Government Watch. On the Income Threshold in Merger Regulation

The Lithuanian Free Market Institute has examined draft amendments to Articles 3, 8, 9, 11 and 12 of the Law on Competition No VIII-1099 and submitted its comments and proposals to relevant authorities.

The draft law stipulates a higher income threshold beyond which businesses should receive a concentration permit from the Competition Council. In its position paper, LFMI welcomes the proposal to increase the comprehensive income threshold from €14.5 million to €20 million and the separate income threshold from €1.45 million to €2 million as well as the proposal to take into account only the domestic income.

However, LFMI noted that even after the proposed increases the comprehensive income threshold and the separate income threshold would remain among the lowest in the European Union, exceeding only those established in Bulgaria, Estonia, Cyprus, Malta and Hungary. In LFMI’s view, unreasonably low income thresholds undermine business conditions, distort competition and pose administrative burden both on businesses and the Competition Council who are obliged to assess low-value mergers. To add, the assessment procedure costs between €5,900 and €10,300, posing a significant financial burden, especially on small enterprises.

Given the aforementioned arguments and the fact that enterprises with a turnover below €50 million and with less than 250 employees fall within the EC definition of small and medium-sized enterprises, the Lithuanian Free Market Institute calls for increasing the threshold to €35 million (as it is in Latvia) or €50 million (as it is in Poland).

Read the full position paper (in Lithuanian) here.