On 12 March, the Competition Council (CC) fined fuel dealers – SIA LUKoil Baltija R and SIA Akselss – for not submitting a merger notification timely. Both undertakings secretly operated as one undertaking since December, 2010, while a merger notification to CC wassubmitted only in early 2015.
In accordance with the Competition Law, in case of significant mergers the permission from the CC is required. Thus, the state is able to avoid significant lessening of competition and prevent consumers and undertakings from adverse changes in markets. If undertakings implement a merger without the approval by the CC, the state cannot fulfil its duty to protect the competition within the market, and the market structure may suffer an irreversible damage. Therefore, undertakings for not submitting the merger notification timely are sanctioned with a fine.
Cooperation between SIA LUKoil Baltija R and SIA Akselss developed within a framework of a franchise agreement and, starting December, 2010, SIA LUKoil Baltija R and SIA Akselss” secretly began operating as one undertaking – SIA LUKoil Baltija R exercising de facto sole control over SIA Akselss. The merger notification to the CC was submitted in early 2015, after the competition authority had reviewed conditions of competition in the market.
The fine set to the undertaking – EUR 104 397 –is the highest penalty applied for such type of infringement in the history of the CC. While determining the amount of the fine, the CC took into consideration fact that both undertakings provided the CC with all information requested regarding the merger, and as well as signed the Administrative Contract with the CC, according to which, the undertaking the fine has already paid into the state budget.
While evaluating the consummated merger, the CC concluded that the merger does not harm the competition, therefore is to be cleared. Before the merger, both undertakings operated and competed only in Riga, the capital of Latvia, and city of Valmiera, though, after the merger their operations were extended to cities of Jēkabpils, Jelgava and Liepāja. However, in result of the merger in none of these territories market share of both undertakings have increased substantially, as well as competitive constraints are exercised by other competing fuel dealers.
The merger also has not led to any significant changes in the market of fuel wholesale, because the market share of SIA Akselss in the market is small – it is not even among the 40 largest market participants.
In Latvia, the merger approval by the CC is required for mergers where the combined turnover of the participants in the merger for the previous financial year has exceeded EUR 35 572 000 or the total market share of the participants in the merger in the particular market exceeds 40 per cent.