In response to the publicly disclosed information about a possible increase in the cost of compulsory third party motor liability insurance (hereinafter – MTPL) premiums due to a fine imposed on the Motor Insurers’ Bureau of Latvia (LTAB), the Competition Council (hereinafter – the CC) informs that a coordinated transfer of the fine imposed on the LTAB to consumers may create a risk of a competition law infringement.
Competition law aims to promote the welfare of society by preventing the distortion of competition against the interests of society, market participants and consumers. One of the most important instruments to achieve this objective is the imposition of fines for infringements of competition law, including by deterring both the infringer and other market participants from committing future infringements.
At the end of 2023, the CC adopted a decision concluding that the membership fee imposed by the LTAB for membership of the bureau had hindered the entry of new market participants in the MTPL market, thereby restricting competition. For infringement of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), the CC fined the bureau EUR 336 086.
The decision to impose the fine in question was imposed on an association of market participants (hereinafter – LTAB) whose members cover the entire MTPL market in Latvia. In the CC's assessment, the LTAB must take particular care that the fine imposed does not adversely affect consumers by contravening the competition law objective explained above, given that the provision of a MTPL policy to every vehicle participating in road traffic is a compulsory obligation.
While market participants have discretion to organise the financial means necessary to pay the fine, the CC recalls that Section 101(1) of the TFEU also prohibits agreements which directly or indirectly fix the prices of goods or services. This concept of agreement implies a coordinated intention on the part of at least two market participants, which may also result solely from their actual conduct. Consequently, conduct whereby a fine imposed for an infringement of competition law is passed on to consumers in a coordinated manner by making the prices of goods or services more expensive may be assessed by the CC as a potential infringement of competition law.
The CC recalls that MTPL market participants are also required to set their premiums and their premium calculation policies independently of other market participants.
Within the scope of its competence, the CC will continue to monitor the compliance of the conduct of the LTAB and the MTPL market participants with the competition law framework, in particular in the event of a potentially coordinated increase in MTPL premiums.