The Competition Council (CC) has concluded an in-depth investigation of the competitive conditions in the international cash transfer market, including an assessment of the compliance of the agreement concluded by Latvijas Pasts and Western Union with competition law. The CC concluded that certain provisions of the agreement create exclusive advantages for Western Union and restrict free competition on the market. Thus, the CC, applying the “Consult First” principle, remedied the potential infringements by negotiating the exclusion of the competition restrictive provisions from the agreements.
Western Union is an international company that provides cash transfers in cooperation with other merchants. One of the partners is Latvijas Pasts, which offers cash transfers at post offices on behalf of Western Union.
In the course of its investigation, the CC found that the agreement between Latvijas Pasts and Western Union included an exclusivity clause or single branding clause which prevented Latvijas Pasts from entering into agreements with cash transfer service providers competing with Western Union. Taking into account the unique infrastructure or post offices owned by Latvijas Pasts throughout the territory of Latvia, as well as the conditions and market conditions for the provision of cash transfer services, the CC concluded that the exclusivity restriction in the agreement could lead to foreclosure of competitors. In addition, in the assessment of the CC, the agreement restricted Latvijas Pasts from cooperating with Western Union's competitors for a certain period of time after the termination of the agreement, thus further reinforcing the negative effects of the agreement on the market against fair competition.
After an in-depth legal and economic assessment of the agreement, the CC concluded that the relevant provisions should be assessed as a vertical agreement which could be contrary to Article 101, paragraph 1 of the Treaty on the Functioning of the European Union and Section 11, paragraph one of the Competition Law. In the view of the CC, the agreement was likely to reduce competition between different providers of cash transfer services, thereby also leading to negative effects for consumers, such as reduced choice of providers and higher prices for services. At the same time, the CC decided not to open a formal infringement case, but to resolve the situation through negotiations, using the “Consult First” principle. This approach, given the complex nature of the assessment of the issue at stake, allowed the CC to restore free competition on the market more effectively.
The exclusivity clauses in question have now been excluded from the agreement between Latvijas Pasts and Western Union and the risk of a competition law infringement has thus been eliminated.
In addition, the CC recalls that the State and its capital companies are obliged to select cooperation partners on the basis of pro-competitive and open criteria, which would allow the implementation of the principle of good administration enshrined in the State Administration Structure Law. In this way, potential non-compliance with Section 14.1, paragraph one of the Competition Law, which prohibits State and municipal capital companies from discriminating between market participants by creating different conditions of competition, can also be avoided. In particular, the State and its capital companies are obliged to carry out a thorough assessment of which companies to cooperate with and, if necessary, to organise open tenders to select the best cooperation partners in an objective manner.