The Competition Council (CC) of Latvia has gathered operational results and the most significant conclusions on the competition supervision in Latvia of year 2015.
Overall, in 2015, the CC disclosed eight competition law infringements, for which 29 undertakings were imposed with fines in the total amount of 1 042 440 EUR. During the last year, fines in the amount of 1 052 030 EUR, imposed by the CC within previous years, have been paid into the state budget. If decision of the CC is appealed to the court, penalties are paid after closing the proceedings.
The most frequently disclosed infringement – cartel schemes within public procurements
All of the prohibited agreements disclosed by the CC in 2015 were bid rigging cases, where in total 26 undertakings were involved. Additionally, the CC issued warnings to 23 undertakings for participation within ten similar infringements of smaller scale and significance. Victims of these violations were state institutions and local municipalities, as well as capital companies that organized procurements within 15 different industries.
Significantly, due to the CC’s trainings to organizers of procurements, the CC has received twice as much applications on signs of possible prohibited agreements. Such trend indicates that organizers have become more knowledgeable, responsible and more capable of protecting resources of state budget from damages created by cartels.
At the same time, during investigations, the CC often faces with suspicions concerning corruption when organizer has agreed with preferred winner of the procurement and has invited other tenderers to submit fictive tenders.
A topical problem – competition distortions by the state and local municipalities
Normative enactments that unreasonably create an unlevel playing field or discrimination and unjustified advantages to self-owned undertakings are ways how the state and local municipalities distort competition and undermine the investment-friendly environment.
Last year, the CC in 14 cases indicated competition risks that are caused by regulatory enactments. Usually, authors or the legislature take into account an opinion of the CC and avert distortion risks. For example, the Parliament of Latvia did not adopt amendments to the Latvia’s Value Added Tax Law, which would discriminate organizers of private concerts and other entertainment events. Since opinions of the CC have only recommendatory nature, harmful regulations can still be adopted. In 2015, the Parliament adopted amendments to the Waste Management Law, thus, even more reducing opportunity of private entrepreneurs to operate and promoting monopolization of municipal managers. Competition distortions are also created by binding regulations issued by local municipalities. For example, in Riga, the capital of Latvia, a regulation was adopted to introduce a fee to taxis’ for the entry into the Old City – Vecrīga. Regulation provides for the annual fee of 300 EUR to a carrier regardless of the number of owned cars, this way discriminating carriers with a smaller fleet. Another example are regulations that provide for the mandatory health checks of workers of local municipalities’ undertakings to be carried out only in medical institutions owned by the local government.
In order to help public bodies to build a competitive environment, the CC developed guidelines. In the meantime, the CC concludes that the guidelines help to improve awareness and understanding of competition law, but does not avert an abusive behaviour. Thus, the CC insists on competitive framework that prevents competition distortions by public persons.
As especially significant problem the CC sees competition advantages granted to undertakings that are owned by the state or local governments. A glaring example is Riga Freeport Authority which unlawfully turned against private providers of tug-boat services for more than seven years. Finally, in 2015, after three decisions of the CC and closed proceedings, Riga Freeport Authority undertook to terminate the infringement and pay a fine in the amount of 622 363.40 EUR. Currently, the tugboat fleet through the auction has been passed to SIA Strek.
Trends of mergers and cooperation agreements
Last year, the CC examined 20 mergers and three notified cooperation agreements. Over the past two years, the CC has examined 38 of such transactions within 24 industries, affecting the competition development in a segment of the economy of 3.8 billion.
Overall, during the past two years, most of mergers and notified agreements have been among small fuel retailers, thus, creating a stronger competition against market leaders in the wider area.
Assessing trends and market structure, the CC foresees a further consolidation of the fuel retail market, between manufacturing undertakings that are in a need of strengthening the export capacity, as well as in retail.
Proceedings on decisions of the CC – in a favour of the state
In 2015, legal proceedings were closed in 16 cases. The court upheld 15 of the CC’s decisions, while in one case proceedings were closed and the decision of the CC entered into the force after concluding an administrative contract.
Changes and topicalities in the regulatory framework
In 2015, the CC concluded work on two extensive draft laws – amendments to the Competition Law and the Unfair Retail Trade Practices Prohibition Law.
Amendments to the Competition Law are essential to both parties – the CC and undertakings. Amendments are significant for the CC to be able to investigate infringements according to the good practice of the OECD and the EU, while for undertakings – to have clearly defined limits of liability and opportunity to receive a claim for damages, as well as for the opportunity to use the Leniency program more widely. Currently, progress with adoption of the amendments has come to a standstill because of particular NGOs, in spite of their active cooperation while drafting the law and already expressed support.
Furthermore, the Unfair Retail Trade Practices Prohibition Law entered into the force on 1 January, 2016. Since the end of 2015, the CC actively consults retail undertakings on the law implementation.
Overall, in 2015, the CC has developed and published a record number of guidelines, in total six, thus, explaining various issues regarding implementation of the competition law.
International operation and recognition
While assessing preparedness of Latvia to join the OECD Competition Committee, the organization evaluated Latvian competition policy and operation of the CC. The OECD recognised Latvian competition authority as professional and effective in implementation of the competition policy and taking over the good international practice. Additionally, the OECD invited the state to strengthen independence and resources of the CC.
For the very first time in history, the CC has been included within the prominent Global Competition Review Rating Enforcement – the annual ranking of the world's top antitrust authorities. The CC received the high rating of three stars for a significant progress in the detection of competition infringements during the past years, as well as for promotion of the competition culture and improvement of operational efficiency. While evaluating performance indicators of the CC, Latvian competition authority has been described as “perhaps, the best enforcer in the region”.
For media inquiries:
Inita Kabanova
Head of Communication Division
The Competition Council of Latvia
E-mail: inita.kabanova@kp.gov.lv
Ph: +371 67365210; Mob: +371 20219048