Latvia's State Forests fined €7.86 million for competition violations

The Competition Council (KP) has fined state forestry company "Latvijas valsts meži" (LVM) €7.86 million after finding that some of its long-term partners received advantages over other companies for years.

How the inequality arose

According to KP, certain LVM partners were able to obtain specific timber and logging rights without taking part in public auctions, avoiding competition with other market participants. Meanwhile, other companies had to compete for the same limited forest resources through public auctions and had access to a smaller volume of coniferous sawlogs. The council concluded that this arrangement reduced business risk for favored companies and put them in a more advantageous position at the expense of competitors.

Requirements imposed on the company

Beyond the fine, LVM has been ordered to stop granting advantages to its long-term partners and to sell timber going forward in a way that gives all market participants equal opportunity to purchase it.

Decades-long contracts

KP noted that as of 2023, 11 long-term logging contracts were still in force, with the longest running until as far as 2096. The council pointed out that both LVM and the Ministry of Agriculture had previously been informed about problems with these contracts, but no solution had been reached.

LVM's response

LVM stresses that it did not sign these contracts itself — they originated before the company's founding and were inherited from the State Forest Service. LVM says it has not signed any new long-term contracts of this kind during its existence and had already been seeking ways to terminate the historical agreements. This year LVM went to court, asking that the long-term logging contracts be declared invalid and suspended until a final ruling. However, KP maintains that the market inequality has persisted for too long and has benefited certain companies at competitors' expense.