On 5 October 2022, the Competition Authority issued a decision prohibiting the concentration of AS Eesti Post and its sole competitor AS EXPRESS POST. This is the second time the concentration was prohibited. The same undertakings also wanted to concentrate in 2011, but the Competition Authority did not permit the transaction.
Both AS Eesti Post and AS EXPRESS POST provide a periodicals delivery service, business letter service and direct mail service (addressed and unaddressed advertising), and AS EXPRESS POST operates in and around larger towns. The Competition Authority found that the concentration would have significantly restricted competition because the concentration would have put AS Eesti Post in a monopolistic position in terms of periodicals delivery, business letters and direct mail in Estonia.
Pursuant to subsection 3 of § 22 of the Competition Act, the Competition Authority prohibits a concentration if it is likely to significantly restrict competition in the goods market above all, by creating or strengthening a dominant position. However, according to the guidelines of the European Commission, an otherwise problematic concentration may nevertheless be permissible if one of the parties is a failing firm and the competitive structure would be restricted to at least the same extent, regardless of whether the concentration is accomplished or not. According to the guidelines of the European Commission, the failing firm defence can only be applied if: (i) the allegedly failing firm would be forced to exit the market in the near future due to financial difficulties; (ii) there are no other purchasing options that would restrict competition less than the notified concentration; and (iii) without concentration, the assets of the failing firm would exit the market.
During the procedure, as an additional argument for concentration, the parties brought up the need to apply the failing firm defence. The parties to the concentration emphasised that the business of AS EXPRESS POST has been unprofitable in recent years, and that volumes have significantly decreased in the postal sector as a whole. Despite the fact that AS EXPRESS POST has been unprofitable in recent years and the undertaking’s future activity may not be sustainable in its current form, the Competition Authority found that the argument of a failing firm defence does not apply. This in particular because the sale process of AS EXPRESS POST lasted for a relatively short period, and the absence of a less anti-competitive buyer and the exit of assets from the market was unclear.
In order to prevent anti-competitive effects resulting from the concentration, AS Eesti Post proposed commitments. The proposed commitments related to limiting price increases for the business letter and the direct mail service for the next five years, non-discriminatory treatment of its subsidiary and other customers, and early-morning delivery of periodicals.
The Competition Authority was of the opinion that the behavioural commitments proposed by AS Eesti Post would not have fully eliminated competition issues. Even if the commitments could ensure customers price security for a certain period, it would not be equivalent to competition or the natural development of the market. Therefore, the Competition Authority was of the opinion that permitting a concentration that would have immediately eliminated any competition in the delivery of periodicals, the business letter service and the direct mail service was not justified.