Abuses of sugar market in Latvia, Estonia under spotlight

  • 2004-11-17
  • From wire reports
RIGA-TALLINN - Sugar has become a headache across the Baltic states, as Latvia's competition watchdog has punished one of the country's sugar refiners and two trade companies for price fixing.

Meanwhile, Estonia braces itself for a penalty after accumulating excess sugar stocks on the eve of EU accession.

In Lithuania, the consumption of domestically made sugar has plummeted dramatically due to accumulated stocks earlier this year.

Latvia's Competition Council said it had fined Liepajas Cukurfabrika, the second largest sugar producer, and trade companies Greis Logistika and Kesko Food, for coordinating sugar prices and thus distorting competition, a council spokeswoman said.

Dana Sosnovska said the sugar supply contract between Liepajas Cukurfabrika and Greis Logistika stated that the distributor's obligation was to distribute and sell sugar for prices specified in price lists attached to the contract, thereby allowing the sugar factory to control retail prices.

The council also concluded that the agreement between Greis Logistika and the owner of Finnish-owned Kesko Food led to price coordination during the February-May period, and restricted the freedom of Kesko Food to set the sales price of sugar.

The council has imposed a 4,000-lat (5,800-euro) fine on Liepajas Cukurfabrika and a 1,000-lat fine each on Greis Logistika and Kesko Food, which they have to pay within a month.

Liepajas Cukurfabrika director Valija Zabe would not comment on the reproaches, saying the company needed to review the decision. She added that the company would decide whether to appeal the decision or pay the fine once all the arguments were assessed.

Greis Logistika and Kesko Food would not provide any comments either, arguing that lawyers were still studying the council's conclusions.

According to Latvian competition law, companies are banned from entering into agreements that entail setting prices or conditions for the formation of prices. The Competition Council, while investigating the sugar market, said it did not uncover any evidence suggesting that Jelgavas Cukurfabrika, the country's largest sugar maker, closed similar contracts with retailers.

Meanwhile, Estonian officials are preparing for penalties that resulted from when the country accumulated excessive supplies of sugar shortly before EU accession last May. The outgoing European Commission scheduled a date when the final estimate of the Baltic country's excessive stocks would be approved. The size of the monetary penalty will depend upon this estimate.

The commission was originally scheduled to announce the size of excessive stocks to all new EU members by Oct. 31.

"The reason why the deadline is being postponed is not a secret - it's the huge Estonian stockpile, which according to provisional estimates reaches 91,000 tons," Ene Maadvere, chief of the trade bureau at Estonia's Agriculture Ministry, said recently.

She added that technical experts at the commission were demanding that sugar stocks accumulated by private individuals should also be registered as excessive. "Because of the excessive sugar in the hands of private consumers alone, Estonia may be facing a penalty of half a billion kroons," Maadvere said.

In Lithuania, consumption of sugar produced by the country's four factories has dropped 42 percent year-on-year to 40,000 tons at the end of October. Industry officials, however, were upbeat about a turnaround.

"The situation should improve as we have sold out of the surplus sugar, which was imported in early May. However, the market still remains open," Rimantas Stulgys, president of the sugar producers' association, said.

The government has assigned 50 million litas (14.5 million euros) of offsets for the export of 60,000 tons of surplus sugar in order to avoid accumulation fines from Brussels.

The sugar-manufacturing season, which began in late September, is expected to be completed in mid-December. Lithua-nian output should reach 103,010 tons of white sugar, identical to the sugar-manufacturing quota set by the EU for the country last year.