Competition law update – Latvia

New rules for retailers regarding cooperation with suppliers

The Parliament of the Republic of Latvia – the Saeima – has recently adopted a new act on Prohibition of unfair retail practice and related amendments in the Competition law (the “New Act”). The New Act comes into force on 1 January 2016. The purpose of the New Act is to regulate retail field more effectively by providing rules that restrict retailers to use strong buying power against suppliers especially in grocery sector.

It is advised that retailers as well as suppliers review their agreements and cooperation practices to ensure that requirements of the New Act are fulfilled.

The New Act applies to grocery retailers and non-food product retailers that are having significant market power (“Retailers”). Under the New Act a market participant or several market participants have significant market power if, considering their buying power for a sufficient period of time and the suppliers’ dependency in the relevant market, they have the capacity of directly or indirectly applying or imposing unfair and unjustified provisions, conditions or payments upon suppliers and may hinder, restrict or distort competition in a non-food products’ market in the territory of Latvia.

According to the New Act the following actions of the Retailers are prohibited:

  1. to require from suppliers to pay or in other way to remunerate for conclusion of an agreement;
  2. to require from suppliers directly or indirectly to pay for placement of goods in stores unless parties agree in writing that payment is for additional placement of goods in particular places;
  3. to request from suppliers to provide lowest price for goods and restrict suppliers’ freedom to agree on lower price with other retailers;
  4. to require from suppliers to compensate retailer’s expenses regarding opening of new stores, renovation of existing stores, administration costs and other payments that are connected with retailer’s business;
  5. to set unfair and unreasonably long payment terms for delivered goods;
  6. to determine unfair and unreasonable remedies for breach of agreement.

In case of violation of the New Act, the Competition Council applies a fine in the amount of up to 0,2% from the Retailer’s previous year’s net turnover, however, the minimum amount of the fine is EUR 70.

For more information, please, do not hesitate to contact us by email: office(at)legatum.fi.