On 13 November 2010 the Competition Council (CC) adopted a decision to approve the proposed merger of Baltkom group and Izzi group – the second and the third largest telecommunication companies in Latvia.
While assessing the proposed merger the CC concluded that it could significantly impede effective competition in paid TV market in capital city Riga and three other cities (Ludza (population ~ 10 247), Jēkabpils (population ~ 26 956) and Balvi (population ~ 8 253)) and on wholesale market of paid TV channels in Latvia. Potential impact on markets of voice telephony and internet data transmission has been assessed as irrelevant.
This merger was cleared with the following binding obligations.
Considering existing quality problems of parties, quality requirements and compensation system (in the case if the quality requirements are not met) have to be included in contracts with new clients of paid TV service.
Parties are obliged to provide their new customers of paid TV service (1) contracts without minimal term and penalty for prior annulment of the contract or (2) possibility to divide installation costs for maximum period of 24 months, with opportunity of prior annulment of the contract, by covering installation costs. The average installation charge has to be initially defined in the contract and set close to the actual expenses of the installation. Similar conditions have to be applied to those clients of paid TV who have started using parties' services one year before the merger is completed, with the difference that the installation charge for these clients can not exceed the previously defined penalty. The CC has also stated that parties have to inform consumers about the changes via internet and TV.
To resolve competition concerns in paid TV market in connection with rise of market shares, merger participants are forbidden to implement pricing policy that is directed towards elimination of competitors in paid TV market in above mentioned cities. It has also been stated that marketing activities and offers to potential clients of paid TV service have to be similar throughout the territory of Latvia.
If until 15 April 2013 local national level TV channels LNT and TV3 quit free DVB-T, parties are obliged to offer these channels licence agreements on non-discriminatory conditions.
The positive effects of the merger (e.g. consolidation of resources that might facilitate creation of new services; rise of competitive capacity of merger parties in markets where it creates no threat to competition) and factors that lessen potential threats (e.g. dynamic development of the technologies, strong competition from the side of Lattelecom Ltd. and the fact that competitors use technologically more developed platforms) were also taken into account.
The approval is valid until 15 April 2011 – if the merger is not carried into effect within the specified validity period parties have to notify the merger again.