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Wednesday 22.05.2019 | Name days: Emīlija

Latvian government supports expanding Competition Council’s authority

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUOn Tuesday, 26 June, Latvia’s government supported amendments to the Competition Law. Changes propose expanding the authority of the Competition Council when dealing with dishonest municipal businesses.

Previously, discussion of this matter had been postponed multiple times because Economy Ministry could not reach an agreement with Latvia’s Large Cities Association. Economy Minister Arvils Ašeradens admitted seeing no options for reaching an agreement with LLCA about amendments to the law.

On Monday, 25 June, LLCA told the media after meeting with Ašeradens that municipalities have a duty to provide residents with services even in cases when private businessmen see no benefit from getting involved or their service quality is not on a sufficient level. «LLCA invited Competition Council to change its philosophy – increase their involvement in situations, not remain in a supervisory position in Riga alone. Situations differ from region to region – people living there have the right to receive quality services,» says LLCA CEO Viktors Valainis.

At the same time, the Foreign Investors Council in Latvia and Baltic Corporate Management Institute offered Economy Ministry to approve amendments to the law.

In a letter addressed to the government, FICIL head Zlata Elksniņa-Zaščirinska mentioned that amendments to the law will help enhance two major principles – honest competition and good management. FICIL also mentioned that negative consequences from public persons’ actions for competition are already recognized and regulated in multiple EU member states, including Sweden, Italy, Finland, Romania, Slovakia, Czech Republic and Lithuania.

Baltic Corporate Management Institute told the government that Economy Ministry’s offered regulation is compliant with good practice of other countries. This allows for meeting OECD corporate management principles and competition neutrality principle without narrowing municipalities’ rights to become involved in business activities.

«OECD has provided recommendations to ensure introduction of the competition neutrality principle. With that, it is recommended to expand Competition Council’s authority to oppose specific actions of municipalities aimed against fair competition. This includes provision of unjustified advantages to some enterprises or pushing private companies from the market. Baltic Corporate Management Institute believes unjustified involvement of municipalities in business activities in situations when goods and services are already provided by the private sector is unjustified. It is also not allowed for municipalities’ goals to be undefined when becoming involved in business activities or when their presence on the market is not assessed. In multiple cases unsuccessful attempts to oppose the neutrality principle only helped underline the flaws in regulations. The proposed amendments help fix that,» said Grafs.

CC informs that amendments to the law are necessary because non-compliance with competition neutrality principle is one of the biggest problems of Latvia’s business environment. This particular problem often takes the form of unjustified advantages for public capital associations. This is also confirmed by CC’s survey results – 64% of respondents mentioned restrictions on competition imposed by public persons as a topical problem for the entire industry. OECD has also submitted recommendations intended to expand CC’s authority in combating such behaviour from public persons.

Information from CC shows that in five cases – in Aizkraukle, Olaine, Tukums, Dobele and Ventspils – there have been five cases since 2013 when the competition supervisor noticed unjustified and artificially created restrictions for private sector companies to provide water counter installation and replacement services. After lengthy talks, CC managed to ensure those restrictions were lifted.

«Situations when institutions unjustifiably establish restrictions, provide exclusive rights or reserve market space for public enterprises, discriminate against other market participants or create unfair competition conditions are unacceptable from the perspective of competition rights,» notes Economy Ministry.

Amendments to the Competition Law provide a procedure in accordance with which CC would be able to oppose institutions and actions aimed at limiting competition. The legislative draft states that in order to prevent competition restrictions, CC holds talks with each specific institution or commercial association. If it is not possible to lift restrictions through talks, CC becomes authorized to make a decision to order a commercial association to prevent measures that impede competition.

Amendments to the law will apply to public persons’ direct and indirect decisive influence over existing capital associations, including state and municipal ones.

«The aforementioned regulation would allow CC act in situations when municipal capital associations limit their competitors’ freedom to inform consumers about their services, discriminating them and providing their own suppliers with more advantageous conditions, or situations when public persons realize decisive influence in water counter installation market and create restrictions for other market participants or provide advantageous conditions for their own companies,» explains the ministry.

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