CCA orders Mirnovec pirotehnika to change lease and business cooperation agreements

Similar as in the recent proceeding that it carried out against the undertaking Orion in the same relevant market the Croatian Competition Agency (CCA) opened the ex officio proceeding following the initiative made by the undertakings Jorge pirotehnika from Križevci and Weco pirotehnika from Omišalj.

The analysis carried out by the CCA involved the assessment of the compliance of particular provisions contained in the agreements entered into between Mirnovec pirotehnika and its partners who sell its products with competition rules.

These were concretely the lease agreements and business cooperation agreements on the basis of which Mirnovec pirotehnika leases business space of the undertakings who sell its pyrotechnic products in the lease period as well as the business cooperation agreements which are entered into by Mirnovec pirotehnika and other retailers in its distribution network.

In the sense of competition rules the provisions of the said agreements that raised competition concerns were, on one hand, the ones that prohibited the lessors to re-sell pyrotechnic products from suppliers other than Mirnovec pirotehnika during the lifetime of the agreement. On the other hand, the business cooperation agreements with other retailers within its distribution network contained exclusive distribution provisions that prohibited the sale of pyrotechnic products from other suppliers – competitors of Mirnovec pirotehnika. The agreements were concluded for a rather long period of seven years and where the lessor would terminate the agreement earlier the restriction not to sell the pyrotechnic products from suppliers other than Mirnovec pirotehnika would remain in force until the original date of expiry set in the agreement concerned.

Shortly after the proceeding was opened by the CCA, Mirnovec pirotehnika proposed concrete remedies to eliminate competition concerns on its own initiative. In other words, it proposed the revision of the disputable lease and business cooperation agreements without delay so as to enable the lessors to sell pyrotechnic products from Mirnovec pirotehnika but also from other suppliers on the same business premises. It also committed itself to change the disputed restrictive provisions contained in the business cooperation agreements with its distributors.

Pursuant to the Competition Act the CCA can accept the proposed committments provided that the infringement is of short duration, whereas the undertaking concerned must propose the remedies on its own initiative and at the early stage of the proceeding. The measures proposed must fully eliminate possible competition concerns within a short time period and restore effective competition in the relevant market concerned. The purpose of such legal provisions is that to ensure, wherever justified and appropriate, efficiency in carrying out otherwise lengthy infringement proceedings and almost immediate re-establishment of effective competition in the relevant market.

The CCA found in this concrete case that the proposed remedies meet the above legal conditions and it ordered Mirnovec pirotehnika to comply with the said measures within 30 days and submit the evidence thereof. Should Mirnovec pirotehnika not comply with the commitments addressed to restore competition until the set deadline without a justifiable reason, the Agency will re-open the infringement proceeding against the undertaking concerned.