2016

The competition council imposes penalty on seven forestry service providers, based on an application filed by LVM

At the end of 2014 JSC "Latvian State Forests" (LVM) applied to the Competition Council with a request to verify the entrepreneurs who had submitted tenders in a procurement organised by LVM, due to suspicion of unfair competition. On 14 December 2015, the Competition Council found a prohibited cartel agreement entered into between „ADV Forestry” Ltd, „Andrēnkalni”Ltd, „LMV Mežsaimniecība” Ltd, „Clean Forest” Ltd, individual merchant „White Water House”, „LatKada”Ltd and „Ramuss” Ltd, and all seven companies were fined. Six of the seven fined companies appealed the decision of the Competition Council to the Regional Administrative Court.

The companies entrusted preparation of their tenders to one and the same person, thus exchanging their commercial information and making real competition impossible.

"Such unfair practice limits the ability of fair service providers to win procurement and provide services to LVM; this way LVM is unable to choose the best offer - the best quality-price ratio. We want to enter into contracts and cooperate with experienced and responsible partners in the State forest management. We will keep reporting to the Competition Council if similar cases occur," says Silviculture Director Mārtiņš Gūtmanis.

First, the companies involved in the cartel denied any connection between them, but later they claimed that they were one market participant, substantiating it with mutual kinship and trust agreements, on the basis of which all the companies are controlled by one person. In the course of investigation, the Competition Council did not obtain any evidence for actual execution of such contracts.

Family ties between company’s employees or owners do not serve as a justification for submission of coordinated tenders. The cartel is one of the manifestations of fraud to deceive the customer giving the impression that the companies are competing in the market. The mere fact that some business owners are connected by kinship, is not a reason for them to be recognised as one market participant, which are not in competition with each other, and cannot be used to justify customer deception. Companies must really compete or if due to kinship it is not possible, they must officially work as one company.

Due to provision of false and contradictory information, as well as due to delaying the investigation process, by not providing the requested information or providing only partial information, the Competition Council also increased the fine imposed on the companies. The companies were fined a total of 59 425 euros.