Taking counsel: List of persons liable for competition law offenses is expanding

  • 2007-02-28
  • By Risto Ruutel [Teder, Glikman & Partners]
On Jan. 24, 2007 the Estonian parliament adopted an amendment to the Penal Code and associated acts by which the list of persons liable for competition violations was significantly expanded. The amendments will go into force March 15. Taking into account the general level of restrictions provided in the Competition Law and the very blurred elements of offenses both in the law and the Penal Code, enterprises may easily find themselves in contradiction with restrictions provided by both the law and the code. These amendments will thus have direct impact on companies' day-to-day business.

In general, violations of the competition law are divided into three categories: breaches of concerted practice regulation, abuse of dominant position (incl. non-performance of special duties of enterprise with special or exclusive rights or in control of essential facilities) and offenses regarding concentrations and merger control. Most likely the regulation of concerted practice will have the greatest impact.

These amendments are a logical step following changes to the Competition Law in 2006, of which the most significant was the abolishing of the obligation to apply for an exemption from the Competition Board in cases of prohibited concerted practice. As a result, the liability of enterprises to ensure the legality of concerted practice was increased.
Previously, liability for Competition Law violations was borne only by members of the management board; in the future personal liability will also be borne by other leading employees, particularly top and mid-level leaders who are not members of management bodies. Liability of legal entities will also increase, as the list of individuals by which a legal person can make offenses will be significantly longer. The situation is especially hazardous if the management bodies have provided leading employees with free authority for acting within their sphere of liability but have not informed them about competition law restrictions provided for the sphere of activities of the undertaking.

Taking into consideration the fact that several Competition Law offenses will result in restricting competition by the enterprise, many legal entities that cannot be held liable at present law will be within the list as of March 15, 2007. So as of March 15, 2007 liability for previously anti-competitive activities will also be borne by top employees who assist in continuation of such activities.
In addition, the amendments will also create wider liability for individual firms that previously were not held liable under Penal Code for competition law offenses. The amendments will have a particularly hard impact on these groups of individual firms that are already in large concerted practices due to specialties of their business 's e.g., taxi drivers, hairdressers and others who provide their services on common business premises or via common governing organizations or umbrella organizations.

Enterprises have until March 15 to find and liquidate risks in their business and ensure conformity with restrictions provided by the Competition Law and the Penal Code. An evaluation of their business by the individuals who will become personally liable for competition law violations is very important. Above all this concerns several leading employees who are not members of management bodies 's e.g., executive directors, heads of departments, sales directors, etc. - and who until today did not bear any personal liability. As the range of natural persons with criminal liability shall be wider, the risks of legal entities (employers) to be investigated due to actions of their employees will increase. For avoidance of the risks the undertakings should examine their internal documents, amend contracts entered into with their clients and partners, if necessary, and amend job descriptions of their employees, as well as organize competition law trainings for the leading employees.

Risto Ruutel is attorney at law at the Estonian law firm Teder, Glikman & Partners, a member of Baltic Legal Solutions,
a pan-Baltic integrated legal network of law firms which includes Kronbergs & Cukste in Estonia and Jurevicius, Balciunas & Bartkus in Lithuania, dedicated to providing a quality 'one-stop shop' approach to clients' needs in the Baltics.