On 1 September 2009 the latest amendments to the Latvian Competition Law entered into force. The amendments are noteworthy for two reasons. First, the Competition Council’s control over mergers has been extended. Second, the amendments clarify some of the prohibitions imposed on dominants retailers in their contractual relations with suppliers.

Further on a merger notice will have to be filed in any of the two following cases: (a) in the preceding financial year the net combined turnover of the merger participants in the territory of Latvia reached or exceeded LVL 25 million; or (b) the combined market share of the merger participants in any relevant market exceeds 40 percent.

In fact, the market share test is nothing new for the Competition Law. The test was deleted from the law in April 2008, but then the Competition Council convinced the Parliament that too many merger deals skipped its control, and the test was renewed.

Consequently, as a result of the amendments, the number of deals triggering the merger notification obligation will increase. Even though it may appear that a combined market share of over 40 percent is not a criterion too strict, it all depends on how broadly or, on the contrary, narrowly the relevant market is defined. If the relevant market is defined as narrowly as the Competition Council has done in some of its cases, e.g., stating that the video “Terminator-3” and TV channel TV3 are out of any competition whatsoever, then not only a market share of 40 percent, but even a market share of 100 percent can be established easily. Thus in some cases the market share test may cause legal uncertainty whether the merger notification has to be filed or not.

In addition, the amendments clarify two of the contract terms prohibited to dominant retailers. First, it is provided that the following can be regarded as unfair and unjustified payments for the presence of goods at a retail point of sale: the so-called “shelf fees”, discounts and payments for participation in marketing campaigns. It should be noted that this list is not exhaustive, and the full scope of the prohibition in question will only be revealed by the practice of the Competition Council. Second, it has been clarified that, with regard to fast moving foodstuffs (term of validity not exceeding 20 days), the term of payment will be regarded as unfair and unjustified if it is longer than 30 days as of the date of delivery.

Practices involved

Competition / Antitrust
M&A