RIGA - Latvia's competition authorities have reportedly concluded that the country's retail fuel market is dominated by three companies that "coordinate sales" and "elbow out" competitors. In a report, a copy of which was obtained by the Dienas Bizness daily paper, the Competition Council states that Latvia's three leading fuel retailers 's Lukoil Baltija R, Neste Latvija and Latvija Statoil 's constitute an oligopoly, which would appear to be a euphemism for cartel.
The council wrote in a report that while the three companies are legally independent, they constitute a "single unit" in relations with rivals, clients and consumers.
Specifically, the council wrote that if in 2003 the "oligopolic trio" controlled 39.34 percent of the Latvian fuel market, then by the end of 2006 they had raised their market share to 49.98 percent.
In recent years the Competition Council has dogged fuel retailers, particularly after the sharp rise in prices at the pump two years ago. Government ministers have repeatedly turned to the council as an instrument to apply pressure on retailers, whom many Latvians accuse of price-gouging.
In its report, the watchdog notes that the Latvian fuel market is quite transparent, which allows Statoil, Lukoil and Neste to coordinate their prices on the domestic market and nudge out other companies.
While Statoil and Neste, for instance, have said that their decision to lower fuel prices was dictated by mutual competition, the Competition Council believes that by adjusting their pricing decisions the three market leaders create a misleading impression of tough competition.
Coordinating decisions to either raise or cut prices is illegal, the council reminds.
The council is expected to pass a verdict on the suspicious cartel agreement sometime in May, the watchdog's representative Skaid-rite Abrama said. She added that for the time being all information concerning the case was confidential, but that the three fuel retailers have been informed of the probe.
In April, the council is scheduled to hear the positions and explanations of the fuel retailers.
Under the Latvian competition law, companies may face fines of up to 5 percent of their annual sales for abusing dominant position.
Haims Kogans, who heads Lukoil Baltija R, voiced indignation over the watchdog's findings. "We have never made any agreements with anybody. We consider Statoil and Neste our rivals," he said.
"The Competition Council has artificially added us to the list so that the three companies together made a dominant position, as the two largest Latvian fuel retailers alone do not have 40 percent of the market, which is the necessary market share for dominant position," Kogans said.
Statoil and Neste have declined to give any comments to the paper.