On August 4, 2026, the Latvian Competition Authority (KP) issued its first decision since the introduction of competition neutrality regulations in 2020, finding that AS 'Latvijas valsts meži' (LVM) violated these rules by continuing to fulfill long-term forestry contracts (IML) that granted unfair competitive advantages to six companies.

The KP imposed a fine of €7,859,606.89 on LVM and mandated that it ensure equal sales conditions for all qualified bidders in the timber trade moving forward. The investigation revealed that from January 1, 2020, to April 28, 2026, LVM provided guaranteed access to specific volumes of timber outside public auctions to IML partners, while other market participants could only purchase timber through competitive public auctions.

KP Chair Ieva Šmite emphasized the significance of this ruling as it marks a critical point in the application of competition neutrality regulations, which require public entities to ensure fair competition conditions for all market participants. The ruling highlighted that the distribution of state resources must be non-discriminatory and based on transparent and objective principles.

The long-term forestry contracts (IML) were established between the State Forest Service and timber companies from 1991 to 1998 to promote the forestry sector's development post-independence. Initially, these contracts had a duration of about ten years, but many were extended significantly, with some lasting until 2096. The contracts granted partners guaranteed rights to purchase timber while imposing obligations for forest maintenance and management.

However, since LVM took over these obligations in 2000, IML partners no longer had to fulfill their responsibilities, undermining the justification for the advantages they received. The KP's investigation found that the execution of IML created unequal competitive conditions in the timber market, as IML partners had guaranteed rights to purchase timber without competing in public auctions.

The KP concluded that the advantages provided to IML partners no longer had an objective basis, as the obligations that justified these advantages had been transferred to LVM. The authority's decision aims to restore fair competition in the timber market and prevent future violations of competition neutrality.