On Friday, 22 October, the Competition Authority issued notification where it was pointed out that coverage by interest groups of the prices and pricing of companies under their umbrella was particularly problematic and should not take place.
The Federation of Icelandic Businesses (SA), The Business Council of Iceland (VÍ) and the Farmers' Association of Iceland publicly responded to this announcement.
Í Joint declarationu SA and VÍ, under the headline „The Competition Authority's outrageous attack on informed debate“, they claim that the Competition Authority has gone far beyond its statutory remit. Various questions are raised which seem intended to demonstrate this. In interview said the CEO of SA regarding the Competition Authority's announcement „absurd“ and „selfishly“.
Í Notice of the Icelandic Farmers' Association their roles are explained and it is emphasised that the organisation complies with all laws and regulations.
The responses from SA and VÍ show that there was a clear need to draw attention to the restrictions that competition law places on the activities and representation of business interest groups. In the interests of an informed debate, it is appropriate to recap the relevant provisions of the Competition Act and, at the same time, answer some of the questions raised in the association's statement and media coverage.
Í Article 12 of the Competition Act states that organisations of undertakings are prohibited from deciding on competition-restricting measures or encouraging barriers that are prohibited under the law. The legislative notes state that in the provision „It is emphasised that both business associations and the businesses themselves are prohibited from establishing or encouraging barriers that contravene the prohibition provisions of this Act…“.
It is clear from this that the provision of Article 12 constitutes an independent infringement of competition law, but its substantive content is also reflected in the prohibition of unlawful collaboration in Article 10 of the Competition Act. The provision of Article 12 is comparable to the rules that apply elsewhere in the European Economic Area and has been interpreted in decisions, rulings and judgments.
The concepts of „to impose restrictions on competition or encourage obstacles“ all measures and arrangements of an association of undertakings intended to ensure that its member undertakings behave in a particular way. The wording of the provision implies that a decision or incentive can be in any form whatsoever.
The application of this provision has been discussed in various decisions of the supervisory authority. Similarly, competition authorities in this country have made decisions in around twenty cases where business associations have been found to contravene Article 12 of the Competition Act through discussions of prices or other anti-competitive barriers.
The Competition Authority then dealt with this specifically in Chapter IV (p. 30 onwards). in the supervisory authority's report no. 1/2008, Supplier trade agreements and other business collaborations in the food market. That section was written because representatives of companies in the grocery market and their organisations had publicly commented on food price rises. The Competition Authority had therefore been compelled to publish public announcement at the end of March 2008, to emphasise the duties of companies and their organisations, in a similar way to now.
The report says, among other things, about this:
„It is undisputed that the activities of business associations can be beneficial and have a positive impact on markets, e.g. lobbying governments in order to improve the operating conditions for businesses. However, cooperation between companies within such associations can be sensitive from a competition perspective. This is particularly the case where competitors in a given industry meet regularly and discuss matters that can affect competition between them. This can create conditions for co-operation and mutual consideration between the companies concerned, which can reduce the incentive to compete.„
The report also reviews examples from European competition law and the writings of scholars.
The aforementioned report sets out detailed guidance for business associations on the interpretation of the aforementioned Article 12 of the Competition Act. Among other things, examples of conduct that may contravene Article 12, pursuant to Article 10 of the Competition Act, are listed. It is emphasised, for example, that the following conduct may be unlawful (see p. 32):
– „Reporting or discussion of prices, price trends, terms of trade, and price changes in inputs and other cost items.“
– „Coverage or discussion of the operational, financial or commercial position of competitors or clients of member associations.“
In Iceland, there is a lack of competition in various important markets. This was stated in the Supreme Court's judgment of 7 January 2021 in case no. 42/2019: „Oligopolistic markets are particularly vulnerable to any form of co-operation between competitors, as it is easier to engage in consultation or anti-competitive coordination in such circumstances, and there is therefore all the more reason to safeguard the independent decision-making of competitors and such copen which can exist in the market despite the oligopoly […]. In the judgment of the Supreme Court of Iceland of 1 December 2016 in case no. 360/2015, it is stated that it is important in an oligopolistic market that there is uncertainty among companies. „concerning the conduct of competitors“.
It must therefore be clear that it is imperative that representatives of business associations do not take any action that unnaturally reduces the desirable uncertainty in the market and the independent decision-making of member companies competing in the market.
In the statement from SA and VÍ, referred to at the outset, various questions are raised about what may and may not be said in public discussion of pricing matters.
For example, it is asked whether SA „may no longer“ to comment on the content of a quarterly survey among businesses on the state and outlook for the economy, which the organisation conducts in cooperation with the Central Bank of Iceland. The answer to that is yes, interest groups may comment on such surveys or on worsening economic conditions. However, in that discussion, the organisations must be careful in public debate or in discussions within the business community regarding the interpretation of the survey's findings.
In discussing these matters, spokespeople for trade associations have more than one option. For example, there is a difference between, on the one hand, an association's spokesperson stepping forward and predicting that companies will raise prices, and, on the other hand, commenting on the necessity of doing so, and on the other hand, a spokesperson analysing rising raw material prices and worsening conditions, but at the same time stating that it is up to the companies themselves to find ways to respond, e.g. through efficiency measures or changes to terms and conditions. The first option is problematic and could contravene competition law, as the association's member companies may take the comments as an indication that it is an opportune time to consider price increases, regardless of their individual company's circumstances. The latter option does not contain such indications and is therefore acceptable.
SA and VÍ also ask whether business interest groups may comment on interest rate rises. The answer to that is yes. It is not contrary to Article 12 of the Competition Act when business associations publicly discuss the Central Bank's interest rate decisions or other matters concerning economic affairs and the general operating conditions for businesses. However, business associations must ensure that their member companies do not regard the association's discussion as an indication that a price change is now timely. It is important that member companies make decisions about price changes, as well as other decisions regarding their operations, independently.
It is also asked whether measures will be taken „The Central Bank is prohibited from commenting on prices in the country.“, or an analyst, e.g. within the commercial banks. The answer to that is no. The Central Bank is not considered an association of undertakings within the meaning of Article 12, and the banks' analysis departments generally are not either.
It should also be noted that trade unions such as the ASÍ, BHM and others are not bound by competition law in this respect.
Business associations stand apart from the group mentioned here, because the members of a business association are often all, or most, of the companies in the relevant industry or industries, and the representatives of such associations then speak on behalf of the entire industry. Clearly, their statements can have a significant impact among businesses. For this reason, the provisions of Article 12 of the Competition Act are of great importance.
SA and VÍ then cite the Norwegian Employers' Association, NHO, which published an analysis of the outlook for the Norwegian business sector, stating that it is not aware of any prohibition on publishing such findings. As previously stated, such information gathering does not contravene competition law unless it is intended to create the conditions for illegal collusion. However, the Norwegian employers' association, like the Icelandic one, must be careful about how the findings are used and presented.
As the above discussion shows, it can be difficult for business interest groups and their advocates to tread the right line in their activities. Nevertheless, it is an unequivocal requirement that such organisations possess the necessary knowledge and have established internal procedures to ensure their activities in this regard comply with the law.
The statement from SA and VÍ can be interpreted as implying that this is lacking. If that is the correct interpretation, it is urgent that this be rectified without delay.
It must not be forgotten that the provisions of competition law are, amongst other things, intended to protect consumers and promote general prosperity. Business interest groups must respect this.
The Competition Authority does not dispute that external conditions in the business sector can be temporarily adverse, e.g. due to rising raw material prices, product shortages, etc. However, it must not be forgotten that the profitability of companies in various important consumer markets has been good, if recent accounts are to be believed. Furthermore, there are widespread opportunities for efficiency gains. Therefore, increasing prices for consumers cannot be the first or only option for companies in a competitive market when faced with temporarily worsening conditions.
The Competition Authority's notice was issued to emphasise these important rules, but did not constitute a position on the legality or illegality of the statements by representatives of interest groups that were cited. The response shows that there was a need to draw attention to these rules of the game of competition law.
Páll Gunnar Pálsson
The author is the Director General of the Competition Authority.
The article was published on Vísir.is on Monday, 25 October 2021 but The article can be accessed here. .
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