The Competition Council (CC) has provided only moral, but still great satisfaction to Rudolfs Meroni, the owner of the company Baltijas Ekspresis, for the suffering and losses caused to him by the state company Latvijas dzelzceļš (LDz).
Satisfaction for R. Meroni is only moral because the CC has decided to recover 5.7 million euros from LDz for the state, not for the benefit of R. Meroni. However, the amount of money is large enough for the whole of Latvia to notice his victory in the fight for justice at the expense of Latvian taxpayers. Namely, LDz living at the expense of state grants will return a part of the received money to the state, so that the state has the means to give the next grants. Virtual money circulation turns into real money in the bank accounts or wallets of CC employees. The State Budget Law of 2021 allocates 2.14 million euros to the section “Implementation of Competition Policy”, of which 1.7 million will go to hire competition supervisors. The next beneficiaries of the fight over competition may be state-paid lawyers, as LDz promises to appeal the decision of the CC to the Administrative Regional Court.
LDz's first reaction to the CC's decision, which became publicly known the day before, was still in force. This was followed not only by the announcement of LDz with the denial of competition violations but also by the announcement of the decision of the CC on behalf of the Minister of Transport Tālis Linkaits stating that “there were grounds for concern about a distortion of competition”. The decision of the CC has been made after long and thorough research since 2017 and even earlier.
Such diligence should rule out the suspicion that the actions of the Minister delegated by the New Conservative Party may have any bearing on the interests of R. Meroni, the sponsor of the New Conservative Party (Jaunā konservatīvā partija, JKP).
This time, CC acknowledged the complaints that R. Meroni's company had addressed to CC in 2017, when JKP was not yet in a position of power. Baltijas Ekspresis has also complained about LDz before, but the examination of previous complaints has ended only with the CC's recommendations on how to properly maintain competition in the rail freight sector. LDz, in the person of its subsidiary LDz Cargo, has violated these recommendations in two ways.
First of all, LDz Cargo has used that only this company was allowed to move railway freight from the eastern border of Latvia to Daugavpils or Rēzekne, which in 2007 received this right from LDz, which has had it since the restoration of Latvia's independence. When the unified USSR railway network was divided due to the collapse of the USSR, the companies that took over parts of it agreed on the procedure for hauling goods across the newly established national borders. When private hauliers were later set up (for example, Baltic Express in 1998), they were allowed to operate domestic services, not from national borders, but from the first station where transnational agreements on cross-border transport end. In place of the USSR, many countries have emerged that find it too difficult to agree on new arrangements for cross-border transportation. According to the complaint of Baltijas Ekspresis and the results of the CC investigation, LDz Cargo and thus also the LDz group have used the situation by offering lower tariffs for transportation in the border area to those cargo owners who will order LDz Cargo transportation throughout the country, i.e. also from Daugavpils or Rēzekne to Riga, Liepāja or Ventspils. Up to Daugavpils or Rēzekne, these transports had to be ordered from LDz Cargo no matter what. To whom these mandatory road sections cost less, the whole freight road across Latvia also cost less, unless LDz Cargo's competitors lowered the price of transportation at their own expense.
It really requires a lot of data and deep knowledge in the organization of railway transportation to calculate the validity of LDz tariff discounts and the actual impact on final tariffs. LDz could probably justify that discounts for customers who ordered LDz Cargo transportation from borders to ports, reflecting only lower LDz Cargo expenses, if the cargo taken over at the Russian or Belarusian border does not have to be handed over to the next carrier in Daugavpils or Rēzekne. These tariff discounts were not so dramatic as to completely deprive all three other carriers, Baltijas Ekspresis, Baltijas Tranzīta serviss and Euro Rail Cargo, of their clients because otherwise these carriers would not exist anymore. The Register of Enterprises shows the Baltijas Ekspresis report for 2019 with a turnover of 38 million euros and a profit of 4.8 million euros.
Secondly, CC is also punishing LDz Cargo for collecting fines from private wagon owners for wagon downtime on the tracks managed by LDz. The origin of the fines is also the agreement of the USSR railway property distributors. They made sure that no one thought of using the wagons as warehouses or living quarters. With private wagons, the owner can do whatever he wants, but only in his own territory. It really would not be right to use public rails as a private wagon park and it could be penalized, but LDz Cargo is a freight carrier, not a railroad caretaker. LDz thought it would be simpler and cheaper if the LDz Cargo, which followed the circulation of Soviet heritage wagons, would follow the circulation of all wagons at once, but it turned out to be more complicated and expensive. It is indeed common in the European Union to complicate and make things more expensive, so those at odds must be punished.
The fine does not reflect what, according to CC calculations, LDz has gotten financial benefits from manipulations with tariffs and fines. The calculation started in 2007 when LDz changed from a company to a group of companies, where each company had to demonstrate the features of economic independence, i.e., maintain separate accounts, the data of which can be used by CC and many other controlling institutions. Last summer, LDz underwent another reorganization, the impact of which on competition may be studied by CC for many years to come. 5.7 million euros is neither the benefit LDz has accumulated during 13 years, nor the interest from this benefit, but the interest from the recent turnover of LDz Cargo. In other words, the amount was made up on the spot or on the assumption that 5.7 million euros are a good number for showing the CC as a solid institution that tries but does not overdo it.