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Saturday 25.05.2019 | Name days: Junora, Anšlavs
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Authorities assess Latvian Railways' possible abuse of dominant position

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At the end of 2018, Latvia’s Competition Council commenced a violation case against state company Latvian Railways and its subsidiary LDz Cargo for possible abuse of their dominant position on the market.

The case was launched following a request from one of Latvia’s largest railway freight carriers Baltic Express. The company’s board chairman Māris Bremze explains that Latvia’s railway industry still has not entered free market status even though it should have happened as far back as 2007.

«Currently the infrastructure maintenance company is also engaged in cargo freights together with LDz Cargo and LDz Logistics even though LDz is supposed to be neutral and only perform management of railway infrastructure,» said Bremze.

When asked if Baltic Express turned to Competition Council complaining about the general situation or some specific case, Bremze said he would rather not comment on details. However, he said it is clear that private carriers are completely dependent on LDz Cargo, which is the sole freight carrier that performs cargo transports in the border region, as well as the only party that ensures cargo clearance documents.

«In a situation when there is allegedly an open market, Baltic Express and every other freight carrier is forced to purchase clearance documents containing rather sensitive information. Then where is any noteworthy cargo industry development? It is clear we cannot hope to ensure optimal load for railway if private carriers are unable to secure private transports, considering the level of bureaucracy they have to go through with LDz Cargo,» said Bremze.

It is unknown for how long Competition Council intends to review this case. Nevertheless, the Competition Law states that in the event of a violation the perpetrating company can be applied with a fine of up to 5% of its last year’s net turnover.

As it is known, during a press-conference on Tuesday, 7 May, Latvia’s Transport Minister Tālis Linkaits voiced distrust to LDz chairman Edvīns Bērziņš and two board members – Aivars Strakša and Ainis Stūrmanis. The minister also said he will ask the company’s council to dismiss them.

He stressed that Latvian Railway’s current administration cannot be trusted and that members do not understand European Commission’s free market regulation. Moreover – there are suspicions regarding possible corruption and scheming within the company.

Explaining the reasons, the minister said the Competition Council has commenced a case for abuse of dominating position and market distortion, which could result with serious financial consequences for the country.

«The general feeling is that the board of LDz does not really understand European Commission’s and EU’s requirements in regards to market openness for free competition», said the minister.

Another aspect is potential corruption and scheming in the industry. The minister did not want to go into details during the press-conference. He only said the corruption cases are related to advertisement contracts. Linkaits said the exact amount paid will be clarified in the future. He only said this amount «is very large».

The minister also stresses that a large amount of emphasis in advertisement contracts was noticed in Ventspils and Dobele.

There is no logical reason why these two cities require so much sponsoring, especially considering these two cities do not have a large number of LDz clients. «With that, we believe many advertisement and marketing contracts were not related to the company’s main form of activities.»

When asked by journalists if contracts could have ties to Aivars Lembergs and Uldis Augulis, the minister said: «I hope we will learn about motivation more through audits».

Linkaits, explaining his request for LDz council to dismiss LDz board members, comments: «I would find it hard to work with a company’s board in the implementation of objectives detailed in the action plan in relation to the country’s railway industry. The decision to keep or dismiss board members is in the hands of the company’s council.»

The council will decide on the aforementioned board members’ remainder in their posts next week.

Everything the minister said in regards to his disappointment with the board does not apply to Ēriks Šmuksts, who, according to Linkaits, is a proven patriot and professional in his line of work.

Bērziņš has since announced that his board has worked as a responsible owner that everything is fine in the company and that accusations are baseless. He said that there was a meeting of LDz council not long ago. During this meeting, participants discussed financial results and called them very good.

When asked about possible corruption in the company, Bērziņš said he is not aware of any. «Corruption Prevention and Combating Bureau is in charge of investigation of corruption, and that LDz has not received any notifications about any criminal cases,» he said.


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