Agency’s independence questioned

Photo: Peeter Langovits

Even though there are examples of the competition watchdog having succeeded in putting its foot down in recent years, others have sparked suspicion as to the board’s independence. The justice minister says the government plans to discuss improving how the agency functions this year.

“Efficient monitoring is not ensured in Estonia,” oil shale chemistry company Viru Keemia Grupp (VKG) wrote to Minister of Justice Urmas Reinsalu on December 13, 2016. Oil shale sector companies claim they have doubts regarding the Estonian Competition Board’s independence in processes involving state energy giant Eesti Energia.

VKG pointed to the price formation of Eesti Energia Mines as it suspected prices offered were not in accordance with competition legislation. VKG found that the board gave preferential treatment to Eesti Energia and its subsidiary in its price formation audit.

Board successful in court so far

The justice ministry’s reply, that arrived a month later, was laconic. “Thank you for the memorandum. We will take your observations into account in planning future activities,” the letter by Secretary General Norman Aas from January 12, 2017 read.

VKG is not the only company that has expressed concern over misuse of the national energy company’s position recently. AS Eesti Keskkonnateenused lodged a complaint with the watchdog regarding Eesti Energia’s competition-harming activities on the waste market on December 2, 2016.

The company was troubled by Eesti Energia’s decision to start using competitions to find partners to supply its waste-burning Iru power station. “Eesti Energia’s action is clearly aimed at weakening competition,” AS Eesti Keskkonnateenused wrote.

Minister of Justice Urmas Reinsalu, in whose administrative area the watchdog belongs since September of 2015, refuted all claims of the competition board facilitating state companies or being biased in its decisions.

“One of the best examples is when the board ordered Eesti Energia subsidiary Elektrilevi to lower the distribution service price by 6.7 percent last year (the year before – ed.),” Reinsalu said. The watchdog also required state-owned transmission network operator Elering to lower its price by 7.6 percent last spring.

Reinsalu said that the two decisions cut state companies’ revenue by €24.6 million a year. “This shows very clearly that there is no conflict of interest, and that the competition board proceeds based on the law, not whether companies are owned by the state,” the justice minister explained.

Reinsalu also said he does not wish to go into detail over VKG’s accusations against the board due to ongoing judicial proceedings where the first instance court has ruled in favor of the competition agency. That is also why the ministry deemed it unnecessary to get involved a year ago.

Eesti Keskkonnateenused have had a change of heart. “We got together with Eesti Energia, talked things through, and eventually concluded that we have no differences,” member of the board Argo Luude said. The company has withdrawn its original complaint.

Concern over the agency’s arm not being long enough has been expressed in other fields. For example, owners of pharmacies have said on numerous occasions that the board is unable to uncover schemes involving straw men.

The medicinal products act states that no pharmacy operator can own or serve on the board of pharmaceutical companies, wholesalers, or companies that offer medical services. The State Agency of Medicines has the right to ask the competition watchdog to identify entrepreneurs based on dominant influence.

One of the more recent examples comes from the spring of 2016 when the medicines agency repeatedly turned to the watchdog regarding potential ties of OÜ Kvatropharma to wholesalers when processing the firm’s pharmacy license. The competition board found that even though the pharmacy operator had a certain connection to OÜ Euroapteek and a wholesaler’s license with OÜ Baltfarma, it was not enough to establish dominant influence.

Arguments presented by the medicines agency and a lawyer who made a similar inquiry point to a borderline case.

The matter to reach the government

Reinsalu said that the problem is not so much with the board’s inactivity rather than inefficient market organization. “The agency has pointed to this in its letter. The simplest solution would be to create effective market organization in the medicinal products sector,” he said.

The justice minister said that the recent Supreme Court ruling in the tariffs dispute of Tallinna Vesi, control actions against the Estonian Broadband Development Foundation, city of Tallinn, and the West Viru Waste Center clearly show the board is performing its duties.

Reinsalu is convinced that these examples cannot be used to claim the watchdog’s arm is too short, or that it is not performing its duties.

The minister adds that as concerns the competition board’s independence and capacity in general, the ministry has been looking for ways to develop competition neutrality and boost the agency’s monitoring capacity.

“The justice ministry plans to take this matter to the cabinet,” Reinsalu said.