The cinema, the Coca-Cola Plaza, in central Tallinn, is owned by Forum Cinemas, whose owners wanted to merge it with the Margus Linnamäe-owned MM Grupp early on this year, but the Competition Authority forbade it at the time, saying Forum's turnover exceeded the maximum permissible.

Külliki Lugenberg, Head of the Competition Authority's merger control department, told ERR Tuesday that: "We will certainly be keeping an eye on what is happening in the cinema market. We will definitely check why Forum Cinemas has closed down [the Coca-Cola Plaza]. We do not currently have this information on whether and when transactions are taking place."

She added that the authority could not coerce the cinema to stay open, even during the festive season.

"The Competition Authority cannot force any company to do business, but this company must be independent in its decisions and business activities. There are measures in place to monitor certain aspects," Lugenberg said.

A monopoly situation has also emerged in the cinema market in Estonia's second city, Tartu, since the closure there of an outlet in summer which had been operated by Forum.

MM Grupp operates 10 cinemas nationwide – four in Tallinn (at the Solaris mall, Mustamäe Keskus, Ülemiste Keskus and the O'Leary's sports bar in the Kristiine shopping mall), two in Tartu – which as noted now constitute an effective monopoly, and one in each of Pärnu, Narva, Jõhvi and Kuressaare.

MM Grupp also distributes motion pictures through the group companies Theatrical Film Distribution OÜ and Estonian Theatrical Distribution OÜ, under the brand name Hea Film.

This means that a monopoly, or something very close to it, would arise if Forum and MM Grupp were to become one.

Lugenberg said: "A situation close to the monopoly in the cinema market could certainly arise if they merged. Therefore, we cannot allow such a concentration. At the beginning of 2021, we were of the opinion that it could not be allowed and I do not see a significant change in the market."

This authority adds that it requires additional powers in mergers – at present it can only monitor them.

"The Competition Authority has repeatedly warned the legislature that an additional instrument for controlling a concentration would be needed to control transactions that fall below the statutory turnover thresholds but may distort competition," Lugenberg went on.

"For example, if there is a market with low turnover but "In such exceptional cases, an additional instrument. would help to prevent this. In many EU member states, this possibility already exists," she added, noting that this desire has not been met to date, though expressing a hope that it may do in the future.

Other criteria which affect mergers, in addition to the turnover limit, include whether the company has acquired another, operating in the same sector, in the preceding two years, or not – something which Lugenberg said she was not sure of having happened or not.

At present, the definition of what would constitute the same sector or industry in the context of the MM Grupp's cinema chain acquisitions is not clear, Lugenberg added.

"This is assessed on a case-by-case basis. The industry is certainly a slightly broader concept than just cinemas themselves," she said, adding that the turnover of Forum this year is not currently known – in other words whether it was above or below the €2 million threshold.

In theory, MM Grupp could continue its merger with Forum Cinemas without applying for a permit from the Competition Authority, if the latter's turnover remained below the €2 million.

At the same time, Lugenberg said that the MM Grupp has not submitted a new application for the merger to the Competition Authority, so they do not know whether a new transaction is planned, but suspending the business in order to fit the turnover criteria would not be allowed.

MM Grupp is headed up by businessman Margus Linnamäe, who owns the Apollo cinema chain.

Prior to the notification of its formal decision, the Apollo Group withdrew its application for the acquisition.  A few days later, however, ERR reports, ownership stakes were changed to make Forum Cinema head Kristjan Kongo majority shareholder with a 51-percent stake, with the remaining 49 percent belonging to MM Grupp.

Forum's turnover in 2019 was reported at €18.3 million, then €12.8 million in the coronavirus-blighted 2020, which saw cinemas closing their doors completely for several weeks.

A takeover of Forum would have increased MM Grupp's share to over 80 percent in Tallinn and 90 percent in Tartu and would also, it is argued, have had an adverse effect on the film distribution market.

ERR News reported Monday that the Coca-Cola Plaza will close in December due to a combination of low customer levels and coronavirus restrictions, quoting Ärileht, the business section of portal Delfi.

Currently, Forum Cinema operates two cinemas: Coca-Cola Plaza in Tallinn, and Centrum, in Viljandi.

The Apollo group also runs the bookshops of the same name and is reportedly the franchisee of KFC in Estonia.

MM Grupp is also a major player in the pharmacy sector in Estonia, a sector which saw nominal reforms last year, and the Postimees Group, which publishes the newspaper of the same name and its regional variants, commercial TV station Kanal 2, radio stations and other media outlets, is also a Linnamäe company.

Kristjan Kongo: We are looking for a new investor

Kristjan Kongo, head of Forum Cinema and now as noted above reportedly majority stakeholder in the company, said that turnover had been poor in the past year due to restrictions.

He said: "We are at somewhere around 35 percent compared with the 2019 turnover figure."

While he would not give concrete figures, Kongo said the two-million-euro mark had been exceeded this year.

He also said that acquisition by the MM Group was no longer on the table, and installed a minority shareholder investor was being sought for MM Grupp's 49-percent stake.

"These latest developments in the cinema market have certainly affected the deal and renegotiated some nuances. But the big picture plan is still the same," Kongo said. 

"When [the Competition Authority] said 'no' to the acquisition, the decision was immediate that it was not required [for MM Grupp] to maintain a 49 percent holding."

Kongo also said that Coca-Cola Plaza would be reopening its doors after Chrismtas, with the program of movies to be published a week beforehand.

Cinemas in Estonia have to conduct coronavirus certification checks, and mask-wearing is a requirement and screenings must end no later than 11 p.m., but if these conditions are met, they can operate.

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