In February, the investment fund Baltcap announced that Pihlakodu, part of their portfolio, sold Estonia's largest ambulance service provider Karell Kiirabi to the private owners of Südamekodud, the largest operator of elderly homes in Estonia.

Karell Kiirabi serves the regions of Harju County, Lääne-Viru County and Ida-Viru County with 18 ambulance brigades, employing nearly 350 people.

In 2022, Südamekodud had a turnover of €8.2 million, and Karell Kiirabi had a turnover of €11.6 million. The Competition Act stipulates that if the combined turnovers of the merging parties in Estonia exceed six million euros, and at least two of the parties each have turnovers exceeding two million euros in Estonia, the merger must be reviewed by the Competition Authority. However, this transaction did not reach the Competition Authority's purview.

Specifically, the new owner of Karell Kiirabi is Meditsiiniteenused OÜ, established at the beginning of February this year, which in turn is owned by newly established companies whose owners are Jako Laanemägi, Martin Kukk, Rene Ilves and Rain Rosimannus – the same individuals who also own Südamekodud care homes. As a new company, Meditsiiniteenused OÜ does not have any turnover.

Last week, Äripäev, covering the topic, called the businessmen's action in acquiring Karell Kiirabi a JOKK scheme (legally correct but ethically questionable) to avoid Competition Authority scrutiny.

One of the new owners of Karell Kiirabi and a board member, Martin Kukk, told ERR that the investment was made through a separate company for clarity, as Karell Kiirabi's operations are entirely different from the core activities of Südamekodud.

"Secondly, the acquisition of Karell Kiirabi AS was in the interest of the actual beneficiaries of Südamekodud AS, not Südamekodud AS itself," added Kukk. "In our view, merger control is not necessary for this transaction. Accordingly, we did not see it necessary to request approval from the Competition Authority. It's worth mentioning that no individual has a controlling influence over Meditsiiniteenused OÜ."

Kadri Lepikult, head of competition enforcement at the Competition Authority, said that the Competition Authority does not initiate proceedings on mergers itself – the parties involved must submit a notification if the conditions specified in the law are met.

"The Competition Authority does not have the option to 'invite' itself to start merger control on its initiative. This transaction was structured in a way that, based on the criteria set out in the Competition Act, its submission was presumably not considered mandatory," explained Lepikult. "Upon learning the specific details of this transaction through the media, the Competition Authority decided to investigate. We have sent requests for information to the companies to check for joint controlling influence."

She added that the Competition Authority considers the turnover criterion for merger control to be well-functioning and clear for both companies and the authority, and the turnover thresholds provided by the Competition Act are at an appropriate level considering Estonia's size.

However, the Competition Authority proposed to the Ministry of Justice in 2022 that an additional criterion be added next to turnover, so the authority could require notification of a merger if the parties' turnover from the previous fiscal year does not exceed the thresholds set in the Competition Act, but there is reason to believe that the merger could significantly harm competition in the market.

Martin Kukk confirmed that the company has received questions from the Competition Authority, is willing and open to cooperate with the authority, and will provide comprehensive answers.

--

Follow ERR News on Facebook and Twitter and never miss an update!