NEWS

2012-12-20

The Competition Council fined for the restriction of competition

Today, the Competition Council  imposed a fine of over 57 mln Litas on the safety service “G4S Lietuva” (hereinafter – G4S) and three major Lithuanian banks – AB DNB Bank, AB SEB Bank, and Swedbank AB (hereinafter jointly – the Banks) for agreements that unreasonably restricted capabilities of G4S competitors to operate in cash handling and collection services markets.
The Banks were committed to purchase all cash handling services from G4S, thus, capabilities of other cash handling service providers to compete were significantly restricted. During the term of the agreements (from 3 years and 2 months to 5 years and 3 months), the Banks were deprived of access to G4S competitors’ offers, even if they might provide cash handling services at more favourable terms and conditions. It is worth mentioning that cash-handling costs, incurred by the Banks, were eventually borne by consumers by paying the Banks for cash withdrawals from ATMs, currency exchange, and other cash transactions.
Provision of cash handling services to the Banks is closely related to money collection services rendered to the Banks’ clients (companies). These circumstances resulted in damage caused by the said agreements to the Banks’ clients, since the Banks’ rules restricted their options for other than G4S cash collection service provider and taking advantage of the benefits of competition.
Competition among sellers of goods or providers of services obliges them to compete for clients and offer them as much better prices and quality as possible. Therefore, corporate practices, that restrict buyers’ options to purchase goods or services from competitors, in case such practices cover large market shares and lasts for a long time, are damaging for buyers and may also lead to forcing out of competitors and to the decrease in competition, or even, its complete elimination.
After evaluation of the investigated circumstances, the Competition Council have stated that such practices of G4S and the Banks violate Article 5 of the Law on Competition which prohibits agreements restricting competition. Moreover, given the nature and extent of the practices, the agreements were acknowledged to have affected a trade between EU Member States, thus violating the provisions of Article 101 of the Treaty on the Functioning of the European Union.
The Competition Council has imposed fines, totalling to over 57 mln Litas, to G4S and the Banks for the agreements that restricted competition. The fines were established given the fact that the agreements covered great shares of the cash handling and collection market and lasted for quite a long time – from 3 years and 2 months to 5 years and 3 months. When imposing fines on the Banks, the Competition Council has considered the fact that the Banks’ actions had restricted their clients’ choice for a collection service provider and purchasing collection services at competitive prices.
The following fines were imposed on the companies for agreements restricting competition:
- JSC “G4S Lietuva” - 9,437,800 Litas;
- AB DNB Bank - 8,630,200 Litas;
- SEB Bank - 24,808,200 Litas;
- AB Swedbank - 14,243,600 Litas.
The estimated amount of fine of “G4S Lietuva” was almost three times higher than imposed, however the fine was reduced to 10 per cent of the company’s gross annual income, as the maximum fine to be imposed for breaches of the Law on Competition.
The obligation to stop anticompetitive practices was not prescribed to the Banks and G4S, since, upon coming of the investigation to the end, these practices were stopped.

“Transparency is a prerequisite for our business, so, I welcome the resolution of the Competition Council. I believe that the execution of this resolution will contribute to a faster development of cash handling and collection services in Lithuania.
The agreement of the three major Lithuanian banks and the company “G4S Lietuva” impeded the growth of other service providers in this market. For example, the safety service “Eurocash1” has invested nearly 8 million Litas to the cash handling and collection services infrastructure over the last three years. However, the said agreements of other market players did not allow us to fully utilize our capabilities.
I hope the situation will change, while the growing competition in the market will benefit, in particular, businesses that purchase cash handling and collection services,” says EUROCASH1 Director Vytautas Labeckas.


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