On 9 March, the Competition Council of Latvia (the CC) adopted a decision to impose a fine on SIA “Baltstor”, manager of Mego and Vesko brands, and SIA “Lenoka”, partner operating in the retailers' cooperation of SIA “Baltstor”, for systematic unfair and groundless application of sanctions to suppliers. This is the first decision, where the CC detects an infringement of the Unfair Retail Trade Practices Prohibition Law (URTPPL).

URTPPL came into force on 1 January 2016, and its purpose is to limit abuse of procurement power by retailers against suppliers, in order to reach balance of interests of suppliers and retailers in retail trade. To assess the process of introduction of the Law, the CC conducted market supervision in 2016 and in the first half of 2017, during which the CC detected possible non-conformities to the requirements of URTPPL in activities of SIA “Baltstor” and SIA “Lenoka”.

The case investigation by the CC encompassed 30 suppliers, who cooperate with Baltstor retailers' cooperation, randomly selecting five categories of products – bread and its products, meat and its products, milk and dairy products, grain products and non-alcoholic beverages. 

During the investigation, the CC concluded, that both companies have applied unfair and groundless sanctions to suppliers for inaccurate prices in waybills and for incomplete execution of orders. The amount of imposed fines exceeded 10% and reached more than 400% of the amount of principal debt. The companies also had not implemented measures to initially eliminate and mitigate detected errors, thus creating favourable conditions for repeated application of sanctions.

According to requirements of URTPPL sanctions shall be proportionate to harm caused to retailer and the value of non-supplied goods. If the amount of sanctions exceeds 10% of the amount of principal debt, such sanctions shall be recognised as unfair and groundless.

The CC detected, that the companies involved in this infringement have abused their procurement power against more than 60% of suppliers examined within the case investigation. Consequently, SIA “Baltstor” has received from suppliers payments of groundless sanctions equal to more than three thousand euros, and SIA “Lenoka” – almost 13 thousand euros. The investigation conducted by the CC indicates, that application of such contractual conditions was systematic and the companies may have implemented this unlawful practice also against other suppliers.

For the infringement of requirements of URTPPL the CC imposed a fine of 13 533 euros on SIA “Baltstor” and 60 487 euros on SIA “Lenoka”. The authority also imposed a legal obligation on these companies to eliminate this infringement.