Competition Law Amended - Latvia
- Latvia
- 05/06/2008
- Lejins, Torgans & Vonsovics
On 13 March 2008, Saeima (the Parliament) has adopted a set of material amendments to the Competition Law of Latvia, changing, inter alia, the legal definition of a dominant position, merger (concentration) notification requirements and procedures, eliminating the individual exemption procedures for anti-competitive agreements and introducing a new concept of abuse of dominant position in retail markets. In addition to the substantive amendments, a number of new procedural rules have been introduced as well. The amendments except for the provisions concerning change in the definition of dominant position, introduction of the concept of the abuse of dominant position on a retail market and the related penalty provisions entered in force on 16 April 2008. The provisions concerning change in the definition of a dominant position and the concept of abuse of dominant position on a retail market will enter in force on 1 October 2008.
Definition of dominant position
By the new amendments to the Competition Law Saeima has substantially expanded the scope of definition of dominant position in Latvia. If prior to the amendments an undertaking would be considered dominant if it had a market share on the relevant market of at least 40% and had the market power, the amendments have dropped the market share criterion. Thus, as of 1 October 2008 any undertaking having a market power on the relevant market would be considered dominant irrespective of its actual market share.
Abuse of dominant position on a retail market
In addition to the changes in the general definition of dominant position, a specific concept of dominance in retail markets has been introduced. Thus, an undertaking would be considered dominant on a retail market, if having regard to its purchasing power and the dependence of the suppliers in the relevant market the undertaking has an ability to apply or force, directly or indirectly, on suppliers unfair or unreasonable terms and conditions or payments, and it may prevent, restrict or distort competition on any relevant market in Latvia for a sufficiently long period of time.
A dominant position in a retail market is considered to be abused by the following behavior:
- applying or forcing unfair or unreasonable conditions in respect of return of goods, except for return of goods of inferior quality and return of goods supply of which or the increase of the volumes of supply of which were initiated by the supplier itself;
- by applying or forcing unfair or unreasonable payments in respect of placement of goods in retail premises, except if these payments are justified by introducing in the market a new product not known to consumers;
- by applying or forcing unfair or unreasonable payments in order to enter into a contract unless these payments are justified on the grounds that the contract is entered into with a new supplier which as such requires a specific appraisal;
- by applying or forcing unfair or unreasonable payments for supplies of goods to a new retail location;
- by applying or forcing unfair or unreasonable payment settlement deadlines for the supplied goods;
- by applying or forcing unfair or unreasonable penalties (sanctions) in respect of violation of the terms of a transaction.
As distinct from the existing concept of abuse of dominant position under the Latvian Competition Law, the list of abuses of dominant position on a retail market is an exhaustive list of abuses. Thus, an entity having a dominant position on a retail market would only be considered abusing its dominant position if its behavior falls under one of the six abuses specified in the Competition Law.
An undertaking in breach of prohibition of abuse of dominant position on a retail market may be subject to a fine in the amount of up to 0.05% of its turnover of the previous financial year, in respect of its first offence, or in the amount of up to 0.2% of its turnover for any subsequent offence.
The new concept of abuse of dominant position in retail markets is in addition to, and not in lieu of the general prohibition of abuse of dominant position. Therefore, where the relevant behavior would constitute both an abuse of dominant position in a retail market and breach of the general prohibition of abuse of dominant position, it will be prosecuted as a breach of the general prohibition of abuse of dominant position, and as such will be subject to more substantial penalties.
Self-assessment of anti-competitive agreements
The amendments have removed the existing procedure of individual notification to the Competition Council of the agreements having as their object or effect the prevention, restriction or distortion of competition on the relevant market. This procedure has been replaced by a self-assessment procedure according to which the market participants are not required to notify these agreements to the Competition Council provided that they meet the exemption conditions specified in the Competition Law. However, the law has also retained a discretionary possibility to seek an individual exemption of the agreement, provided that the agreement is notified to the Competition Council prior to its signing or the effective date and there is no undergoing investigation of the transaction by the Competition Council.
Notification of concentrations
The amendments have revised the legal definition of a concentration, changed the notification thresholds and introduced an option to file the short-form concentration notifications in situations where the concentration does not cause a threat to competition. At the same time the amendments also extended the time period in which the Competition Council has to review the concentration notifications from the existing period of 30 days to 45 days from the date a complete notification is made.
According to the amendments, the concentrations now have to be notified to the Competition Council if the aggregate turnover of the parties to a concentration during the previous financial year in the territory Latvia was not less than 25 million years. The former requirement to notify a concentration if at least one of the participants of the concentration prior to the concentration was in a dominant position on a relevant market has been deleted.
Short form concentration notifications can be made if the participants to concentration are not active in the same relevant market or in vertically related markets, and provided that the aggregate market share of the participants of concentration on the relevant market does not exceed 15%. The Competition Council, however, will be entitled to require a full concentration notification if it determines that additional investigation of the notification is necessary.
Legal effect of the Competition Council decisions
The amendments have exempted the Competition Council decisions from the general principle of the Latvian administrative procedure according to which an appeal of an individual decision by a state institution is suspending the entry in force and application of the decision until the appeal procedures are completed. The Competition Law is now explicitly providing that all Competition Council decisions, except decisions on fines and penalties, are entering in force on the date they are notified to the addressee and that their appeal does not suspend their application and enforcement. Thus, the undertakings subject to Competition Council’s decisions will now need to request the administrative courts to suspend the Competition Council’s decisions while the appeal of the decision is pending. In the present practice of the administrative courts these requests are seldom granted.
