Kaupo Lepasepp Partner kaupo.lepasepp@sorainen.com
	Piibe Lehtsaar Associate piibe.lehtsaar@sorainen.com
	Mari Matjus Associate mari.matjus@sorainen.com

Extensive amendments to the Competition Act entering into force on 15 July 2013 will affect almost all areas regulated by the Act, from the definition of undertaking to the list of misdemeanours. Of all the provisions of the Act, only those relating to state aid and unfair competition are completely untouched by the current changes. As the Competition Act amendments have an impact on all economic operators, we have prepared this selective summary of the most significant changes.

The single most negative issue for undertakings in this package of amendments to the Competition Act and related acts may be the extension of the limitation period for competition-related misdemeanours from two years to three, in line with tax misdemeanours. On the positive side, the Competition Authority will be authorised to approve competition-improving obligations voluntarily assumed by companies and to terminate proceedings without issuing a definitive opinion on supposed violations.

Read more about specific amendments:

• Extension of the limitation period for competition misdemeanours
• Clarification on the possibility to treat a group as a single undertaking
• Having special or exclusive rights ceases to be automatically considered a dominant position
• Permissions to concentrate to be valid for a limited term
• Competition Authority to be entitled to swifter intervention for competition law violations
• More possibilities for terminating proceedings
• Natural persons can be punished for obstructing state supervision
• Competition law aspects of the Electronic Communications Act amended
• Elements of a criminal anti-competitive agreement clarified in the Penal Code

Extension of the limitation period for competition misdemeanours
The limitation period for competition misdemeanours is extended from two to three years. This means fewer cases of undertakings escaping sanctions due to the expiry of misdemeanours. This extension will affect, eg, first-time abuse of a dominant position plus enforcement of concentrations without the Competition Authority’s prior permission.

Clarification on the possibility to treat a group as a single undertaking
The Competition Act definition of undertaking is amended to remove the reference that undertakings can be treated as one only if there is no competition between them. According to the explanatory memorandum, it is unlikely for undertakings linked by a control relationship (i.a. undertakings belonging to the same group) to be competing with each other. It should be noted, however, that the amended definition does not prevent treating undertakings linked by a control relationship as separate undertakings if indeed they do compete with each other.

Having special or exclusive rights ceases to be automatically considered a dominant position
As for more specific issues, the Competition Act’s regulation of undertakings with special or exclusive rights will undergo thorough changes. First of all, the statutory presumption that undertakings enjoying special or exclusive rights are automatically in a dominant position will be deleted. Secondly, the Competition Act restrictions on undertakings enjoying special or exclusive rights, such as the right of a state or local government body to establish their prices, will be lifted. Only the accounting separation obligation will remain.

Furthermore, starting from 1 January 2014 public competitions for granting a special or exclusive right will no longer be held under a regulation of the government, but normally in accordance with the concession granting procedure set out in the Public Procurement Act. In essence, this removes one of the duplicate selection procedures. In practice, the procedure established by a government regulation was mostly used for granting special or exclusive rights for waste transport prior to 1 January 2011, when the system was transferred under the Public Procurement Act.

Permissions to concentrate to be valid for a limited term
As a new requirement in the field of concentration control, concentrations must be implemented within six months from the entry into force of permission. The Competition Authority may extend this deadline once, to one year. In the case of concentration transactions with numerous contractual preconditions which may require a long time to achieve, this new requirement may lead to a risk of having to apply for a new authorisation. According to the explanatory memorandum, delays of more than one year may cause the Competition Authority’s previous assessment of the effect of concentration on the goods market to become obsolete, thus mandating a new procedure.

The Competition Act clearly provides that permission to concentrate will be considered to include permission to apply restrictions on competition which are directly related to and necessary for the implementation of the concentration. However, the Competition Authority is still not required to assess whether a given restriction is directly related to and necessary for the implementation of the concentration.

Proceedings concerning concentration will be suspended for up to two months if the obligations which an undertaking proposes to assume require further analysis or if the parties involved in the concentration are willing to amend or improve these obligations. Obligations may include an undertaking not to limit the product range or not to increase prices during a certain period. The explanatory memorandum refers to proceedings in the case of Eesti Post and Express Post which ended with a decision to prohibit concentration. It is alleged that the Competition Authority simply did not have enough time to analyse the obligations proposed by Eesti Post.

Competition Authority to be entitled to swifter intervention for competition law violations
In cases of urgency, the Competition Authority may on its own initiative issue a precept to perform a certain act or refrain from an illegal act if it sees the risk of serious and irreparable damage to competition. This type of interim measure is only possible for violations related to European Union competition law. Violations of a purely domestic nature may not be addressed by precepts.

The right to issue interim precepts is based on a European Union regulation, but as the European Commission has never invoked this right, its active use by the Estonian Competition Authority should not be anticipated either.

More possibilities for terminating proceedings
The Competition Authority will be authorised to terminate violation proceedings in an increasing number of cases without issuing a definitive opinion on the supposed violation. Proceedings may be terminated if, eg:

• the undertaking has assumed an obligation;
• the circumstances described in the application refer to an essentially civil law dispute involving no apparent risk of damage to competition; or
• the undertaking has ended the activity addressed by the proceedings and there is no need for a precept.

At this point, it would be appropriate to further describe the assumption of obligations by an undertaking, a concept based on the example of the European Union regulation. In the future, an undertaking that does not wish to wait for the Competition Authority to decide whether a violation existed or not may propose obligations which it would be willing to assume to improve the competitive situation and mitigate the negative effects of the violation under investigation. If the Competition Authority approves the proposed obligations, proceedings may be terminated without a decision on whether a violation occurred or not. This option may be in the interest of both the undertaking and the Authority.

Assuming obligations and the resulting possibility to terminate proceedings is foreseen for violations of both European Union and Estonian competition law. Furthermore, performance of obligations approved by the Competition Authority is mandatory for an undertaking. For example, in March 2013 the European Commission imposed a fine of 561 million Euros on Microsoft for failing to comply with obligations it assumed in 2009.

Natural persons can be punished for obstructing state supervision
Until now, the wording of the Competition Act permitted only legal persons to be fined in misdemeanour proceedings for refusal to submit or failure to submit on time documents or information necessary for state supervision or submission of false information to the Competition Authority. From now on, natural persons may also be punished for this misdemeanour by a fine of up to 1200 Euros, or by arrest.

Competition law aspects of the Electronic Communications Act amended
Reference to special or exclusive rights in the meaning of the Competition Act will be deleted from the Electronic Communications Act. According to the explanatory memorandum, communications undertakings with special or exclusive rights in communications services or related fields do not exist in Estonia. The ban on providing cable network services for communications undertakings providing network services and meeting certain conditions (especially undertakings in a dominant position or holding special or exclusive rights) will also be removed from the Electronic Communications Act.

Elements of a criminal anti-competitive agreement clarified in the Penal Code

The purpose of these amendments is to exclude the possibility to interpret the elements of the criminal anti-competitive agreement in the Penal Code as covering only the fact of concluding an agreement or adopting a decision and not the agreement itself or its implementation. In short, this harmonises the description of anti-competitive cooperation, as provided in the Competition Act and the Penal Code, and clarifies that both conclusion and fulfilment of anti-competitive agreements are punishable under the Penal Code.