Last year, the Competition Council (hereinafter - the CC) adopted 28 decisions, including four infringement decisions, fining 13 companies and imposing fines totalling more than 17 million euros. In 2021, fines previously applied by the CC in the amount of more than 4 million euros were transferred to the state budget. Penalties are paid by companies when the authority enters into an administrative contract with the offender or when the authority's decision enters into force, most often after the end of the Court proceedings, if it has been appealed.
The total average public benefit from the CC's work or the implementation of competition policy over a three-year period, eliminating distortions of competition, monitoring and encouraging changes in markets to promote fair competition, and monitoring the implementation of large mergers, is € 26 million. However, in the past 2021 alone, the public benefit is measured in the amount of 52 million euros.
Procurement cartels - one of the main problems of the competition environment
Last year, the CC detected two cartels, both of which involved the coordination of illegal agreements of companies in public procurement.
In 2021, the “Builders' Cartel” was discovered, establishing a long-term prohibited agreement between ten construction companies on the conditions for participation in public and private procurements in Latvia. Based on the information provided by the Corruption Prevention and Combating Bureau and additional evidence obtained during the investigation, the CC fined Ltd. “SKONTO BŪVE”, Ltd. “LATVIJAS ENERGOCELTNIEKS”, Ltd. “VELVE”, Ltd. “ARČERS”, Ltd. “RERE BŪVE”, SIA “RE & RE”, Ltd. “RBSSKALS Būvvadība”, Ltd. “ABORA”, JSC company “LNK Industries” and Ltd. “MERKS”, imposing a fine in the amount of more than 16 million euros. A settlement was reached with Ltd. VELVE on the termination of the legal dispute in the case. The company agreed with the established facts and committed not to appeal the final decision of the CC in the Court. Ltd. “RBSSKALS Būvvadība”, on the other hand, initiated insolvency proceedings, so no decision was made on the fine, but litigation with other companies is ongoing.
The institution also found that two amelioration companies – Ltd. “Valkas meliorācija” and Ltd. “Agromeliorators” – illegally agreed on the terms of participation in three procurement procedures organized by Ltd. “Zemkopības ministrijas nekustamie īpašumi” by submitting mutually agreed bids. As a result, the CC imposed a fine of more than 221,000 euros for participation in the cartel. This is the second cartel found in the land reclamation sector in the last two years.
Based on suspicions of prohibited agreements between companies, seven dawn-raids were carried out in a total of 20 companies to obtain evidence of possible violations of the Competition Law. In addition, in 2021, implementing the “Consult First” principle, nine prevention measures were implemented in cases of small market participants and possible minor violations, educating and warning a total of 24 legal entities about potential violations of the Competition Law.
Involvement of public administrative bodies in business
Along with the amendments to the Competition Law on 1 January 2020, which give the CC broader powers to address distortions of competition in the market caused by public administrative bodies, in 2021, the institution has implemented several measures to implement the principle of competitive neutrality among public administrative bodies. As a result, in 2021, the CC received more than 110 different complaints about the actions of public administrative bodies, in particular about the anti-competitive rules in procurement.
Last year, a negotiation procedure was used in four cases to prevent a violation of competitive neutrality: in the organization of waste collection services in Jēkabpils and in grave excavation services in Ventspils and Daugavpils, as well as in a public procurement organized by a public company. In addition, two market surveillance were caried out in 2021 - the organization of grave excavation services in the largest cities of Latvia and the supervision of the procurement on production of number plates organized by the Road Traffic Safety Directorate - conclusions obtained within the framework are important in the further education of public administrative bodies regarding the observance of the principle of competitive neutrality.
Supervising the actions of public administrative bodies in the regulatory process - in 24% of cases, anti-competitive rules have been removed. This includes an assessment made in 2021 of the impact of Covid-19 restrictions on fair competition in, for example, the beauty industry, the retail sector, etc.
Last year, in addition to violations of competitive neutrality, the CC also detected abuse of a dominant position at the disposal of public entities. The CC punished Jelgava's City Municipality for its actions, unreasonably and in violation of the regulatory framework, ensuring the right of its capital company Ltd. “Jelgavas komunālie pakalpojumi” to operate in the municipal waste collection and transportation market in the administrative territory of Jelgava's City. As a result, the market was closed for competition for more than seven years. The CC imposed a fine of 51,123 euros for the violation of competition law. Whereas in 2021, an agreement was reached with the Riga's City Municipality and Ltd. "Getliņi EKO" on the intention to close the waste management market in Riga for 20 years to competition. Riga's Municipality paid a fine in the amount of 500,000 euros to the state budget for violation of competition law, while Ltd. "Getliņi EKO" paid 385,000 euros.
There is a growing desire for companies to merge
In 2021, the desire of companies to merge and strengthen their position in the market has significantly increased. As a result, the number of merger reports assessed by the CC has doubled since 2020, when decisions were adopted in 11 cases while in 2021 – 22 decisions. That is the highest number of decisions adopted in a year in the last five years. Also, in 2021, the CC received three times more notifications regarding mergers of market participants than in 2020, when only eight reports were received, but last year – 25.
Last year, the CC provided 88 pre-merger consultations and assessed many mergers within one month, paying special attention to mergers requiring in-depth assessment. In 2021, such in-depth assessment took place in two cases - in the merger of the Lithuanian company “AKROPOLIS GROUP” with the “Alfa” manager Ltd. “DELTA PROPERTY”, as well as in the case of a merger of companies related to the operation of cinemas, where, in order to avoid significant negative consequences in the cinema screening market, the CC allowed the merger with remedies. The remaining 21 of the 22 mergers were authorized without objection as no possible negative effects on competition were identified.
Improvement of regulatory framework
In 2021, the CC has been actively working on the improvement of the regulatory framework, preparing amendments to the Competition Law in order to transpose the ECN+ Directive, which provides the necessary guarantees of independence, resources and enforcement powers for the effective investigation and prevention of antitrust infringements by the CC.
Last year in addition to implementing the requirements of the ECN+ Directive, also the CC worked on the implementation of the Prohibition of Unfair Trading Practices Law, which aims to transpose the European Union (EU) Directive on Unfair Trading Practices in Business-to-Business Relationships in the Agricultural and Food Supply Chain and integrate the Unfair Retail Trade Practices Prohibition Law, which restrict the use of retailers' purchasing power against suppliers. The Directive provides the protection of suppliers and aims to protect the smallest players from unfair trading practices by larger companies. The new law on the Prohibition of Unfair Trading Practices Law entered into force on 1 November 2021. Compliance of market participants' actions with the new law is supervised and controlled by the CC.