On 17 December, the Competition Council (the CC) took a decision to prohibit SIA MAXIMA Latvija (MAXIMA) to use the commercial premises in the centre of the capital Riga, at Tērbatas iela 33/35. The CC established that the planned transaction would significantly reduce competition on the relevant market, limit the possibility of consumers to purchase daily consumer products in stores of bigger number companies and would strengthen the market power of the current retailers.
Currently SIA ESSA, which is now operating on the daily consumer products retail market under the trade name “top!”, uses the commercial premises at Tērbatas iela 33/35. In accordance with the merger notification, it was planned that further on the rights of lease of the particular premises will be acquired by MAXIMA. As both companies perform commercial activity of similar nature and as a result of the transaction one market participant would take over assets of the another (retail premises), it is considered a merger, which shall be notified to the CC.
In order to assess the market affected by the transaction in the more objective manner, the CC performed survey of customers of “top!” in the particular premises. During that it was established that majority of visitors of the store are tourists, people working nearly and inhabitants of the centre, who visit the shopping place in a walking distance. The survey showed that the addressed shoppers make comparatively small and easily movable purchases – for 83% of respondents the sum of the purchase did not exceed ten euros.
75% of participants of the survey indicated that they would choose four stores located in the neighbourhood for making similar purchases – three stores of SIA RIMI LATVIA (RIMI) and one MAXIMA store. Taking into account the results of the survey, the CC established the distance and determined the time period that consumers would be ready to make in order to visit other shops being in the neighbourhood. Thus, the CC established that the relevant market is the daily consumer products retail market within the walking distance of approximately four minutes around the particular commercial premises.
Currently five shopping places are operating in general in this territory, where services are provided by RIMI, MAXIMA and SIA ESSA, and maintenance of such market structure is important for efficient competition. After the transaction only two biggest retailers would continue their operation, thus increasing their market share as well as the number of MAXIMA stores. The CC is confident, that it would change the market structure and would significantly decrease competition.
Current development trends for both biggest retailers, especially opening stores of a small format, create significant barriers for other traders to commence or perform business in Riga centre, including making difficult the possibility to find appropriate premises for retail. Considering the market power and competition advantages of MAXIMA and RIMI, the CC has concluded already previously, that other retailers have limited possibilities to establish effective competition pressure.
As competition would significantly decrease, the positions of the biggest daily consumer products retail companies would be strengthened, as well as the possibilities of consumers to purchase more various products from the bigger number of companies would be limited, the CC decided to prohibit MAXIMA to acquire the right of lease for the commercial premises in Riga, at Tērbatas iela 33/35.