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The Court Upholds the Decision on Prohibited Agreement within a General Partnership



On 20 June the Supreme Court of Latvia issued a judgement to uphold the decision by the Competition Council (CC) of Latvia which made a distinction between permitted business cooperation and a prohibited agreement under the guise of a general partnership.

After the court’s judgement, the CC’s decision, adopted on 4 November, 2011, to fine five construction supervision and design service providers for the prohibited agreement has entered into force. In the decision the CC stated that undertakings had founded the general partnership Latroad in order to carry out common activities and participation in public procurements. However, instead of allowed agreement on joint cooperation in an implementation of a specific project, the enterprises carried out a long-term market sharing and an exchange of information, which had been anticipated already in a covenant of the general partnership.

For small businesses the submission of a joint tender is an opportunity to participate in large procurements. Though, such unions are not acceptable if each of members is able to fulfil contractual obligations on its own, the Court stresses in the judgement.

Within procurements, members of Latroad generally could participate individually, the CC concluded in its decision in year 2011. In spite of a fact that tenders in procurements were submitted in the name of the general partnership, the work was carried out by one or two chosen members, while the participation by other members was only formal. Thus, the partnership was used as a platform for an exchange of information and market sharing instead of a cooperation to qualify for procurements that would not be possible for individual undertakings.

Establishment of general partnerships itself is not a violation, but an opportunity for small or medium-sized undertakings to participate in larger public procurements. Though, general partnerships may not serve as a platform for bid rigging and avoiding of mutual competition.