On 21 December 2023, the Competition Council (CC) decided to fine the Motor Insurers’ Bureau of Latvia (LTAB) EUR 336,086 for anti-competitive practices of the Bureau. On the initiative of LTAB, a settlement was concluded between the CC and LTAB, as a result of which LTAB confirmed its guilt of the infringement and undertook not to appeal the decision of the CC, for which LTAB received a reduction of the fine.
According to the Compulsory Civil Liability Insurance of Owners of Motor Vehicles Law, membership in the LTAB is a prerequisite for the commencement of activities on the compulsory third party motor liability insurance (MTPL) market in Latvia. For more than a decade, becoming a member of the LTAB required fulfilling a number of requirements, including a one-off entry fee, the amount of which was set by the LTAB and was an independent decision of the bureau.
Currently, nine insurance companies provide MTPL services in Latvia – four registered in Latvia and five branches of foreign companies registered in the Latvia. Given that only the members of LTAB can provide the MTPL services, LTAB's unlawful conduct affected the growth of competition in the entire MTPL services market. In the view of the CC, the entry of any new and capable market participant can have a significant impact on the market, and therefore the imposition of unjustified charges may constitute a significant barrier to competition.
During the investigation, the CC found that the entry fee set by the LTAB was not reasonable at the level it was set. Nor had the LTAB set a legitimate objective for the period from at least 2011 to 2022 to be able to reasonably set the fees and the level of the fees for joining the bureau. The CC also concluded that the formula for calculating the entry fee, which had been revised several times, was vaguely defined and open to interpretation, which could have led to an unequal application of the formula among potential members of the LTAB. In addition, the employees of the LTAB were aware that the setting of the entry fee could potentially constitute an infringement of competition law and deter market participants from joining the LTAB.
The CC therefore concludes that LTAB's conduct in setting and applying a certain level of entry fee as a precondition for membership for the period from at least 20 April 2011 until 16 May 2022 has hindered the entry of new market participants in the Latvian MTPL market and is contrary to Article 101(1) of the Treaty on the Functioning of the European Union.
On the initiative of LTAB, the CC and LTAB have agreed to terminate the legal dispute by concluding a settlement, which includes an obligation for LTAB not to appeal the decision of the CC. In view of the above and the savings of the authority's resources, the CC reduced the fine imposed on LTAB by 10%. Accordingly, LTAB was fined EUR 336,086 for the infringement of competition law. At the same time, the CC also clarifies that, in line with the purpose of the legal provisions contained in Section 14.3 of the Competition Law, there are no grounds to impose a fine directly or indirectly on those members of the bureau who were not involved in the implementation of the infringement of competition law.
Any company against which the Competition Council has initiated an infringement case may use the opportunity to conclude a settlement by acknowledging liability for the infringement on its own initiative and providing all the information necessary for the decision of the Competition Council. This allows for faster detection and correction of the infringement and saves the resources normally required for investigations and possible litigation, thus reducing the fine for the company. Settlements are also often used in the practice of the European Commission and competition supervisors in the many EU member states.