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The Competition Council Fines Retail Chain for Imposition of Unfair Discounts on Milk Processing Company



On 30 November 2010 the Competition Council (CC) adopted a decision to fine one of the largest retail chains in Latvia RIMI Latvia Ltd. for abuse of dominant position in retail trade. It was established that this retailer has imposed unjustified payments (discounts) on Valmieras piens JSC for the placement of its goods in low price shops Supernetto owned by RIMI Latvia Ltd. The fine was set at the amount of EUR 88 609. Retailer was also obliged to terminate the infringement.

Dominant position in retail trade as a special rule was introduced in the Competition Law in 2008 and differs from the classical dominant position in the required level of market power – in order to have a dominant position in retail trade, the enterprise does not have to possess market power over consumers and competitors, it is sufficient to establish market power over suppliers. This is a first decision establishing an infringement of this rule.

As a market participant with dominant position in retail trade in daily consumer goods retail market in supermarket sector in Latvia and with considerable market power over dairy Valmieras piens JSC, RIMI Latvia Ltd. was forbidden to impose such discounts.

Discounts that RIMI gained when buying from Valmieras piens JSC where applied for the placement of these products in low price shops and where not related to the amount or justified by any other economical reason.

The dependent position of Valmieras piens JSC was indicated by many factors. For instance considerable part of the production of this dairy was realized in RIMI chain but only RIMI profited from this cooperation while Valmieras piens suffered losses that where afterwards compensated in cooperation with smaller retailers. Supplier also did no receive data on realization of its production that are essential for sound financial planning.

The CC stated that such situation when retailer carries out low price strategy at dairy's expense is not acceptable. In this particular case retailer did get a discount on products that where meant for low price shops, but this discount was not fully transmitted to a final price – the difference between price in low price shop and regular shop mostly where below the discount made by producer.