PwC Competition Watch 2019, a survey conducted by PricewaterhouseCoopers Legal (PwC Legal) finds that Latvia needs closer collaboration and consultation with market players to minimise market distortions and build criteria for better market supervision.
The survey finds that businesses representing a total of 16 industries were fined over the period from 2002 to 2018, with most fines levied in construction, transportation, and wholesale & retail trade. These industries have historically faced the highest rate of shadow economy. Fines for prohibited agreements prevail in 88% of cases, with 254 out of 326 company breaches classed as serious.
It takes 381 days on average to handle a breach, with up to 510 days spent handling the most serious breaches. The duration of handling has increased over the years. The amount of fine as a percentage of revenue has also risen over the period from 2014 to 2018 to reach 2.5% of revenue.
The survey also finds that the Latvian Competition Council takes a comparatively flexible approach to fining. Since 2002, in 43% of cases the fine assessed originally was reduced during the fining process on grounds of relevance and efficiency, which are not prescribed under regulations issued by the Cabinet of Ministers.
The legislation provides for a number of options to adjust the fine assessed according to the facts and circumstances of the case, but PwC Business Advisory director Raimonds Dauksts points out the need for more precise fining rules to make Latvia a more transparent and attractive market in the eyes of investors:
“It takes a set of clearly defined, foreseeable and transparent rules to encourage investors to do the investing. Breaches should be evaluated not only within each industry but also at national level to make decisions having wider implications for improving the business environment and regulation.”
Businesses now have the option of cooperating with the Competition Council to receive a penalty reduction under the Leniency Programme, but they have not been very keen on this option. The survey shows that fines were reduced under the Leniency Programme in only 6% of cases, mitigating circumstances helped reduce the fine in 29% of cases, and 41% of cases had some other reasons for a reduction.
Maris Butans, head of EU and Competition Law Practice at PwC Legal, emphasises the significance of culture in deterring offenders:
“Not so many businesses have applied for the Leniency Programme because the fines levied aren’t changing the overall culture, and there are some other options available to reduce your fine.”
The survey is based on publicly available data obtained from the Competition Council’s decisions on prohibitions, agreements, and abuse of dominant position, whether or not the national or EU competition rules have been enforced. All the aggregated data and analysis presented in this report is the result of meticulous work carried out by the experts of PwC Legal, in particular its EU and Competition Law Practice. The analysed data covers the Competition Council’s earlier decisions from 2002 through 2018.
Please find more information here.
The full survey is available here
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