The Competition Council (KP) has applied a fine of EUR 336 086 on Latvian Motor Insurers’ Bureau (LTAB) for competition-distorting activities, as confirmed by the council.
KP and LTAB have agreed on a peaceful resolution, in accordance with which the insurance bureau admitted its guilt and promised not to appeal the council’s decision. LTAB got a reduced fine as part of the deal.
In accordance with the Compulsory Civil Liability Insurance of Owners of Motor Vehicles Law, membership in LTAB is required to enter the compulsory civil liability insurance (OCTA) market in Latvia. For more than ten years in order to become a member of LTAB, applicants had to meet multiple requirements and pay a single-time membership fee, the size of which was dictated by LTAB.
KP commenced an investigation of this after receiving a complaint from Balcia Insurance about the LTAB fee on the 2nd of August 2021.
Currently, the OCTA service is provided by nine insurers with four branches of foreign companies registered in Latvia and five branches of foreign companies registered in the Latvian market. Because only LTAB members are allowed to provide OCTA service, the organisation’s illegal actions had a profound effect on competition in the entire OCTA market.
According to KP, any emerging and capable market participant’s entry to the market can have an effect on it. This is why the application of an unjustified fee can be considered an obstacle obstructing competition.
During the investigation KP found that the LTAB’s entry fee was never justified in the requested amount. Between at least 2011 and 2022 LTAB did not have a legitimate goal behind requesting such a fee and its amount.
KP also concluded that the entry fee calculation formula, which was edited multiple times, was never clearly defined and had multiple interpretations, which allowed for creating formula inequality between potential LTAB members.
LTAB employees knew that setting an entry fee could potentially create a violation of competition rights and deter market participants from joining LTAB.
KP concluded that the actions of LTAB in setting and applying a specific amount for an entry fee as a requirement to joining the organisation has existed at the very least between April 2011 and May 2022. This requirement may have slowed the entry of new market participants to the OCTA market in Latvia and is contrary to the Treaty on the Functioning of the European Union.
KP’s decision mentions that at least six insurance associations have paid membership fees worth EUR 665 887. This includes Seesam Insurance, whose liabilities were taken over by Compensa Vienna Insurance Group’s Latvian branch, which paid EUR 42 686; Baltijas apdrošināšanas nams, which paid EUR 56 915; Lansforsakringar International Forsakringsaktiebolag, whose liabilities were taken over by Gjensidige Latvian branch and paid EUR 111 899 to LTAB.
Swedbank P&C Insurance Latvian branch paid EUR 161 931 in its entry fee; Compensa Towarzystwo Ubezpieczen Vienna Insurance Group, which later became Compensa Viennav Insurance Group Latvian branch, paid EUR 149 604l; PZU Lietuva, whose liabilities were taken over by Balta, paid EUR 142 852.
According to information from LTAB, regardless of the entry fee being corrected over the course of time, the goal behind the fee remained unchanged – a fair distribution of the financial burden between existing members and development of the infrastructure of new LTAB members. However, in other internal LTAB documents the listed goal for the entry fee was “ensuring an equal distribution of the financial burden”.
Following the suggestion from LTAB, KP and LTAB agreed to end the legal dispute. LTAB will not challenge KP’s decision and in return the fine will be reduced by 10%. This means the total fine applied to LTAB will amount to EUR 336 086.
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