Latvia tightens competition law

  • 2008-03-19
  • From wire reports
RIGA - Lawmakers overwhelmingly approved amendments to the Law on Competition in the final reading despite protests from retailers, according to reports. The amendments close a few loopholes and essentially give the Competition Council, the regulatory body, wider scope in addressing possible violations.
Economy Minister Kaspars Gerhards urged lawmakers to support the amendments, arguing they will improve the effectiveness of the Competition Council and prevent malicious use of dominant market positions.
Competition 's or the lack thereof 's has widely been seen as one of the main factors for Latvia's rampant inflation, and last year the government included intensifying competition as one of the key points in its anti-inflation plan.

Passage of the amendments also comes after a major nationwide study by Diena, a leading daily paper, found that higher competition in retail food sales provides for at least 10 percent reduction in prices. Regions with more brand-name stores had lower prices than those that didn't, the study found.
Food prices are soaring by over 20 percent annually in Latvia, outpacing inflation and taking a bigger chunk out of household income. Increasingly many Latvians feel that retail stores are gouging consumers, though the major chains all claim that the mark-ups are purely due to producers.
Gerhards added that council decisions will be appealed only at the Administrative District Court, and the Administrative Regional Court will not consider such claims any more, thereby preventing the endless delays in litigation that had stonewalled previous decisions.

Crucially, one of the amendments clarifies that contesting a decision by the Competition Council does not lift fulfillment of its decisions; rather, this would not apply to the payments of the fines to be performed after the court decision, the minister said.
In addition, the amendments specify the so-called dominant market position, excluding the condition of at least 40 percent market share in a particular market and therefore capable of forcing unjust and ungrounded conditions or payments onto the suppliers and hinder, limit or distort competition in any particular market.
A retailer in a dominating position will not be allowed to force producers to take back goods unless the inferior quality of the goods has been proven. In the past, retailers have been able to force distributors to take back goods on nearly any whimsical basis.

Also, demanding unjust and ungrounded payments for placing goods at a retail store will be prohibited, unless these payments are substantiated by promotion of a new product, which is unknown to consumers, on the market.
The Competition Council will be allowed to apply a fine of up to 5 percent of the annual turnover of the company in the latest financial year and not less than 250 lats (355 euros) per each offense.
In case of failure to conform to Competition Council decisions, the council is entitled to increase the fines.
Seventy-three voted for the changes, and none voted against. The remaining were either absent or abstained.
The law amendments will come into effect on October 1, 2008.