Competition Economics Handbook 2020

Latvia

06 November 2019

Copenhagen Economics

The Competition Council of Latvia (CC) currently employs two economists who provide economic support during case investigations and are involved in sector inquiries. The role of economic analysis seems to vary depending on the type of case and investigation; in merger control and in sector inquiries, economics has played an increasingly larger role in recent years. The number of mergers that move to Phase II investigation is still quite small. Merger prohibitions are very rare and unlike in many other jurisdictions, the CC seems to accept behavioural remedies. Abuse cases are often settled with the parties, meaning that there are few follow-on damages cases. The priority of the CC seems to be bid-rigging in public procurement and government activity in market operations. However, the role and importance of economic analysis in these cases is limited.

This article is based on interviews with prominent competition law practitioners from the law firms Cobalt, Ellex, Sorainen and TGS Baltic as well as with the economist team of the Competition Council of Latvia (CC).

Role of economic analysis is more pronounced in merger investigations

There are relatively many merger filings per year and the number of Phase I notifications has increased by more than 50 per cent in 2017–2018. However, only a few mergers move to Phase II investigations. Some of the interviewees saw economics having a more and more pronounced role in merger investigations. For example, recent mergers in the grocery retail sector have involved party appointed economists and a more economic-based methods from the CC (eg, to define relevant geographical and product markets). Two retail mergers were prohibited by the CC and are currently pending in court. Prohibiting a merger is, however, rare in Latvia: the two aforementioned prohibitions are the only prohibitions during the past decade.

The CC has a high success rate in court. Some interviewees postulate that the court might have become more willing to accept economic evidence presented as part of argumentation and evidence. The court can itself appoint economic experts, to assess the economic analysis presented by CC and the parties. However, the lack of specialised, local economists trained specifically in competition economics was considered a barrier to the use of more economic reasoning by some interviewees, both in investigations and in court.

Abuse of dominance cases are often settled

Abuse of dominance investigations are relatively rare in Latvia. The competition authority seems to consider it more efficient to settle cases early rather than to conduct full inquiries that may lead to fines or taking cases to court. In 2017, the CC concluded six negotiation procedures, five of which concerned abuse of dominance. In 2018, the CC imposed a fine in an abuse of dominance case in the waste sector. The AKKA/LAA decision concerning excessive pricing in copyrighted music was cited among the interviewees as a significant abuse of dominance decision from recent years.

In terms of anticompetitive agreements, the CC has adopted several decisions, for instance, concerning public transport, the construction sector and public procurement. The CC seems to be fairly concerned about cartels in relation to public procurement as well as government (municipalities’) involvement in market operations. Amendments in competition law taking place in 2020 gives the authority more power to act against public administrative bodies if they distort competition. The role and importance of economic analysis in bid-rigging cases seems, however, to be limited.

Market inquiries rely on economic analyses

The economists at the CC also contribute to the market inquiries. In recent years, there were at least three no-table market investigations: the vehicle inspection market, the pharmacies market and the market for waste management. The vehicle inspection market inquiry was mentioned as an example where economic analysis played an important role, including impact analysis of deregulation on prices and service quality.