On 1 November 2020, important amendments to the Competition Law (‘the Law’) came into force in Lithuania, further increasing the need for businesses to prevent infringements.
Greater liability for all infringements of the Law and significantly increased fines can potentially lead to the termination of businesses.
The amendments are relevant to companies operating in any business sector and at any level of trade or production. They are relevant to all companies, regardless of their size.
All actions completed before 1 November 2020 will still be assessed under the old rules; practices, that started before the law came into force but continue after that, will be assessed under the new rules.
We are highlighting amendments to the Law related to stricter liability that are vital for businesses to pay attention to.
Joint liability of group companies for competition law infringements
Companies in the same corporate group as an infringing company (eg parent companies) could be found jointly and severally liable for an infringement. Joint liability could apply solely because companies belong to the same corporate group – it is not necessary to prove that the other companies knew about the infringement or encouraged certain actions.
Joint liability for the infringement in this case also means the obligation to pay the fine imposed by the Competition Council. This obligation would also be transferred to successors to the rights and obligations of the infringer.
The amendments are also intended to avoid situations where companies escape fines by transferring their activities to other companies or through corporate restructuring.
The maximum fine for an infringement in Lithuania will be capped at 10% of worldwide turnover
Until now, the Lithuanian Competition Council has imposed fines not exceeding 10% of an undertaking’s turnover in Lithuania. From now on, fines for a violation committed in Lithuania can be assessed according to the income of the whole group of companies in all countries throughout the world.
Fines for associations and consortia
Fines for associations and consortia will not be calculated on the basis of their turnover but on the turnover of members or participants. If the associations or consortia cannot pay the fines imposed for infringements of competition law, the fines will have to be covered by members of associations and participants in consortia.
Fines ‒ payment terms
Fines must be paid to the state budget within 3 months from a decision by the Competition Council, unless the decision is appealed to a court and the undertaking concerned provides the Competition Council with a financial guarantee or suretyship insurance to cover the fine.
In addition, infringements of competition law can have other negative consequences
- the Competition Council may require company reorganization or sale ‒ of the company, property, or shares
- possible personal liability of managers (a fine of EUR 14 500 and a ban on holding a managerial position for 3-5 years)
- possible disqualification of companies from public tenders for up to 3 years
Preventive compliance measures
Infringements of competition law are often committed due to lack of knowledge of applicable rules. In order to address the risks of competition law infringements in a timely manner and to avoid significantly increased fines in the future, we recommend the following competition compliance measures:
- conducting an internal audit of company agreements, documents and employees’ correspondence;
- developing and implementing a robust competition law compliance programme to meet company needs;
- conducting interactive and sector-specific competition law training for employees.