On 12 January, the Competition Council of Latvia (the CC) adopted a decision to prohibit SIA “RIMI LATVIA” (RIMI) from using retail premises at the shopping centre “DOMINA Shopping” in Riga, the capital of Latvia. The CC concluded, that this transaction would cause significant harm to competition, strengthening the retailer's position on the market, therefore, this transaction shall be prohibited.
After assessment of the circumstances, the CC detected, that implementation of this transaction would increase the market power and strengthen position of RIMI in market of daily consumption goods retail trade in particular in the segment of shopping centres. At the same time, such a transaction would increase the market power of RIMI on the daily consumption goods procurement market of Latvia, acquiring more favourable conditions from suppliers than their competitors. The CC also concluded, that the transaction would even further reduce possibilities to exercise a long-term competitive pressure exercised by competitors and, consequently, also reduce the choice of consumers.
Considering the significant reduction of competition on markets identified during the transaction assessment, the CC decided to prohibit this transaction.
The Chairperson of the CC Skaidrīte Ābrama: “RIMI has established a strong market position – it owns a large amount of shops in strategically significant places and it has competition advantages in terms of cooperation with suppliers. By allowing RIMI to use the premises at the shopping centre “DOMINA Shopping”, its market share would increase even further. By prohibiting this transaction, the Competition Council concurrently gives a signal to other retailers – strengthen your competitiveness, grow and develop to be able to implement efficient competitive restrains on the large market participants and to ensure wider choice for consumers!”
Facts about the assessed transaction
- Daily consumption goods retail stores with the area of sales premises exceeding 600 m2, and which can ensure at least 6,000 assortment units per month at their premises were determined as the product market affected by this transaction.
- During assessment of the transaction, the CC followed the latest European Competition authorities’ practices for determination of geographical market, determining it within a distance (isochron) of a 13-minute drive around “DOMINA Shopping”.
- 62 daily consumption goods retail stores were included for determination of market shares on the relevant market (within a 13-minute drive distance), including stores that are situated in shopping centres.
- Shopping centres are considered as strategically significant places, because consumers most frequently combine shopping at these centres with a visit of daily consumption goods retail stores situated at these centres.
- Currently, RIMI operates at seven shopping centres out of ten on the relevant market. Operation at these shopping centres comprises almost half of the company turnover on the relevant market.
- Since the number of shopping centres is limited, other retailers have limited possibilities to enter this segment and develop efficiently.
- Taking into consideration the leading position of RIMI on the market, it obtains more favourable goods and services delivery conditions from suppliers, which, compared to other competitors, is considered a significant competitive advantage.
- In the existing market situation, competitors of RIMI have no possibilities to implement sufficient competitive constrains. Although SIA “MAXIMA Latvija” is considered as the closest competitor of RIMI, the company has a considerably smaller market share on the relevant market, assessed in the merger transaction. The company does not operate in any at any shopping centre, which, respectively, limits its ability to compete efficiently on the relevant market identified in the transaction.
- According to the Competition Law, instances when one retail network store is replaced at the trading venue by another retail network, which offers the same or similar assortment, are considered to be a merger and shall be reported to the CC. The particular premises at the shopping centre “DOMINA Shopping” were previously used by AS “Prisma Latvija”.
- National control of company mergers is necessary to exclude significant reduction of competition resulting from company mergers, because in the case of losing the competition driving force prices can increase, the choice and quality, as well as the overall growth of national economy can decrease.
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Competition Council of Latvia
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