On 21 January 2020 Competition Council published the results of the market supervision on beer sales market in Latvia. During the market supervision a specific emphasis was put on issues of HoReCa and public event sectors.

Exclusive contracts and their role in the market

According to the report, the consequences of exclusive sales contracts are that they prevent other market participants from offering their products in specific places of distribution. According to a survey between small beer producers most commonly exclusive sales contracts are signed in the HoReCa sector.

Competition Council conducted research on beer sales contracts in the HoReCa market sector and concluded that they do not explicitly restrict other market participants to offer their production to HoReCa sector clients, which have already signed a contract with a beer supplier.

However, large producers and importers can offer their clients the equipment necessary for beer storage and sales, as a consequence they have more influence on the HoReCa sector. Furthermore, this is usually done without a reward. According to Competition Council, this circumstance prevents HoReCa companies from signing contracts with smaller beer producers, since they cannot offer the same amount of opportunities and goods.

Contracts on selling beer in public events and their impact on competition

In the public events sector use of exclusive contracts is a common practice. In addition, a permit to sell beer in the event territory sometimes exceeds the yearly income of a small beer producer, leaving them without the opportunity to offer their services. During a public survey, 72.7% of respondents admitted that the assortment of beer in public events and HoReCa sector is not sufficient.

Public event organizers have admitted that criteria they most commonly consider when choosing beer suppliers are the following:

  • – Company’s experience in serving high numbers of customers;
  • – Assortment of offered products, their reputation between consumers;
  • – Beer supplier’s financial stability and technical capacity for serving events of the specific scale;
  • – Price of the production, which should be in accordance with specific nature of the event;
  • – Compatibility of brands between the event and the beer supplier considered.

The conclusion is that the common ground for signing the contract is the belief that the beer supplier will have the capacity to provide drinks during the whole time of the event.

Conclusions and recommendations by Competition Council

After analysis of beer supplying contracts, the Competition Council came to a conclusion that any barriers preventing small beer producers from taking part in the market are rather caused by economic inequality than the contents of the contract.

To avoid that large beer suppliers that are sponsoring a public event gain exclusive rights on selling beer during events, organizers should assess the impact that exclusive contracts may have on competition. Accordingly, a clause that requests a consent from a competitor for other competitors to join, should be avoided.