«As dominant traders expand further, so does their procurement power as they try to influence producers more and more, forcing them to work with minimal revenue,» as said by members Association of Latvian Traders.
The organization notes: «Now is the time for the country to understand – small and medium sized traders should be protected. The situation is already tragic – dominant traders have already taken over half of the market. This also increases their procurement power.»
They emphasize that often the sale price in Rimi and Maxima is lower than the price offered by producers to retail traders.
«The prime minister and minister should know that meeting with local businessmen and discussing the problem and possible solutions would benefit the country more than the search for luck in Luxembourg or signing of an agreement with Japan. We believe the government has one last chance to address and resolve local problems,» – LTA representatives comment on the situation.
LTA explains that the major traders pay only 6% of their turnover to the state budget. Small and medium-sized companies pay 11%. By supporting active market division in favour of dominant traders, the government has lost EUR 40 million for the state budget in the past four years.
The Competition Council limited market power for the first time in eight years by setting a prohibition for one of the dominant traders. The majority of 62 retail trade companies located near Domina shopping centre are owned by Rimi. Seven out of ten multi-functional centres in Riga have Rimi in them, LTA notes.
Stanislavs Blankenfelds, head of Latvian Consumer guardianship union, is confident that the right of choice should be retained for the benefit of buyers. It is unacceptable for the country to have only two stores. People should also be more patriotic, he says, and the government should support its own producers and traders.
Blankenfelds notes that those traders are worried about profits and the interests of local residents. «In many other countries local municipalities support local businesses to ensure their earned money is used for development and is not lost. Profits of Rimi and Maxima supermarkets in Latvia have grown in millions lately, especially in recent years. I doubt their owners are interested in investing that money into Latvia’s development. They would much rather transport that money out of the country,» – Blankenfelds comments.
LTA president Henriks Danusevics believes it is highly important to maintain variety in trade. He adds that dominant traders are able to make a good profit even under conditions of a limited market. «It is good that the Competition Council has decided to limit uncontrolled development of dominant networks. This offers a chance to other traders to develop and provides a range of choice for consumers. The area offered by Domina shopping centre could be managed well by other shopping networks, such as Elvi, Elkor, Mego, Prizma, Top, Stockmann or Sky. The same applies to Maxima, which already has a contract signed with Somina Shopping,» – Danusevics says.
LTA council viewed the matter of balanced market development in Latvia in January. «Looking at tax proportion depending on turnover and size of the business, it becomes clear that small and medium businesses pay 5% more than dominant businesses. As the market share owned by dominant business increases and market share owned by retail traders declines, their tax revenue decreases as well. For example, for every EUR 45 million earned by Rimi, the state budget lost a quarter of a million euro, because this market share is taken away from those who pay more taxes from revenue,» – members of LTA say.