In April 2011 Parliament adopted amendments to competition legislation that allow chief executive officers (CEOs) to be held personally liable for infringements if they contribute to the organisation or implementation of an anti-competitive practice.
The concept of 'contribution' in the new legislation is very broad. As might be expected, it covers direct involvement in committing an infringement - for example, participating in meetings with competitors for an anti-competitive purpose and approving unlawful behaviour by employees. However, it extends to situations in which company employees participate in anti-competitive meetings without the CEO's knowledge. In such cases the CEO is liable because he or she is deemed responsible for knowing whether his or her employees are engaged in such practices.
Personal liability may be invoked in respect of abuse of dominant position and the conclusion of anti-competitive agreements with competitors. This includes agreements with the effect or object of restricting competition, but excludes vertical agreements.
If a CEO is found liable, he or she may be banned from acting as the company's CEO or a member of its supervisory or management board for between three and five years. In addition, he or she may be fined up to Lit50,000 (around €15,000).
The Competition Authority has no right to impose penalties on a CEO; instead, the responsibility lies with the administrative courts. After issuing a prohibition decision, the Competition Council may ask the court to issue a separate decision on the CEO's personal liability. The new legislation includes an incentive to make the leniency policy more effective: a CEO who cooperates with the authority under the leniency programme will receive personal immunity and escape a fine.
The amendments are the latest indication that Lithuania is moving towards a stricter competition regime. The introduction of personal liability for CEOs is to be welcomed from a competition perspective as a way of raising awareness of competition law problems at senior managerial level. However, making CEOs liable for their employees' anti-competitive actions may prove too great a burden - not only for CEOs, but also for companies operating in small Lithuanian markets. It is debatable whether it is appropriate to invoke personal liability in abuse of dominance cases and effects-based anti-competitive agreement cases, in which a finding of competition law infringement requires a thorough economic analysis of specific commercial practices.
The extension of personal liability to such complicated cases may have been introduced purely as a preventive measure, with the authority's main aim being to identify more cartels in which CEOs are clearly involved. It is to be hoped that the practical operation of the new mechanism will be clarified soon.
For further information on this topic please contact Karolis Kačerauskas or Lina Barauskaite at LAWIN Lideika Petrauskas Valiūnas ir partneriai by telephone (+370 5 268 1888), fax (+370 5 212 5591) or email ([email protected] or [email protected]).