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News

Competition - Latvia

 

 

The Competition Council recently published a brief report on its activities in 2008.(1)

 

Figures

 

The report noted that in 2008 the council delivered decisions in 110 cases, in 26 of which legal violations were detected. Fifty-seven of these cases were merger notifications, meaning that the merger review process accounted for more than 50% of the council's caseload. Two of these merger notifications were prohibited, five resulted in fines being imposed upon the undertakings for failure to notify and in two cases the council imposed commitments upon undertakings. In comparison with 2007, the number of cases relating to mergers investigated by the council decreased by one-quarter.

 

The council reported that in 2008, the battle against cartels and abuses of dominance continued. A total of 36 such cases were heard by the council, resulting in the detection of 12 violations. Twenty-nine undertakings were fined an aggregate of over Lats500,000 (approximately ˆ720,000) for these violations.

 

Interestingly, the state budget for the council in 2008 exceeded Lats1million. While the imposition of fines is not the council's sole function when monitoring the markets, it is debatable as to whether many of the council's investigations are justified given that the fines that it issues do not cover its overall costs.

 

Violations

 

Prohibited agreements

The council found that seven violations had occurred with regard to prohibited agreements. Three of these were violations of procurement regulations by road construction companies that had compared their submissions to two contracting authorities. Two infringements were with regards to resale price maintenance in the publishing sector, where publishers had requested that retailers retain predefined sale prices of the published material. A similar case was reviewed by the council concerning the sale of alcoholic beverages, where a company was found in violation for fixing resale prices for both retail and wholesale customers. Finally, a horizontal agreement was found to exist between bus lines operating on the national inter-city level.

 

In 2008 the council did not specifically focus on any one sector of the economy. However, the fact that several investigations took place within a single sector implies that the council is inclined to review the whole of any sector in which one infringement has been discovered.

 

Dominant market position

The council delivered five decisions in 2008 regarding abuse of a dominant market position. One of those related to the operation of the Riga International Bus Station, which was found to be abusing its dominant position by setting equal charges for usage of its infrastructure and imposing different terms and conditions for that. Two decisions concerned the activities of Latvian Propane Gas (LPG), the incumbent national provider of liquid gas. One of these decisions found LPG guilty of tying the lease of its gas containers to the use of the gas it supplied. The other found that LPG was setting unfair tariffs for consumers and households to which it supplied liquid gas. LPG was also found to have violated its position in 2007.

 

The council also ruled that the actions of the incumbent, state-owned national railway operator Latvian Railway constituted an abuse of its dominant position. According to the council, the operator had required a private undertaking to contribute to maintenance of a specific railway, which, according to the applicable legislation, was the railway operator's responsibility. The railway had thereby abused its dominant position.

 

Finally, the coucil adopted an interesting decision at the very end of 2008 with regard to the activities of the Copyright and Communication Agency. The court found that, as the artist's authorized party, the agency had imposed excessive tariffs on merchants for the playback of certain music.

 

Thus it can be seen that, in general, 2008 continued the council's trend of investigating the incumbent operators of network infrastructures, while also ruling in other areas where the need arose.

 

Comment

 

The council was keener to investigate and deliver decisions on antirust cases in 2008. Twelve violations of antitrust matters were found in 2008, whereas 2007 saw only seven such violations. In 2007 the council spent more time on the review and scrutiny of merger applications.

 

It remains to be seen how the council's caseload will change in 2009. It is predicted that 2009 will see even more antitrust investigations, since more undertakings may be tempted to collude in order to survive contractions in the markets. However, in some cases such illegitimate collusion could be supplanted by legitimate mergers by those trying to reorganize and restructure.

 

 

 

 



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