Taking counsel

  • 2005-08-10
  • By Zita Ozola [ LOZE, GRUNTE & CERS ]
At the end of last year Latvia's Competition Council announced that, according to its information, for some time a cartel agreement existed among Latvian egg producers. The council's decision involved the fixation of prices of hen eggs, which is prohibited under the Competition Law. The decision was one of the first steps taken by the state to fight against cartel agreements concluded among market players.

By adopting its decision, the Competition Council at the same time announced that it would pay special attention to the liquidation of cartels and encouraged market players to use the leniency program 's i.e., when a market player and other persons submit evidence to the council about the existence of a cartel agreement 's and even reduced punishment for the whistleblower who participated in the cartel.

The purpose of these actions is to protect, preserve and develop free, equal and fair competition in all sectors, thus facilitating the overall development of sectors and ensuring economic benefit for the consumers. Until recently, information released by the Competition Council showed that it had paid attention to two sectors 's the advertising market and the fuel retail market. However, the evidence has not been sufficient to initiate cases.

Where does a cartel start? A cartel agreement is an agreement among competitors with the aim of distorting or restricting competition by other market players. They agree directly or indirectly about fixing prices or forming conditions for prices, about exchanging information on prices, scope of sales and market division, and about anything else that may affect the competition in the market.

For the purpose of competition rules, an agreement could be a contract between two or more market players or concerted practices in which market players take part, as well as a decision taken by a registered or unregistered grouping (association, union and the like) of market players or by an official of such a grouping.

Such agreements do not need to be written. A cartel agreement may be detected in uniform, conscious and goal-oriented actions of the competitors aimed at distorting competition, restricting the commercial freedom of market players and application of uniform regulations, as well as coordinating and exercising influence on market forces. Any of the aforementioned activities that indicate the formation or existence of cartels are strictly prohibited by provisions of the Commercial Law.

Accordingly, concerted practices comprise contacts between at least two market players, where one of the competitors discloses the intent of his actions to the other competitor based on a request voiced by the market player or by simply accepting such exchange of information. Consequently, direct or indirect information exchange, which endangers competition and does not correspond to normal conditions in the market, is sufficient for assessing such action as concerted practice.

Considering all this, one can conclude that the Competition Council will focus its attention on sector associations, which unite representatives of the relevant sector for the protection and representation of their interests. Although the goals set out in the foundation documents of such associations might not be directly aimed against competition in the sector, the very principle of operation of such associations 's regular or irregular meetings of competitors, which provide open and free opportunities for information exchange among members 's may be compared to a cartel.