In order to ensure the detection of significant competition infringements and market distortion, two high-priority infringement cases have been completed in the first half of 2024. The Competition Council (CC) fined a total of three companies, applying penalties in the amount of more than 142 thousand euros. At the same time, in the first half of 2024, following successful litigation and settlements, companies have paid more than 5.3 million euros to the state budget.
In one case, the CC found a cartel between two construction companies – SIA GATE L and SIA Aksīte – mutually dividing renovation projects for multi-apartment residential buildings in Saldus. A fine of 108,472.36 euros was imposed for this infringement. In the second case, the CC found a vertical agreement in the activities of SIA Mirastyle, a wholesaler/retailer of lighting objects, which consisted of fixing resale prices to certain retailers. For the infringement of the competition law, the CC imposed a fine of EUR 34,490.26 on SIA Mirastyle.
The number of people warned is on the rise
Also, during this period, five preventive procedures were implemented in cases of minor potential infringements, warning a total of 56 legal persons of potential infringements of the Competition Law and the Prohibition of Unfair Trading Practices Law, in line with the “Consult First” principle. The number of legal entities warned has almost doubled compared to the same period last year.
Active monitoring of retail
Monitoring of several markets, such as retail, was concluded in the first six months of 2024. The CC investigated the competitive situation in the market after the entry of LIDL into the market of Latvia and, taking into account the sharp price increases in stores, explained how prices are transferred from producer to processor or from wholesaler to retailer and found that in some retail stores, domestic products were priced more than imported goods. In order to improve the situation in the food retail sector, the CC prepared and submitted proposals to the Ministry of Economics (MoE) to amend the Prohibition of Unfair Trading Practices Law (PUTPL).
During the reporting period, the CC also investigated other markets in-depth, such as the heating market in Riga, where it identified competition failures in the procurement of heating on the right bank of the River Daugava in Riga, as well as the behaviour of educational institutions in renting dormitories to tourists, inviting educational institutions to reassess whether their dormitory activities are necessary in the relevant market.
Merger trend – unchanged
The CC has also assessed mergers in 11 cases. All 11 mergers assessed have been cleared without objections as no significant negative risks to competition were identified. One merger case involved an in-depth investigation and led to the clearance of a merger between distributors of industrial packaging, food packaging and cardboard packaging. Comparing the merger activity in the first half of 2024 and the first six months of the previous year, the CC concludes that the trend is constant and stable, with the same number of merger decisions taken in both periods.
Complaints about public sector conduct in procurements
In the first half of 2024, the CC received almost 60 different complaints about the conduct of public entities – the State, municipalities and their capital companies – including mostly about discriminatory conduct by public entities, for example in organising procurements. At the same time, in the first half of 2024, the CC issued eight opinions to public entities on whether their shareholding in capital companies is justified.
In one case, in order to eliminate non-compliance with the competition neutrality regulation set out in Section 141 of the Competition Law, the CC conducted negotiations with the local government of Tukums Municipality, because the municipality, without organising procurement procedures, transferred the management of multi-apartment residential houses to the private sector, the management rights of which had not been taken over by the residents. The municipality, in compliance with the external laws and regulations and in order to promote fair competition on the market, undertook to organise a procurement procedure for the management of non-acquired multi-apartment residential houses in the future.
Raising business awareness of fair competition
To improve the competition environment in Latvia and the regulatory framework, the CC participated in 60 meetings with policymakers in the first half of 2024. In 2024, it also provided views on the compatibility of draft laws with the principles of free competition and distortions of competition in areas such as pharmaceuticals, finance, retail, utilities, electronic communications, health, insurance and others.
In addition, to promote market participants’ understanding of competition law, the CC educated businesses and public procurers on the latest developments in competition law enforcement at 42 events. This included seven “Competition Council Academy” seminars, where market participants on the premises of the CC or online are educated free of charge on cartel agreements, vertical prohibited agreements, unfair commercial practices, public involvement in business, mergers and other topics.
In addition, in the spring, lecturers from the CC, Procurement Monitoring Bureau (PMB) and the Corruption Prevention and Combating Bureau (CPCB), in cooperation with the Latvian Chamber of Commerce and Industry (LCCI) and the Investment and Development Agency of Latvia (IDAL), organised a series of educational seminars for companies on fair participation in procurements, educating almost 200 company representatives in total.
International recommendations to boost competitiveness
At the same time, to promote the competitiveness of the Latvian economy, the Organisation for Economic Co-operation and Development (OECD), in its report on the Latvian economy published on 25 April, recommended strengthening the powers of the CC to ensure the competitive neutrality of state capital companies and to supervise the financial or banking system in Latvia. In addition, the OECD recommends that the CC continue its ongoing work on IT development, increasing the CC’s resources for IT equipment and software development, as well as staff training. This will expand the CC’s IT laboratory and existing facilities for better quality ex-post evaluations.
Also, the CC Council Member Kārlis Piģēns was elected to the Office of the Competition Committee of the Organisation for Economic Co-operation and Development (OECD) at the end of 2023 and, thus, represents the interests of Latvia in international competition policymaking from 2024.