Claimant’s alleged abuse of dominant position as a defence against claims

Lithuanian courts have examined the dispute between AB Klaipėdos vanduo and AB Grigeo Klaipėda. Klaipėdos vanduo sought to recover contractual penalties from Grigeo Klaipėda under a wastewater collection and treatment agreement.

Grigeo Klaipėda exceeded the permitted pollution limits for wastewater, and its wastewater contained significant amounts of starch, glue, and other production-related substances that are extremely adhesive, clog a large part of the infrastructure equipment, and accumulate on walls and filters. As a result, additional technological and human resources were needed for equipment maintenance, repair, and renewal.

In its defence, Grigeo argued that the claimant, Klaipėdos vanduo, was abusing its dominant position in the market. In its counterclaim, Grigeo alleged that certain contractual terms were discriminatory, prevented market participants from operating fairly, and restricted competition.

Key aspects:

• Article 102 of the Treaty on the Functioning of the European Union (TFEU) and Article 7 of the Lithuanian Law on Competition provide sanctions for abuse of a dominant position in the Lithuanian market. This includes conduct that unjustifiably restricts the ability of other market participants to operate or that discriminates against them. Contractual terms that contradict the TFEU or the Law on Competition are deemed invalid.
• The case did not establish any facts indicating discriminatory application of terms or unjustified pricing under competition law principles. Since the defendant was a unique client, exceptional terms could lawfully be applied to it.
• The courts emphasised that holding a dominant position is not, in itself, a violation; however, any unlawful exploitation of such a position may be sanctioned.

This case is one of the few civil cases in which the application or non-application of TFEU Article 102 has been considered. It illustrates how Lithuanian courts interpret and apply TFEU Article 102 and Article 7 of the Law on Competition in practice, particularly in the context of abuse of dominance and discrimination.

Grigeo based its defence on the argument that the agreement relied upon by Klaipėdos vanduo should be declared invalid under both TFEU Article 102 and Lithuanian Law on Competition Article 7, which prohibit and sanction abuse of dominance. Klaipėdos vanduo argued that its actions were lawful and did not amount to unlawful exploitation of market power.

The case addressed specific contractual terms that, according to Grigeo, were discriminatory: unequal commercial terms, pricing principles that could restrict competitors’ opportunities, and other practices allegedly aimed at reinforcing Klaipėdos vanduo’s dominant position. However, the court found that Grigeo failed to prove that other market participants were subject to different terms or that any comparable undertakings existed in a similar position to Grigeo.

A key passage from the court summarises the competition law aspect of the case (non-official translation):

“135. As the defendant did not submit specific evidence that the claimant applies more favourable or different penalty terms to other undertakings providing wastewater with identical pollution levels and volumes, and did not identify any such specific undertakings (other customers) that would receive more favourable conditions, the court of first instance had no basis to find a violation of Article 7 of the Law on Competition or, even more so, Article 102 TFEU, one of the conditions of which is that the abuse of a dominant position could affect trade between Member States. It should also be noted that it was not disputed that the defendant is the only such customer in the claimant’s operations; therefore, the penalty mechanisms applied to the defendant cannot be directly compared to those applicable to standard customers. The case materials confirm that the defendant’s unique status justified the need for individually negotiated contractual terms.”

Unless the dispute proceeds to the Supreme Court of Lithuania, the following conclusions may be drawn:

• A defence against claims for contractual penalties based on competition law is possible and assessed by the courts.
• A party alleging discriminatory treatment under the Law on Competition and the TFEU must prove that such discrimination exists.
• To establish discriminatory treatment, the defending party must demonstrate not only the potential unfairness of the terms but also that other market participants in a comparable position are in fact subject to different contractual conditions.