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Latvia: Competition Council
Chairwoman of the Competition Council
Justice, professionalism and independence are the core values of the Latvian Competition Council. Based on these values, we have developed our medium-term operational strategy, and these values guide our everyday actions in the field of competition protection and promotion.
The priority of the Competition Council (CC) is the fight against the most severe competition distortions: abuse of dominant position and especially cartels. However, to win the fight takes careful planning, proactivity and searching for innovative solutions. 70 per cent of the Competition law infringements established in Latvia in 2013 were cartel agreements, and most of those were bid-rigging cases. Presently, it looks as though the ratio of investigated cases will remain unchanged in 2014. Although in previous years bid-rigging cartels were detected less frequently, I do not think that the increase in detection indicates markets becoming more cartelised. The greater role here has been the targeted actions of the CC, which established a specialised cartel unit at the beginning of 2013. The synergy of the enforcement activities with the promotion of competition culture among procurement organisers and market players has resulted in faster investigation process and larger number of received complaints on alleged bid rigging.
In 2013, the CC began to apply a practice of issuing warnings prior to initiating an investigation into cases of alleged minor bid riggings (eg, when the companies are indirectly related). Thus, while the resources of the CC can be used efficiently in cases of major significance, undertakings are informed and educated in fair competition and the consequences of the infringements. Together with the warning, enterprises are encouraged to introduce competition compliance programmes. However, in case of repeated infringement, the CC will initiate an infringement case.
To expand competition control, in 2014, the CC chose 15 markets for sector inquiries. Thus, even without complaints or other infringement indicators from market participants, our attention, according to sector inquiry prioritisation principles, is drawn to the markets that merit attention. These markets have substantial influence on the expenses of households, involve public procurements, have experienced recent mergers or infringements, and are too heavily regulated (or the regulation is being changed), and so on. Thus, in 2014/2015, the CC will carry out sector inquiries into the markets of medical services, fuel retail franchise agreements, energy, transportation, construction, telecommunications, and the distribution of various consumption goods as well as various services. It can be noted that some of the sector inquiries have already led us to initiating infringement cases to scrutinise the competition concerns that have been revealed. In 2014, shortly after the introduction of the euro, the CC also participated in national market inquiry activities to verify that enterprises do not enter into prohibited agreements or otherwise concert their actions to increase prices unreasonably due to the introduction of the euro.
The operation of the competition authority is highly influenced by processes in the markets, and even more so when talking about merger control. The large number of merger cases reviewed up until 2008 began to drop rapidly from 2009 onwards, partly because the notification threshold was raised and partly as a result of the economic crisis. However, in recent years economic activity has grown, and so has the number of notified mergers. The higher notification threshold now allows the CC to concentrate its resources on substantial cases. Thus, in the first half of 2014, the CC reviewed seven mergers and exempted agreements; and in 2013, 22, many of which were in the food production and fuel retail markets. Although all the mergers in 2014 were cleared without remedies, market concentration can cause efficiency benefits and the reduction of consumer welfare, therefore the CC has to ensure the ex post evaluation of the markets. Thus, in the beginning of 2014, the CC published its report on sector inquiry into the market of milk production and processing. As part of the inquiry, the CC evaluated the level of competition after the merger of two large milk processing enterprises, and revealed that the merger has not harmed the situation of farmers or end-consumers.
In line with competition enforcement, competition advocacy has become increasingly important. In 2014, the CC will continute its in-depth involvement into the development of sectoral policies promoting competition. Some of the markets where the active involvement of the CC is essential to prevent the further distortion of competition and to find solutions that encourage competition include:
- the waste management sector;
- the use of the in-house principle within local municipalities;
- regulation in the pharmaceutical sector;
- digital terrestrial TV and telecommunications;
- the unjustified and unnecessary involvement in business by public companies; and
- conflict of interests and abuse of dominant position in Riga Freeport.
However, merely talking about the benefits of free competition is not enough to change the existing system. Currently, the legal status and regulation of the CC does not make the its opinion binding. Thus, in case of non-compliance, the CC cannot suspend such distorting behaviour, normative enactment or decision. To fully implement its aims and protect free competition, the CC is not planning to put up with such conditions – we have prepared draft recommendations for amendments to the Competition Law to provide for such absolutely indispensable preconditions of effective and trustworthy operation of competition authority as full independence from any political influence. Draft amendments would also provide for additional sanctions to take actions against public persons. The CC currently operates under the supervision of the Ministry of Economics, and although the decisions on investigation cases are taken independently, the operational and budget planning is directly dependent on the Ministry of Economics. Moreover, the members of the CC are approved by the government (Cabinet of Ministers).
To strengthen the operative capacity of the CC, we are continuously looking at our efficiency level to ensure that no opportunities have been missed. Thus, the CC has developed a case prioritisation strategy, which will serve as guidelines for the authority and as clarification to the business community, explaining exactly how the authority will execute its prioritisation by focusing on the most relevant infringement cases.
The CC continues to strengthen and widen its network of allies in cartel detection. In 2014, the CC agreed with the Corruption Prevention and Combating Bureau to carry out joint inspections to identify violations and to obtain evidence. Cooperation has also been strengthened with the Security Police and State Police.
The communication strategy of the CC envisages an open communication with society, providing systematic and sector specific information and education activities, as well as seeking feedback. Conducting various meetings, seminars and lectures with businesses and their associations helps us raise awareness and overall competition culture and gives an opportunity to spot competition concerns and look for solutions in earlier stages.
In 2014, the CC organised and hosted a lawyers’ forum that serves as a platform for discussion among specialists of the CC and representatives of law firms that specialise in competition law. The forum was dedicated to the current issues in competition law, an exchange of the experience of lawyers and the competition authority, and finding new solutions to increase the effectiveness of productive operation.
Being aware that, with s decision of the CC and even with a court ruling, the process of law enforcement cannot always be completed, the CC has devoted serious effort to advance the recovery of fines. In 2014, for the first time, the CC carried out a market inquiry following the fraudulent transfer of assets carried out by the enterprise that had been heavily fined. The CC concluded that the newly established enterprise as a legal successor has to pay the fine. This case shows that the authority has to devote resources not only to investigating infringements, but also to follow up the payment of fines after legal proceedings. Such activities are one more step in the direction of achieving truly effective and deterrent enforcement of competition policy.
Chairwoman of the Competition Council
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