Market surveillance News

On 18 October, at the International Competition Network (ICN) Annual Forum in Barcelona, the Latvian Competition Council (CC) received the highest award for its competition assessment in the wood chip market, which investigated the reasons for price increases in 2021 and 2022 and made recommendations to strengthen competition in the market.

Within the framework of the International Competition Network, the ICN and the World Bank Group organise the Competition Advocacy Contest every year. The contest aims to highlight the efforts of competition authorities, public and non-government organisations and the private sector to promote healthy competition in different markets. In the category “Embedding competition principles in public policies, especially when responding to crises”, the Latvian CC and its market study on the price increase of fuel wood chips was one of two winners.

The increase in the price of fuel wood chips has a significant impact on the costs of heat producers using wood chips as fuel. Thus, the increase in costs for heat producers following tariff changes is also passed on to heat consumers. In order to ensure that there are no infringements of competition law in the fuel wood chip market, the CC, at the invitation of the Ministry of Economics and the Energy Security Task Force, carried out market surveillance of the fuel wood chip market, which was concluded before the start of the heating season.

Juris Gaiķis, chairman of the CC: “Following the Russian invasion of Ukraine, prices for wood chips rose significantly during the heating season, for example the price of high-quality wood chips increased by 160% in one year. Given the widespread use of wood chips in district heating systems in the regions and the cost shift to end users, the CC aimed to find an explanation for the price increase as soon as possible and provide recommendations to market participants to mitigate the negative consequences for consumers, as well as to policy makers to make data-driven decisions. Preventive and rapid market intelligence in response to problematic situations, including rapid and simultaneous price increases, is an essential tool to foster competition in different sectors, such as the CC's investigations in the fuel market or the ongoing study on food prices in retail stores.”

In the study, the CC found that price increases were due to restrictions on timber imports from Russia and Ukraine, inflation, insufficient wood chip production capacity and other factors. In order to promote competition in the market, the CC also made recommendations to heat producers, such as setting reasonable requirements in procurement to increase the level of competition and obtain competitive price offers.

The International Competition Network Forum is one of the world's leading competition law events, providing an exchange of information and experience between competition authorities and leading competition law experts from more than 135 countries, fostering a dynamic dialogue which in turn serves as a basis for a common understanding and sound competition policy principles.