In the first eight months of this year, the Competition Council of Latvia (the CC) has adopted 12 decisions on mergers, which is by 50% more than last year at the same period. Most frequently consolidation of market participants has taken place among retailers of daily consumption products.
In all decisions mergers were permitted, because it does not significantly affect competition. Merger transactions assessed in this year have influenced such areas as generation of heat energy and electricity, retail sales of non-food products, retail sales of fuel, sales of car gas, wholesale of automobiles and their spare parts, manufacturing of animal feed, hotel services, telecommunication services and non-life insurance services.
The CC concludes, that the trend of consolidation of companies increases. This situation is based on various reasons: strengthening of the market position, change of business focus, strengthening of export capacity, creation of synergy among several companies aimed to reduction of costs, formation of joint development policy and increasing of competitiveness on the market.
Moreover, consolidation of companies significantly affects demand change trends in Latvia. Due to the fact, that nowadays consumers increasingly more appreciate complex telecommunication, availability of internet and digital entertainment services, as well as the opportunity to watch television outside their home, market participants are looking for solutions to meet this demand. Consequently, merging of telecommunication, media and other technology companies can be observed in the sector.
In this year, similar as in the previous year, merging of companies on the retail market of daily consumption products continues. In the current market structure, strengthening of competitiveness of smaller merchants is observed – merging of the trade mark “top” companies in regions of Latvia. Despite mergers of these retailers, there are still not sufficiently strong market players in Latvia, who could create efficient competition pressure on the two largest retailers – SIA “RIMI LATVIA” and SIA “MAXIMA Latvija”.
Currently, the CC examines five merger transactions and simultaneously provides pre-merger consultations to several entrepreneurs. Entrepreneurs have used this option already 33 times in this year.
A permission of the CC for implementing a merger transaction is required only if the overall turnover of the merger participants in the previous financial year in the territory of Latvia has been at least 30,000,000 euros and the turnover of at least two merger participants in the previous financial year in the territory of Latvia has comprised at least 1,500,000 euros.
Control of large merger transactions on a national scale is required to prevent significant reduction of competition as a result of mergers. By doing so, the competition driving force is retained, which does not allow groundless increase of prices, promotes increase of choice and quality, as well as growth of national economy in general.