Air Baltic and Transaero under cartel investigation in Latvia over price fixing

Published: 8/23/1999

According to reports in Business and Baltica in Riga, the Latvian Council on Competition is re-opening the case of Air Baltic and Transaero. Alexander Vasilyev, a member of the council, said that aspects of the cooperation agreement between Air Baltic and Transaero, and, specifically, its “goal to limit the competition on regular flights to and from Latvia” violate Part 1 Article 15 of the monopoly law. According to Vasilyev, the agreement has already caused one operator, RIAIR, to withdraw from the market. At the end of 1998, the Council expressed concern over the airlines' agreement to sell tickets at the same price, suggesting that, under Latvian law, this implied a potential cartel. The Bureau of Competition (the Council's executive body) was then directed to resolve the situation. According to Vasilyev, "this case is very difficult and contradictory, as it involves firms operating outside Latvia.” Consequently, the council acts "as cautiously as possible in order not only to uphold the law, but also not to act to the detriment of international air traffic." The present investigation may result in arbitration, or the council could use its powers to levy fines of 5-10% of turnover, in order to restore what it considers to be a competitive environment. So far, Air Baltic, Transaero, and RIAIR have not commented on the case. Oleg Korshe, Vice President of Air Baltic, declared that "first, it is necessary to clarify, whether violations took place. The position of the Council is not clear for us, and we will be able to forecast our further actions after we meet with the Council in the second part of August". Vladimir Slavgorodsky, the Transaero representative, claims that Transaers has not so far received any notice from the council. Maris Karklins, President of RIAIR said that: "We will be meeting with all the sides - the Council, Transaero, and Air Baltic and try to clarify the situation. After the meetings we will decide whether or not to resume our operations ".

Article ID: 776