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Friday 17.11.2017 | Name days: Uga, Hugo, Uģis
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Fine applied to two Knauf Group plasterboard suppliers

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUOn 30 September, Latvia’s Competition Council made the decision to punish Knauf and Knauf Group’s Norgips sp.z.o.o. from Poland for using a loyalty system that considerably restricted competition, thereby breaching the prohibition on abuse of market dominance.

For the violation of regulations governing competition rights, the Competition Council decided to apply a fine worth a total of EUR 1,621,398.38, as BNN was informed by CC.

CC began the investigation after results came in in regards to the 2013 market monitoring, which addressed the state of competition on Latvia’s plasterboard production and distribution market. CC received information that suggested a possible violation of competition rights and abuse of market dominance by Knauf and Norgips in Latvia.

During the investigation, CC concluded that Knauf and Norgips had been offering their clients – the largest construction material retail traders in Latvia – a special loyalty discount system throughout 2009-2014 and which had individualized certain conditions for receiving discounts. Because of this discount system, retail traders were motivated to procure materials from Knauf Group and other companies associated with this business group.

CC notes that provision of a discount is not a violation in of itself, as long it is economically justified. Nevertheless, CC concluded that the provision of competition-restricting loyalty discounts was used as a reward for retail traders for not procuring plasterboard products and other construction materials from alternative sources. This effectively provided exclusive cooperation between Knauf and Norgips and Latvia’s largest construction material retail traders.

With that, Knauf’s and Norgips’ realized loyalty discount system restricted the range of choices for retail traders and their access to other plasterboard suppliers in Latvia, as well as limited the access of other competitors to Latvia’s distribution market. This only served to limit the development of competition on the market. At the same time, this discount system allowed both companies in question to defend and maintain their dominating positions on the market.

CC member Janis Racko noted: ‘The companies’ dominant position on the market is not a violation on its own. However, companies with a dominant position on the market have double the responsibility for their actions, including for their discount policies and their possible impact on the market. Abuse of market power is a serious breach of competition rights because it distorts the competitive environment and limits the chances of other businessmen to work on the market and offer consumers their products and services.’

Although Knauf and Norgips can appeal CC’s decision in court, the two companies have to comply with CC’s order and stop their loyalty discount system.

Knauf has been applied with a fine of EUR 965,548.18 and Norgips sp.z.o. has been applied with a fine of EUR 655,850.20.

Ref: 102.109.109.5099


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