Competition Board to weigh Apollo-Forum Cinemas merger

Director of the Competition Board Märt Ots. Photo: Madis Veltman

Apollo Group’s intent to acquire Forum Cinemas requires thorough analysis in terms of whether to allow the transaction to go ahead, Director of the Competition Board Märt Ots told the “Otse Postimehest” webcast.

We rarely hear anything from the Competition Board. Does that mean Estonia has no problems with competition or that you are drowning in work?

Competition has not disappeared as even a pandemic cannot destroy the foundations of our economy. The Competition Board’s task is to work for the consumer and monitor prices.

What are the hottest topics today?

The first is a potential movie theater merger (Apollo Group is looking to acquire Forum Cinemas – ed.). We have not received a merger application yet, but it will be a complicated process. We need to carefully consider and analyze what would benefit the consumer and the company. Based on that, we can either allow or block it.

Another important topic is the medicines market. We are keeping an eye on prices and economic regulation in this field. The Competition Board finds that the recent pharmacy reform constituted overregulation. Restricting enterprise cannot benefit the consumer in the long run. The effects [of the reform on prices] will become clear after we analyze a few years’ statistics. It is too soon to draw conclusions today.

Next to that, we have our daily tasks, such as monitoring prices charged by monopolies. Quite a few companies are looking to hike prices in the conditions of the crisis.

What are the criteria used to evaluate mergers and acquisitions?

The first criterion is keeping competition alive. The law states that if a merger would increase one side’s market share to over 40 percent, analysis is in order in terms of whether the consumer would have enough choice left. If a major market participant has effective competitors, we will not have to block the merger, but it still sends up a red flag. The board’s decision regarding the planned acquisition [of Forum Cinemas] has not been made yet. We will wait for the application and then carry out our analysis.

You pursue international cooperation with sister organizations. How do you handle multinational companies?

We first and foremost cooperate with EU member states, as well as competition authorities outside the EU. Every country primarily analyses what takes place in its territory. Major international companies are the responsibility of the European Commission. The recent such example was Luminor.

Which areas do you regulate?

We handle monopoly sectors, such as electricity, gas, water and district heating. We also keep an eye on the railroad and the mail sector. We are directly in charge of price regulation there. These enterprises cannot hike prices without our consent.

You spent years fighting the capital’s water utility Tallinna Vesi in court, with the matter going as far as arbitration proceedings. How satisfied were you with the result?

Yes, it was a long dispute, spanning a decade. It was likely one of the longest and most difficult economic disputes Estonia has seen. Of course, we must be satisfied with the result. Tallinna Vesi sued the state for over €100 million and lost. The price of water was lowered by 20 percent and it has remained on that level for the past ten years.

That serves as a positive example, but have things also gone wrong?

We cannot win all cases as we are living in a democratic society. A year ago, we lost a dispute with a Lääne-Viru County waste conditioning company. The firm was owned by local governments and we concluded that it charged consumers too much. The court ruled that if the local government has laid down the price of garbage collection in an administrative act, the Competition Board has no authority. That is also why we couldn’t contain garbage collection prices in Tallinn. Based on a Supreme Court decision, it does not constitute enterprise.

You are currently monitoring Eesti Energia, power transmission networks and the Narva Power Plants.

Transmission network operators want to hike prices, but we feel companies should revisit their business models, find ways to cut costs and postpone price hikes in the conditions of a crisis. We are also arguing with Eesti Energia over prices charged by Narva district heating network operator AS Narva Soojusvõrk. The company wants to hike the price of heating by quite a lot, while we find that it should take a look in the mirror and try to economize.

What is the difference between a “monopoly company” and an “undertaking in a dominant position”? How is a monopoly defined in the law?

The word “monopoly” itself suggests there is just one of it. Such a company has no competitors, neither today nor tomorrow. Such are transmission network operators, for example, the main power network, that will never see a parallel structure constructed. Also, the power distribution network, gas networks, district heating and water networks – these are monopolies.

That is why we cannot talk about a movie theater monopoly because these are free market companies that are referred to as “undertakings in a dominant position.”

You process a lot of information part of which includes companies’ business secrets. Have there been situations where you cannot access information?

The Competition Board has access to business secrets. Ensured by Estonian legislation, this access comes with a great deal of responsibility and a confidentiality obligation. We are obligated to keep business secrets, including those of monopolies. We have a sturdy security and information system, you can rest assured that nothing will leak from the Competition Board.

Estonia has relatively weak consumer protection, which is why your role is so important. What to do to offer Estonian consumers more effective protection and bring about a fairer market situation as far as prices are concerned?

Consumer protection is indeed weak in Estonia. We have consumer protection and technical regulators, but it is not enough. We could use stronger voluntary, social consumer protection organizations like those in other OECD and EU member states. Such voluntary regulators could help the Consumer Protection Board.