This newsflash opens a series of news items covering large-scale amendments to the Competition Law (Draft Law). At the end of 2013, the Ministry of Economics prepared the Draft Law, which is now under review by the Latvian Cabinet of Ministers. The Saeima (Latvian Parliament) is expected to approve the Draft Law this year. The Competition Law has twice previously been substantially amended and the experience of our team in relation to previous amendments shows that active involvement in discussions is required even at the very earliest stages. We plan to inform you about the essence of the amendments over several newsflashes, so you will have the option systematically and in good time to assess their effect on the operations of your company.
In this newsflash we will address one of the most significant issues – “case prioritising” – to be introduced together with the Draft Law.
According to the Competition Law (or the Law), at present a case investigation on potential violation of the Competition Law can be initiated by an application or an initiative by the Competition Council (or the Authority), or on the basis of a report from another institution. If the information included in the application and obtained in addition does not indicate features of a violation of the Competition Law, the Competition Council must adopt a well-argued decision not to initiate a case. Thus, while assessing an application the Authority must comply with standards of investigation and proof, which requires time and the Authority's resources. Under the Law, a decision by the Competition Council not to initiate a case can be challenged in court; in these cases litigation may require a certain time but can still result in initiation of an investigation into possible violations of the Competition Law.
Under the Draft Law, the present procedure for case initiation will be replaced by a simplified procedure where the Competition Council has an exclusive right to initiate a violation investigation case solely on its own initiative. Thus the Draft Law plans to implement so-called “case prioritising” which enables the Competition Council to decide independently which violations should be investigated, and therefore – which investigation cases should be initiated.
This discretion granted to the Authority has a dual character. On the one hand, it is expected to lead to increasing the Authority’s efficiency, which is the main argument for the Competition Council having to substantiate the amendments. By implementing a new system, the Competition Council will be able to independently decide its priorities during supervision of the competition situation in business sectors important for society where non-compliance with competition principles causes a significant effect and where the Authority’s interference is therefore required most.
The plan is that the main priorities to be assessed by the Authority on initiation of a case will be investigation of the severest violations of the Competition Law – cartels. Likewise, violations that significantly affect competition or consumers’ collective interests might fall within the Authority’s range of vision. The Authority’s priorities – separate market sectors – will be disclosed to the public as far as this does not harm the interests of the investigation. Interested parties, most likely those market participants and consumers directly or indirectly suffering from the offender’s operations, will have the opportunity to express their opinion on planned priorities for the following period.
“Case prioritising” does not exclude the rights of market participants to address the Authority and report on facts providing grounds to detect violations of the Competition Law. However, unlike the present procedure the Authority will not be obligated to react to these private-party applications in a set time and manner. Thus “prioritising” will enable the Competition Council to assess the importance of the case within the context of facilitating economic development and of violation of consumer interests.
On the other hand, introduction of the new regulation significantly limits private persons’ opportunities to protect their rights and interests ensured by the mechanism of challenging decisions. This could be especially topical in situations when bad-faith activities of other companies in the market limit entry of new market participants, in the end resulting in violation of consumer rights. Moreover, “case prioritising” will increase the risk of mistakes by the Authority because no mechanism will be established to supervise the activities of the Competition Council when it refuses to initiate a particular case. So far, the court has ensured the supervision mechanism when private persons challenge the Authority’s decisions. In addition, the new regulation will increase corruption risks in state administration because initiation or rejection of a case will be an institutional process with no control.
“Case prioritising” is closely related to the procedure of civil application of competition law provided in the Competition Law where, apart from the Competition Council, a court can also establish a violation of the Competition Law under civil procedure. Thus in cases when the Competition Council does not find a certain violation to be a priority to initiate and investigate a case by the Authority, the law will still ensure a private party's option to protect their rights and interests through courts of general jurisdiction.
It should be noted that the Authority itself admits that proving a violation of competition law is a complicated and time-consuming procedure. Moreover, some violations can be proved only by executing the special investigative powers granted exclusively to the Authority such as requests for information (including confidential information), inspections in the presence of representatives of the State Police, and the like. A private person can neither request, nor obtain certain information available to the Authority through statutory powers because often such information contains business secrets of close competitors.
Taking into account the competition principle set in civil procedure, a party declaring that a violation has occurred has to produce evidence to prove the existence of the violation. This clearly means in advance that a violation of competition law is difficult to prove. In turn, it can be concluded that this option provided in the Law cannot be compared to a procedure and standard of proof when a violation is investigated by the Authority, while “case prioritising” would still infringe the interests of private persons.
In the context of the amendments, we recommend that you carefully assess cooperation partners, as well as organise communication with them in a form that can be used as proof of a potential violation in case of necessity.
Likewise we emphasise that the process of adopting the Draft Law provides for hearing opinions not only from the state administration but also from the public, industry specialists, associations and the like. Therefore we invite you to take an active part in the discussion in relation to the amendments to the Competition Law and their adoption by the Saeima.