The Riigikogu faced mounting pressure to act, as the relevant EU directive had been awaiting transposition since February 2021. In January of this year, the European Commission imposed a €400,000 fine on Estonia for failing to implement the directive, with an additional €3,000 penalty accruing for each day of further delay.

On Tuesday, the Riigikogu finally adopted the new law. Under the revised act, violations of competition rules will be prosecuted as misdemeanors. This marks a departure from the earlier draft agreed upon in early 2023 by the then-coalition of the Reform Party under Kaja Kallas, Eesti 200 and the Social Democrats, which had called for administrative proceedings instead.

The version submitted to the Riigikogu by the government in February 2024 proposed introducing a new type of proceeding — an administrative process ending in a fine.

The bill passed its first reading in April 2023. However, following a change in government in July — despite the coalition parties remaining the same — the justice portfolio shifted to Eesti 200. The new justice minister, Liisa Pakosta, decided to halt the bill's progress, arguing that violations should be handled through misdemeanor proceedings rather than administrative ones.

This change drew opposition from the Social Democrats. Jaak Aab, an SDE member of the Riigikogu Economic Affairs Committee, argued in March that Pakosta's approach would increase the administrative burden and benefit lawyers, who would gain more opportunities to file endless challenges. He said competition and oversight in Estonia were ineffective, resulting in high prices in sectors where a few firms dictate the market.

Pakosta countered that enforcement should not be rushed and must be carefully considered. She argued that misdemeanor proceedings were the simplest, fastest, most efficient and fairest way to ensure competitive markets, both for the state and for consumers.

In March, the new coalition of the Reform Party and Eesti 200, formed after the Social Democrats were ousted from government, announced it would move forward swiftly with the Competition Act based on Pakosta's misdemeanor-based approach. The method has been supported by the chancellor of justice and business associations advised by the law firm Sorainen.

In May, Competition Authority Director Evelin Pärn-Lee submitted an opinion to the Riigikogu stating that the new bill might not improve competition oversight. On the contrary, it could complicate procedures by creating multiple types of processes — one for merger control and others for prohibited agreements or abuse of dominant position.

According to the authority, the bill makes the Competition Act and its enforcement less clear, more time-consuming and certainly more costly. The agency also expressed doubt about the bill's compliance with the EU directive.

In 2023, Pärn-Lee pointed out that Estonia stood out in the EU for having detected no cartels, unlike Latvia, Lithuania and Finland. She said this raised the impression that either anti-competitive behavior does not exist in Estonia or it simply goes undetected.

Eesti 200 MP Marek Reinaas said in Tuesday's Riigikogu session that the bill fully aligned with the party's market economy philosophy. However, he said there was a deeper ideological question — whether the priority should be punishing violations or letting the free market self-correct. Reinaas argued that the focus should first be on restoring healthy competition in the market, and only then consider whether punishment is warranted.

During the session, Jaak Aab emphasized that competition is limited in essential goods and services markets in Estonia, leading to unreasonably high prices and disproportionately large profits for dominant companies, especially given the country's small market size. He maintained that the previous version of the bill would have been more effective.

After the bill passed, the Ministry of Justice and Digital Affairs issued a statement saying the law would strengthen a fair and transparent business environment, improve the effectiveness of competition oversight and provide consumers with better choices and fairer prices. Pakosta reiterated that the law's adoption marked a key legal policy milestone.

However, Eesti Ekspress reported Monday that deliberations on the Competition Act were accompanied by an intense lobbying campaign in favor of major businessman Margus Linnamäe, allegedly involving the use of his media outlet Postimees to influence politicians.

Social Democratic Party leader and former Interior Minister Lauri Läänemets confirmed that efforts had been made to influence the party's position by pressuring one of his advisers.

According to Eesti Ekspress, several politicians have been in contact with law enforcement authorities due to the aggressive lobbying around the bill. Experts and lawmakers involved with the legislation also described the campaign as unusually forceful.

Last week, during a motion of no confidence initiated against Pakosta, Läänemets argued that the abrupt reversal in the bill's course served narrow business interests and undermined a fair business environment.

The Ministry of Justice stated that the new amendments grant the Competition Authority expanded powers to monitor fair market competition and broad authority to guide businesses toward compliance with competition rules. This should help curb monopolistic influence and improve market access for smaller players.

According to the ministry, handling competition violations as misdemeanors allows for the imposition of effective fines that meet EU standards. Keeping enforcement within the misdemeanor framework also ensures legal clarity and better protection of fundamental rights.

The ministry noted that other EU-derived financial penalties in Estonian law are also enforced through misdemeanor procedures.

The amendments to the Competition Act passed in the Riigikogu with 66 votes in favor, 16 against and no abstentions.

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