Annual Report 2010
The year 2010 was the third year of activity for the new Competition Authority. The general economic development in 2010 can be characterised by the preparation for adopting the euro, the end of the economic depression and the first signs of economic recovery, but also continually high unemployment and accelerating inflation.
Adopting the European single currency undoubtedly has a significant meaning. Besides being the means of payment, the Estonian kroon was the symbol of our independence, freedom and cultural self-awareness. It is a little sad that we can no longer keep banknotes with pictures of our luminaries – Jakobson, Koidula, Tobias, Tammsaare, Hurt, Keres, Baer, Raud - in our wallets. Nevertheless, I am still convinced that our cultural memory is strong enough and important people from our history will not become less significant.
At the same time, adopting the euro and becoming a full member of the OECD are essential for integration. Now we are in a position to state that the more than a century-old dream of Mr Gustav Suits: “Let us remain Estonians, but let us also become Europeans!” has been fulfilled. I am convinced that our national security is also more stable today than ever before. Being a member of NATO, the EU as well as the OECD and having a global currency as the means of payment raises the question as to what is next. It seems that we have accomplished all and one may doubt if we have any destinations remaining. There is an answer to the last question. We do have many high goals to follow – economic welfare, wealth, and higher Human Development Index, just to name a few. Estonia is not among the wealthiest countries in the EU, GDP per capita is remarkably lower than the EU´s average, and thus it is important not to rest on your laurels, but keep on moving forward.
The Estonian Competition Authority plays a certain role in order to achieve previously mentioned goals and to promote economic development and a better business environment. Here we can review some critical subjects in 2010. Let us take the price increase of foodstuff as an example. Estonia is a country with a small and open economy and the price increase on world markets shortly carries over to our prices. That instantly raises a question if the state and government have specific means for repressing price increases, and there are not very many direct options. The turnover tax could be lowered, but that would only provide a short-term effect, because it is not possible to cut it to zero and below that it would already be direct subsidising. What the state can do is creating a better business environment. It means that equal rules apply to all market participants, market barriers for possible new entrants have been removed and the market is not divided with prohibited agreements. It seems somewhat similar to sports competition. It is not acceptable if an athlete achieves results with the help of prohibited substances. In the circumstances of free enterprise there should also be fair rules applied to all. A cartel agreement concluded in order to share a market is the same as doping in a sports contest and economic results achieved with the help of prohibited agreements are not accepted. Strengthening the fight against cartels was one of the main accomplishments of the last year.
In addition, last year will be remembered by the new tasks entrusted to the Competition Authority for price regulation of larger water companies and all heating companies. We have always stressed that the best way to reach economic welfare is promoting free competition, but there are sectors where it is not possible and the monopoly status is inevitably the only option. Considering the technical development today it is unthinkable for each consumer to build an individual bore well or establish an individual power station. Therefore the price regulation of monopoly undertakings is necessary to ensure balance between the interests of undertakings and consumers. We will also do our best in that area to ensure the development of undertakings from one side, but from the other side to guarantee the high quality service for an acceptable price for the consumers.
We hope that the year 2011 will be as successful and the Estonian Competition Authority can assist the economic development and the growth of consumer welfare.
With best wishes