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Small and developing competition agencies – Latvian Competition Authority – December 2017 OECD discussion

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This presentation by the Latvian Competition Authority was made during Break-out Session 2: Enforcement in the framework of the discussion on “Overcoming adversity and attaining success: Small and developing competition agencies” held at the 16th meeting of the OECD Global Forum on Competition on 8 December 2017. More papers and presentations on the topic can be found out at oe.cd/sda.

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Small and developing competition agencies – Latvian Competition Authority – December 2017 OECD discussion

  1. 1. Cooperation with regulatory authorities Success stories Skaidrīte Ābrama Chairwoman of the Competition Council of Latvia 8 December, 2017
  2. 2. Reasons for the cooperation • Reliable source of information such as data, analyses etc. • Sharing experience - new tools and approaches • Partners have competence and power we do not have and can influence the situation from other perspective Benefits from the cooperation • Provides strong synergy of competences and resources for enforcement and common education activities • More efficient competition enforcement and advocacy • Better functioning markets afterwards • Tackling complex matters, not only competition issues • Provides comprehensive lookout/assessment • Eliminating various barriers • Control of remedies Cooperation partners • Corruption Prevention and Combating Bureau • State Audit office • Public Utilities Commission • Consumer Rights Protection Centre • National Electronic Mass Media Council • Media department of the Ministry of Culture • State Revenue Service • Public Procurement Bureau • State Police • Construction Control Bureau etc. Overview on the cooperation
  3. 3. The Freeport of Riga Authority (FRA) case • FRA discriminated competing private tug boat companies, creating barriers to operate in the port of Riga • Previously 2 abuse cases (in 2009 and 2011) against FRA with fines and behavioral remedies. FRA exploited its public power and infringement was not fully discontinued after • Third case settled with fines 0.62 mil. Euro (2015), FRA also agreed to discontinue it’s commercial activities in tug boat services market (structural remedies) SAO competences and activities: • SAO conducts annual audits in public administrative bodies and in state (municipality) owned enterprises, different goals and tasks • SAO conducted evaluation of activities of FRA officials who were responsible for infringements disclosed in the CC’s decisions as well as for the expenditures for legal assistance paid during all proceedings The Competition Council efforts to terminate the infringement at the early stage of investigation • Active advocacy activities, standpoint to the National Ports Board and other public bodies • Essential SAO support during investigation, advocacy before the National Ports Board and after settlement • SAO also in its report (2016) concluded that there was neither market failure, nor security reasons for FRA to act in tug boat market Cooperation with the SAO also in market inquiries and advocacy activities in order to remove competition distortions created by public administrative bodies State Audit Office (SAO) !
  4. 4. Public Utilities Commission (PUC) First stage: Completely opposite approaches historically in abuse cases • The PUC authorized threefold increase of prices for liquefied petroleum gas supplied for households by the dominant company Latvijas Porpāna Gāze (LPG). • Previously LPG prices at the same level were found by the CC to be excessive in the abuse case (in 2008). • PUC for years was tolerating the practice of the monopolistic natural gas supplier Latvijas Gāze (LG) to require new customers to pay unpaid bills of the previous residents. • The CC (in 2013) found out behaviour of the LG as unjustified and abusive and adopted remedies to remove restrictions. • Court evaluated legality of the CC’s decisions in both cases and upheld them. • The Supreme Court made a clear conclusion on legality (in 2014): The CC was not precluded from evaluating under competition law tariffs that have been approved by the PUC. Second stage: different views do not prevent from cooperation • Attempts to cooperate with the PUC during investigation in LG case. There were meetings with the PUC to discuss the possible remedies but with little progress to terminate the abuse. • After the decision, the remedies and principles applied by the CC were discussed with the PUC. The PUC changed its practice approving the principles defined in the CC’s decision. • Later on the CC had successful cooperation (expert discussions, information exchange, recommendations of the CC introduced in the PUC regulations) with the PUC within the study on opening of the electricity market for households (2015) and market inquiry on liberalization of the natural gas market (2017).
  5. 5. Cooperation with the Consumer Rights Protection Bureau (CRPB) The KIA vertical infringement case Car importer and the local KIA authorized dealers/repairers agreed on squeezing out non-authorized car repairers from Latvian market: • In order to preserve the car warranty, clients (consumers) were forced to carry out all repair and maintenance work only at the KIA authorized repairer service and use only original KIA spare parts in repair and maintenance work; • Restriction was included in KIA Warranty and repair booklets (year 2004 to 2014) and official website of the KIA car importer and several KIA authorized car dealers; • Misleading information was also communicated to KIA car owners - they might lose the warranty in case they use non-authorized repair services provider and/or non-original KIA spare parts. Cooperation with CRPB in KIA case • The CRPB and the CC have different objectives when examining the information available to consumers, but they do not rule each other out. • The CRPB initially tolerated restrictions considering safety of consumers as an objective justification. • Different interpretations by the two institutions led to different understandings among market participants. Also the KIA car importer sought the support from the CRPB during the CC’s investigation. • After the CC’s decision: • Discussions continued with the CRPB, Associations and ministries concerning the quality aspects of repair services carried out by non-authorized car repairers; • After further discussions with the CRPB, a common understanding was reached that safety reasons should not be linked with the status of repairer (authorized or non-authorized). The quality of works carried out by any repairer should be the main concern.
  6. 6. Other cooperation examples with the CPRB Household electricity market study (2015) • Parallel evaluation done by the CPRB - offers and draft contracts by all traders that offer electricity for households • The CPRB detected unfair contract terms and provided recommendations Market inquiry in funeral services (2015) • In 2014, the CC initiated a market inquiry followed by the consumer survey • Exclusive tenancy contracts on the premises of hospitals (specific market and risks of competition distortion for consumers) • Responses (no choice, unfair and unethical business practice, risks of possible corruption) • The CC’s and the CRPB’s conclusions - market lacks transparent regulatory framework, therefore the competition is distorted and consumers are adversely affected Schools uniforms market (2016) • Schools are not obliged to have school uniforms, but if decided, the supplier usually is chosen without competing procedure • Competition distortions when selecting supplier, no information given to the parents about specification of the uniform (ignoring consumer rights)
  7. 7. Recommendations • Be active, be first - influence the priorities of other public bodies • Do not be humble and shy, actively explore all possible opportunities for cooperation and all benefits what it can provide • Communicate in early stage the issues and problems, invite also your cooperation partners to discussions • Educate each other, inform other public bodies about your tasks and competences, explain priorities • Use the benefits from your partners network – this is your asset that can help to overcome unexpected obstacles on different levels
  8. 8. Thank you for the attention! www.kp.gov.lv @KPgovLV

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