Today the Lithuanian competition authority Konkurencijos taryba refused to clear the acquisition of 100 per cent of the shares and sole control of the Lithuanian company Baltic Mill by the Latvian firm Dobeles dzirnavnieks. The authority found that the merger would create or strengthen the dominant position or significantly restrict competition in the relevant markets in Lithuania.
According to the merger notification, which was submitted on 10 December 2021, Dobeles dzirnavnieks, which is operating in all Baltic states, as well as in other countries, intended to acquire the Lithuanian holding company Baltic Mill which manages the firm Malsena plius.
Dobeles dzirnavnieks and its related undertakings are active in the manufacture of grain mill products and wholesale supply of flour, flakes, pasta, groats, animal feed, grains and other products. Baltic Mill carries out holding activities of subsidiaries, while its related undertakings (one of which is Malsena plius) are active in the manufacture of grain mill products and wholesale supply of flour, flakes, porridge, cereals, pasta, groats and other products in the Baltic States and other countries.
In order to identify whether the aforementioned transaction would cause negative effects in the relevant markets, Konkurencijos taryba carried out a detailed economic analysis: it assessed market shares of the parties to the merger and the closeness of competition between them, market participants’ production capacities and expansion possibilities, import potential, possibilities for new market players to enter into the Lithuanian market, etc.
The authority sought and received information not only from the merging parties and their competitors, but also from undertakings engaged in various activities related to the relevant markets concerned, including retail and wholesale supply of wheat and rye flour, semolina, flour mixtures, pasta, flakes and other products.
Since the parties to the transaction did not provide all the required information within a set deadline, the merger review was suspended between 19 January 2022 and 6 April 2022. During this time, the authority’s experts continued analysing the available data and collecting additional information from market participants.
Having assessed the information it had collected, Konkurencijos taryba found that Dobeles dzirnavnieks and Baltic Mill are close and important competitors in the daily consumer goods’, i.e. flour, flour mixtures and pasta, markets which are already concentrated, and that competition between these companies is significant. The merged entity would have a very large share of the relevant markets in Lithuania, while the competitive pressure, which benefits consumers, would disappear.
Having seen the preliminary conclusions concerning the merger’s potential negative impact on competition, the merging parties provided feedback and additional arguments to Konkurencijos taryba, however, the authority did not change its assessment. It was also concluded that commitments proposed by the merging parties were insufficient and would not eliminate the identified negative effects on competition.
Having evaluated all collected information and circumstances, Konkurencijos taryba decided not to clear the acquisition of 100 per cent of the shares and sole control of Baltic Mill by Dobeles dzirnavnieks.
Although Dobeles dzirnavnieks had previously received clearances from the Latvian and Estonian competition authorities to implement the merger in these countries, it will not be able to implement the transaction in Lithuania.
The Council Member Karina Kučaidze noted that each authority carries out an assessment of the conditions of competition in a particular country, and these conditions may differ.
"When reviewing mergers, Konkurencijos taryba assesses the conditions of competition under which undertakings operate in Lithuania. In this particular case we found that the transaction, involving the acquisition of one of the largest Lithuanian producers of flour and other products Malsena plius, would harm consumers of our country, so we did not grant clearance", said K. Kučaidze.
The decision of Konkurencijos taryba may be appealed to Vilnius Regional Administrative Court within one month of its notification or publication on the authority's website.
The Law on Competition stipulates that the intended merger must be notified to Konkurencijos taryba and clearance must be obtained if the combined aggregate income of merging parties in the business year preceding the merger exceeds EUR 20 million and the aggregate income of each of at least two merging parties in the business year preceding the merger exceeds EUR 2 million.