Estonia, Latvia, Legislation, Real Estate, Transport

On 21st of August 2014 Tallinna Kaubamaja AS made a stock exchange release announcing the decision of the Latvian Competition Council, which imposed a fine on Tallinna Kaubamaja AS and its subsidiary KIA Auto AS in connection with an alleged violation of the Competition Law. Tallinna Kaubamaja AS and KIA Auto AS are convinced that the accusation is unfounded and there has occurred no breach of the Competition Law.

On 15th of September 2014, Tallinna Kaubamaja AS and KIA Auto AS submitted complaints to the Administrative Regional Court of the Republic of Latvia, in which they ask the decision to be annulled in full. KIA Auto AS and Tallinna Kaubamaja AS will continue conducting their usual business activities and to inform the stock exchange as circumstances are specified, in accordance with the law and procedure laid down in the rules and regulations of the stock exchange.

On 19.08.2014, the Latvian Competition Council notified Tallinna Kaubamaja AS and its subsidiary KIA Auto AS of its decision whereby these companies are imposed a fine with regard to an alleged competition-related violation. The Latvian Competition Council initiated proceedings on the basis of the application filed by SIA Auto Stils Serviss, a competing company, whereby SIA Gros Auto Grupa, the independent distributor of Kia in Latvia, denied warranty repairs to a Kia cee’d passenger vehicle in 2012 without having consulted KIA Auto AS in this matter, because the passenger vehicle had not been serviced at an authorised service centre. By the time of the alleged violation, SIA Gros Auto Grupa had already been notified of the termination of the rights as a distributor.

According to the warranty conditions of Kia that were valid in the period of 2004–2009, Kia passenger vehicles could also be serviced at independent service centres, but in order to ensure the quality of maintenance works and passenger safety, the manufacturer required maintenance works performed at independent service centres to be inspected at an authorised centre free of charge as a prerequisite of the validity of the warranty in order to verify their compliance with the standards established by the manufacturer. However, the Latvian Competition Council has interpreted the referred warranty conditions as a restriction on maintenance at independent service centres.

The Latvian Competition Council took the view that Kia’s warranty conditions violate the Latvian Competition Act. Tallinna Kaubamaja AS and KIA Auto AS disagreed with the conclusions of the Latvian Competition Council. The Council has not considered the numerous evidence and claims filed by KIA Auto AS and has issued a convicting decision based on a single identified violation where a company unrelated to Tallinna Kaubamaja AS group denied warranty repairs without having previously consulted KIA Auto AS, Kaubamaja said.

According to the decision, KIA Auto AS was fined in the amount of 135 thousand euros, whereof 96 thousand euros is imposed jointly on both KIA Auto AS and its parent company TKM Auto OÜ’s parent company Tallinna Kaubamaja AS, which is considered to be liable for the activity of KIA Auto AS in the view of the Latvian Competition Council.