On 1 January 2020, amendments to the Competition Law of the Republic of Latvia entered into force prohibiting public administrative bodies – the state, local governments and capital companies owned by them – to violate the principle of equal competition by unduly restricting or even denying the private sector an opportunity to operate on the market.
Competition distortions created by public administrative bodies can take many forms, but most often public administrative bodies do not respect the principle of competitive neutrality in their activities and discriminate private entrepreneurs. For example, a public administrative body, through its administrative power, shows a special favour to its capital company, thereby unjustifiably limiting the possibilities of private entrepreneurs to offer equivalent services.
Skaidrīte Ābrama, the Chairwoman of the Competition Council of Latvia: “Competitive neutrality or equal rules for game for all – it is the Alpha and Omega for any industry policy maker, any official who cares about a fair business environment. I therefore call on entrepreneurs who have encountered competition distortions caused or promoted by public administrative bodies to report them to the Competition Council so that we can balance the scales of competition as soon as possible.”
The amendments to the Competition Law prohibit public administrative bodies from discriminating market participants, creating an advantage for their own capital companies and implementing activities that force entrepreneurs to leave the market. If the Competition Council sees a possible violation of the norm of the Law, it will first initiate negotiations with the relevant state institution, local government, or a capital company owned by it. In case of unsuccessful negotiations, the authority may impose disciplinary sanctions on capital companies: a fine of up to 3% of the turnover of the previous year.
The Competition Council will actively follow the actions of public administrative bodies in the competition environment, and, in the first year of amendments to the Competition Law, it will focus on education and consultation. In order to help public administrative bodies to adapt to the new norm of the Law, the Competition Council has published guidelines on the assessment of competitive neutrality.
Distortions of competition caused by public administrative bodies are one of the most significant problems of the competitive environment in Latvia, on which the Competition Council is sounding the alarm since 2012. Also the results of the public opinion study organised by the authority every two years confirm that distortions of competition caused by public administrative bodies significantly affect the fair business environment in Latvia.