Dominant Position in Retail Trade

A prohibition of abuse of dominant postition in retail trade has been laid down by Section 13 (2) of the Competition Law.

A market participant or several market participants are in a dominant position in retail trade

if, considering their buying power for a sufficient period of time and the suppliers’ dependency in the relevant market, they have the capacity of directly or indirectly applying or imposing unfair and unjustified provisions, conditions or payments upon suppliers and may hinder, restrict or distort competition in any relevant market in the territory of Latvia.

A dominant positionin retail trade in itself is not a violation: it is the abuse thereof that is prohibited.

A dominant position in retail trade significantly differs from the classic dominant position in terms of the extent of market power. A company that is in a dominant position in retail trade has the ability to impose unfair transaction terms or payments on suppliers, yet contrary to the classic dominant position, they do not have the ability to act completely independently of consumers or competitors.

The concept of a dominant position in retail trade was incorporated into the Competition Law in late 2008 to achieve fair, non-discriminatory and predictable relations between producers and major retailers. In seeking to support small and medium enterprises, the Law provides for the protection of those producers whose market power is too small, in order for them to be able to successfully defend their interests in dialogue with the major traders.

Abuse of a dominant position in retail trade occurs as:

  • application or imposition of unfair and unjustified provisions concerning the return of products, unless the returned product is of poor quality or is a product, including a new product, unknown to consumer, delivery or increase in the amount of delivery of which is initiated by the supplier
  • application or imposition of unfair and unjustified payments, discounts for the delivery of products, the presence of the delivered product at a retail outlet, including for the placement of products on the shelves of shops, and for the promotion measures of the trade. Objectively justified payment for the promotion of a new product, unknown to the consumer, in the market shall not be considered as unfair and unjustified
  • application or imposition of unfair and unjustified payments for entering into a contract, unless such payments are justified by the fact of entering into a contract with a new supplier who therefore needs a special evaluation
  • application or imposition of unfair and unjustified payments for the delivery of products to a soon to be opened retail outlet
  • application or imposition of unfair and unjustifiably lengthy settlement periods for the delivered products. The settlement period for the delivered food products, the shelf life of which is not longer than 20 days, shall be unfair and unjustifiably lengthy if it exceeds 30 days from the day of delivery of such products
  • application or imposition of unfair and unjustified penalties for violating the provisions of a transaction

Timeframe for adjudicating a case of violation

The Competition Council takes a decision within six months from the day of the initiation of a case. If due to objective reasons it is not possible to observe the six month time period, the authority may extend it by up to one year counting from the day of initiation of the case. However, if prolonged fact-finding is required in the case, the Competition Council may, with a justified decision, extend the time period for taking a decision to a period not exceeding two years from the day of initiation of a case.

Fine

  • up to 0.05% of the net turnover of an undertaking for the previous financial year, but not less than EUR 350 each
  • for any subsequent violation if the violation has been committed after the imposition of a fine – up to 0.2 per cent of the net turnover of the undertaking for the previous financial year, but not less than EUR 350 each
  • in the case of a failure to comply with the legal obligations imposed by the authority, the latter may adopt a decision to increase the fine to 2% (in which case the fine may not be less than EUR 700 each)

“Procedures for the Determination of Fines for the Violations Provided for in Section 11, Paragraph one and Section 13 of the Competition Law” No. 796 (Word document)

Appealing a Decision by the Competition Council

A decision may be appealed to the Administrative Regional Court within one month of the date the decision has taken effect.

A judgement of the Administrative Regional Court may be appealed upon the submission of a cassation complaint to the Department of Administrative Cases of the Senate of the Supreme Court.

Rights and obligations of parties to proceedings

Parties to proceedings have the following rights:

  • to submit evidence and provide explanations
  • to propose that the information submitted to the Competition Council is assigned the status of restricted access information (more information)
  • to review the materials in the case in accordance with the procedures established by law, to express own opinion
  • to appeal decisions by the Competition Council

Parties to proceedings have the following obligations:

  • to provide the information requested (including information containing trade secrets) within the period, to the extent and in the form prescribed by the Competition Council
  • to submit evidence at the party’s disposal and to notify the Competition Council of any facts it may be aware of and that may prove relevant in the particular case

Failure to submit information in the possession of a person to the Competition Council within the period and to the extent specified by the latter, provision of false information, and failure to comply with the decisions of the Competition Council or the lawful demands of officials are subject to administrative liability (more information).

Reporting a violation