Signs of illegal competition in the scrap metal market

We are talking about the leading group of Lithuanian scrap metal collection and recycling companies, Kuusamet Group, subsidiaries of which operate in all three Baltic countries. In Lithuania, this group is already the largest division of scrap metal collection and recycling companies, uniting about 20 different companies in this sector. In Estonia and Latvia, Kuusamet Group is owned by the company Refonda, which has been operating in these markets for several years, and purchasing prices for ferrous scrap are much higher than the market average. Using these tactics, Refonda displaced several smaller companies in the Estonian scrap metal collection and recycling industry and took its place in the market by changing its name to Metruna and at the same time turning to offering average market purchasing prices for ferrous scrap. Now Refonda is trying these legally dubious methods of conquering the market in Latvia. The same signs are observed - illogically high prices for the supply of ferrous metal scrap, which most likely does not allow the enterprise to operate profitably, and leads to the fact that it is liable - this is evidenced by the company's latest annual reports. According to the annual reports, the losses of Refonda are covered by its parent company. It can be predicted that, using such competitive tactics, the market share of Refonda will increase significantly.

It should be also added that the market share of Refonda increases significantly only if the responsible institutions of Latvia - the State Environmental Service, the Competition Council, the State Revenue Service - continue to remain silent observing what is happening. The activities of Refonda may be considered predatory competitive tactics and prohibited by law regulating competition. At the same time, companies are free to vote on their price dynamics, except in cases where the company takes a more organised position in the market, and in this case the company allows them to ensure that their actions do not distort competition. In addition, companies engaged in diplomatic positions, and, in my opinion, Kuusamet Group, should not adhere to an aggressive policy. Aggressive market practices also include economic policies of unreasonably low prices (so-called “predatory pricing”), thereby raising the price of ferrous scrap to a level at which other competitors are no longer able to purchase it, while recovering their costs. Such companies are being forced out of the market. And although the Refonda company has not yet gained traditional positions in the Latvian scrap metal market, nevertheless, if we evaluate its position in the Baltic market as a whole, especially its already leading position in the Lithuanian scrap metal market, then the presence of indicators of the observed position is obvious. Therefore, the price recession implemented by Refonda on the Latvian market, which most likely has been leading to the emergence of the company for a long time, can be regarded as an abuse of its dominant position.

This data, according to the Association of Baltic Scrap Metal Recyclers, is provided as support for starting an investigation or, at least, for marketing research of the situation in the scrap metal collection market in the countries of Latvia and Lithuania. The actions of the Kuusamet Group companies in the Baltic countries indicate a general pattern of behaviour aimed at an aggressive, most likely undervalued and therefore economically unreasonably low pricing strategy, which is applied over a fairly long period of time. As a result of such actions, the weakest companies (in Latvia for a year or more) are unable to sell to other competing market participants, thereby attracting customers or even leaving the market. In our opinion, the responsible authorities in Latvia should begin to analyse events in the Latvian scrap metal market, as there are signs that a negative impact on the competitive situation is beginning to occur and threatens the tax revenues of their country.