decisive influence. Therefore there is no exact percentage shareholding below which it is safe to assume that control will not arise in the absence of other structural links between the parties. To the best of our knowledge, the lowest shareholding that has been found to amount to control was 20 per cent.

5 What are the jurisdictional thresholds? Under the provisions of the Law on Competition, the Council must be informed of the intended market concentration and its permission must be obtained when the combined aggregate turnover of the undertakings concerned is more than 30 million litas in the last financial year prior to concentration, and the aggregate turnover of each of at least two undertakings concerned is more than 5 million litas in the last financial year prior to concentration.

The Council has the right control concentrations that fall below the above-indicated turnover thresholds. The Council may, within 12 months after the implementation of a concentration, request merging parties to file a notification if it is likely that a concentration falling below the jurisdictional thresholds will create or strengthen a dominant position, or result in a significant impediment to competition in the relevant market. This alternative means of exercising jurisdiction was designed to address competition concerns in so-called 'small markets', where turnover figures of firms with significant market power are below the level that would allow the competition authority to claim control over concentrations under the thresholds mentioned above. The Council uses this right on average for one to two cases per year.

6 Is the filing mandatory or voluntary? If mandatory, do any exceptions exist? All concentrations of undertakings exceeding the turnover thresholds defined above must be notified to and receive approval from the Council.

A concentration shall not be deemed to arise where commercial banks, other credit institutions, intermediaries of public trading in securities, collective investment undertakings or management companies and insurance companies acquire 25 per cent or more of the shares with a view to disposing of these shares in the future, provided that:

they do not exercise voting rights in respect of those shares; disposal of shares takes place within one year of the date of acquisition; and the acquiring undertaking informs the Council about such acquisition within a one-month period. 7 Do foreign-to-foreign mergers have to be notified and is there a local effects test? Article 2(2) of the Law on Competition expressly states that the Law on Competition shall also apply to the activities of undertakings registered beyond the territory of Lithuania if such activities restrict competition in the internal market of Lithuania. Accordingly, Lithuanian merger control rules apply to all concentrations that fall within the turnover criteria described above, irrespective of where a concentration takes place and whether the parties concerned have any subsidiaries or activities in Lithuania. Notably, however, if a party to a concentration is an undertaking of a foreign country, its aggregate turnover is calculated as the sum of income received from the sale of its products in...