RIGA - Prime Minister Aigars Kalvitis blasted the Competition Council last week, decrying its decision to approve Statoil's takeover of Shell filling stations more than two years ago. In the PM's words, the deal restricted competition in retail fuel trade and made price-fixing between retailers more likely.
Speaking on Latvian Radio April 15, Kalvitis said that the Competition Council on several occasions has made the wrong decision in authorizing mergers since the latter resulted in decreased competition. Specifically, he referred to the takeover of Shell's filling stations by Statoil at the end of 2002.
"The question is about professionalism. I think it was a very erroneous decision to let Statoil and Shell merge... because now we have very few players on the fuel market and price-fixing is more likely," said Kalvitis.
He pointed out that a price-fixing agreement had been discovered in Sweden, where competition on the fuel market was even tougher than in the Baltic state.
After Statoil's subsidiary took over Shell's stations its share of Latvia's fuel retail market increased to 22 percent. Latvian officials have often voiced suspicions about a price-fixing agreement between fuel retailers, who have denied the accusations.
The Competition Council studied the fuel retail market in Riga last year but did not find any illegal arrangements. It concluded there was no price war on the market, with fuel retailers following each other's suit when setting the price.
Kalvitis agreed that the Competition Council's mistakes are related to its insufficient capacity and financing. In order to improve the situation, the government has increased the council's budget this year and is ready to keep raising it.
Fuel prices in Latvia keep setting new record-highs and have become a continuous complaint among drivers. Still, the price increases have occurred on a backdrop of rising crude and commodity prices across the globe.
At present Statoil's Latvian subsidiary, which as a rule sells the most expensive fuel, charges 0.559 lats (0.795 euro) per liter for both gasoline 95 and diesel fuel.
