Increased penalties should deter unfair commercial practices in trade - Competition Council

RIGA - Higher fines should deter unfair commercial practices in trade, Sanita Uljane, Head of the Unfair Trade Practices Prevention Division of the Competition Council (CC), told LETA in an interview.

The government has approved amendments to the Unfair Trade Practices Prohibition Act, which also provides for an increase in the fine for unfair trade practices from 0.2 percent to 4 percent of turnover.

Uljane said that when comparing the current situation in Latvia - with a fine of 0.2 percent - with other EU Member States, such as France and Spain, it is evident that the fines imposed in cases of unfair commercial practices are significantly higher, including, for example, in France, in the case of "black practices", the fine can reach up to 10 percent of the company's turnover.

"This fact points to the need to rethink the level of sanctions in order to match market conditions and ensure effective deterrence," said Uljane.

At the same time, she pointed out that so far this 0.2 percent of turnover has not been applied to any trader.

While in theory the CC could impose maximum fines, in practice a number of factors are always taken into account - the duration, gravity, repetition, as well as mitigating and aggravating circumstances.

In an interview with LETA, Maris Spicka, CC Executive Director, said that the existing law in Latvia sets limits for fines, but that several important circumstances must be taken into account when deciding on the specific amount of the fine. In cases of competition law infringements and unfair commercial practices, the amount of fines is determined by the Cabinet of Ministers, which takes into account the gravity of the infringement, its nature, consequences and impact on market participants.

If the infringement concerns only one supplier, is of short duration and its effects are not significant, the fine imposed may be lower. However, where the infringement involves several suppliers, has significant consequences such as solvency problems for traders, and is of a lasting or repeated nature, the fine may reach a maximum of 4 percent of turnover.

Spicka said that it would be useful for traders to carry out their own internal risk assessments to ensure a level playing field for all comparable suppliers. Such an assessment could include contract reviews and analysis of mark-up calculations, for example in the case of butter suppliers, to mitigate potential competition risks and ensure fair treatment in all aspects of cooperation.