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Retail Chain Fined for Overly Long Payment Period for the Delivered Products



On 13 January 2011 the Competition Council (CC) adopted a decision to fine one of the largest retail chains in Latvia MAXIMA Latvija Ltd. for abuse of dominant position in retail trade. It was established that this retailer has applied unjustifiably lengthy payment periods for the products delivered by a small bakery Siguldas Maiznieks Ltd. The fine was set at the amount of EUR 64 029. Retailer was also obliged to terminate the infringement.

While delaying payments retailer can use the profit derived from the respective products and afterwards pay interest for such use of capital. In this case however it was established that these interest payments did not countervail the harm caused by the payment delays to Siguldas Maiznieks Ltd.

Such acceptance to disadvantageous terms and crediting of a retailer is not in the economic interests of Siguldas Maiznieks Ltd. – enterprise needs current assets to ensure payments to its creditors and to the state budget. Delaying theses payments can harm its business and reputation, as well as impede ability to raise funds and participate in public procurement procedures.

In its decision, the CC has also defined that settlement period can be regarded as sound and fair if it does not exceed the average turnover time of the particular goods plus up to 10 days that might be required for collation of payments and other operations with payments. In this particular case such term was exceeded considerably.

As it was established that Maxima Latvija Ltd. Has a dominant position in retail trade in daily consumer goods retail market in supermarket sector in Latvia and has established market power over Siguldas Maiznieks Ltd., Maxima Latvija Ltd. was forbidden to apply unjustifiably lengthy payment periods.