Amendments to the Competition Act and Penal Code
02.08.2004
On 1 August 2004, the Competition Act and Penal Code Amendment Act entered into force. The necessity to amend the Competition Act arose out of the need to bring valid Estonian competition law into conformity with the law of the European Union upon joining the union.
Since Estonia joined the EU, the European Commission exercises supervision over certain matters related to competition in Estonia (matters relating to the entire community market). Below, you can find a short overview of the most important amendments.
- The definition of goods market is altered not to involve only Estonian geographical territory.
- The provisions concerning agreements of minor importance cease to extend to the limitation of production, service, goods market, technological development or investment, or sharing of goods markets or sources of supply, including restriction of access by a third party to a goods market or any attempt to exclude the person from the market. This means that such agreements are prohibited even if they do not exert significant influence on the goods market.
In the case of other agreements, agreements of minor importance are still allowed, but the extent of goods market affected is increased by 5 per cent. Therefore, agreements, practices or decisions are considered to be of minor importance if the combined market share of the total turnover of the undertakings which enter into the agreement, engage in concerted practices or adopt the relevant decision does not exceed 15 per cent in the case of a vertical agreement, practice or decision; 10 per cent in the case of a horizontal agreement, practice or decision; and 10 per cent in the case of an agreement, practice or decision which includes concurrently the characteristics of both vertical and horizontal agreements, practices or decisions.
- In the case of an undertaking in dominant position, a new notion has been introduced into the Competition Act - the notion of "collective dominance" known from the European law and denoting a situation when several companies collectively enjoy a dominant position within a market. The existence of collective dominance can be established on the basis of economic analysis and market structure analysis. Collective dominance is usually associated with joint exertion of market force by tacit coordination of market behaviour by two or more companies. The grounds for establishing collective dominance are the same as in the case of single dominance, but the market share is calculated as a total of the market shares of all undertakings jointly dominating the market.
- The new version of the Competition Act ceases to include a provision saying that block exemption does not apply to an undertaking in a dominant position within the market. The restrictions on resorting to block exemption have been set out in a Government of the Republic Regulation. Valid regulation on block exemption of vertical agreements sets out that in certain cases an undertaking in dominant position may also resort to block exemption. For instance, in the case of exclusive purchasing agreements, it is not the seller's market share that matters (the seller may be an undertaking in dominant position in some market, but the market share of the seller is not taken into account), but the market share of the exclusive purchaser (since the exclusive purchaser is the only one on a certain territory). Similarly, market shares are not important in the case of qualitative selective distribution system. Anyone who meets the qualitative criteria, may join the system - in this sense the market is free and the market shares do not count.
- A violation of competition rules does not always constitute a crime anymore, since the amendment establishes new necessary elements of a misdemeanour. A misdemeanour proceeding is commenced if criminal proceeding has been terminated due to lack of public interest or due to the fact that the violation is not material or the act was committed through negligence. A fine in the amount of up to 500,000 Estonian kroons is foreseen for legal persons in the case of abuse of dominant position within a market and agreements, decisions or concerted practices restricting competition. The same applies in the case of a violation of obligations of undertakings with special or exclusive rights or in control of essential facilities or failure to notify on time of concentration not restricting competition.
- Criminal punishments are still imposed, but on slightly different grounds than earlier. Criminal punishment is foreseen for abuse of dominant position within a market only in case of repeated offence, i.e., punishment for misdemeanour has already been imposed on the offender for the same offence. The same principle applies to concentration restricting competition and violation of obligations of undertakings with special or exclusive rights or in control of essential facilities. Section 400 of the Penal Code, which concerns agreements, decisions and concerted practices prejudicing free competition, was not amended. Therefore, criminal proceedings being carried out in the matter of abuse of dominant position are subject to termination and the Competition Board may decide on whether to commence misdemeanour proceeding with regard to the same violation or not.
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