Samsung admits cartel activity and reaches agreement with Competition Council - International Law Office

Following a sector enquiry, the Competition Council initiated an investigation into possible cartel activity among Samsung television distributors in Latvia on its own initiative. In October 2009 the council adopted a decision which was remarkable for a number of reasons. In the decision the council simultaneously applied Article 11(1)(i) and (iii) of the Competition Law and Article 81, Part 1 of the EC Treaty, thereby exercising its obligation under EU Modernisation Regulation (1/2003/EC), and found violations of both norms. The resultant fines were the highest that the council has ever imposed. SIA Samsung Electronics Baltics, which is the main representative of Samsung Electronics Co, was fined Lats4 099 942.75 (€5,833 692.96). The Samsung television distributors – SIA RD Elektroniks, SIA Proks, SIA Elkor Trade, SIA Rota-K – were fined Lats1,442,524.54 (€2,052,527.50), Lats267,529.53 (€380,660.22), Lats541,920.38 (€771,083.23) and Lats270,718.07 (€385,197.11), respectively.

This case was also remarkable in that the violation discovered by the council involved prohibited practices on both horizontal and vertical levels. The council discovered that Samsung Electronic Baltics and the four companies reselling Samsung televisions at wholesale and retail level engaged in concerted practices and reached agreements aimed at market division, limitation of parallel imports and price stability. The prohibited conduct took place between May 28 2007 and the second half of 2008.

Two of the parties – Samsung Electronics Baltics and Proks – had engaged in mitigation practices: Samsung Electronics Baltics changed its distribution agreements and Proks removed the obligation to use resale prices and offered customers discounts if they had bought goods during the period in which those resale prices had been applied. These actions earned both companies a reduction in their respective fines.

The decision was appealed to the Administrative Court. During the proceedings Samsung Electronics Baltics and Proks concluded administrative agreements with the council. The Competition Law foresees the possibility of concluding an administrative agreement in order to settle a legal dispute pending before the court. By concluding administrative agreements both undertakings admitted the existence of the cartel. Also, due to the signing of these agreements, the council decided to decrease the fines from Lats4,099,942.75 (€5,833,692.96) to Lats2,459,965.65 (€3,500,215.78) for Samsung, and from Lats267,529.53 (€380,660.22) to Lats152,224.3 (€216,595.66) for Proks.

The conclusion of administrative agreements in competition cases is not widespread practice. However, this case makes clear that by signing administrative agreements, undertakings which have been involved in cartel activity may have their fines reduced. Such agreements also constitute useful mechanisms for settling legal disputes without having to endure lengthy court proceedings.

For further information on this topic please contact Ieva Azanda at Liepa Skopina Borenius by telephone (+371 7 201 800), fax (+371 7 201 801) or email (ieva.azanda@borenius.lv).