This article was published as Article in Bændablaðið (p. 48) on 13 June 2024.
Dear farmers,
In the Bændablaðið newspaper on 16 May, I outlined in a letter to you the Competition Authority's concerns about the recently approved amendments to the agricultural produce laws, which enacted exemptions for meat processing plants from competition law. The competition authority's concerns are directed, not least, at the position of farmers.
The Chairman of the Parliamentary Committee on Economic Affairs subsequently responded with an article in Bændablaðið on 30 May. Last week, the Association of Agricultural Businesses (SAFL) published an opinion by Dr. Carl Baudenbacher, former President of the EFTA Court, and the association requested his opinion on the interaction of the EEA Agreement and agriculture in Iceland. The Executive Director of SAFL wrote an article about this in Morgunblaðið on 6 June.
This writing of articles and analyses gives me the opportunity, in the interest of an informed discussion, to highlight a few points. It should be borne in mind in this regard that it is the role of the Competition Authority to ensure that the actions of public authorities do not restrict competition and to point out to the government where things go wrong, in accordance with Article 8 of the Competition Act.
In the opinion of the Competition Authority, the debate following the enactment of the exemption provisions has brought home the importance of Parliament taking the matter up again for detailed consideration at the earliest opportunity. In that discussion, the interests of farmers and consumers will be prioritised, instead of the isolated interests of meat processing plants and their management.
The reasons are, among others, as follows:
The newly approved derogation provisions weaken the position of farmers, in contrast to the purpose of derogation provisions in neighbouring countries, where they apply to farmers' businesses and are aimed at strengthening the position of farmers vis-à-vis their counterparts. The chairman of the Committee on Agriculture states in his article that all talk of increased power for farmers in meat processing plants is „empty chatter“. He cites in support of this that only three operating meat processing plants would have been able to make use of the exemption provisions under the bill as it was presented by the Minister for Food.
The chairman's comments suggest that on this basis the Industry Committee decided to abandon the main objective of the original bill, which was to strengthen the bargaining position of farmers. Instead, it was decided to extend the exemption powers to non-farmer-owned processing plants and grant them carte blanche for mergers and consultations among themselves. This was done regardless of the ownership and management of the processing plants, and without other safeguards being put in place. In the article, the chairman explains that, for example, public pricing was not provided for because it was decided that „to trust that the processing plants would pass the savings on to the farmers.“
The problem here is that due to various incidents, farmers have lost control of the meat processing plants they built. The legislature had an opportunity to correct this by allowing exemptions, but on the condition that farmers would have control of the respective processing plants. Thus, for example, KS, SS or Norðlenska-Kjarnafæði would have to make specific and detailed changes to their ownership, control or other management, if their directors intended to take advantage of the exemption provisions. Such an implementation would have given farmers increased power to control their own interests.
The legal amendment jeopardises the interests of farmers, and therefore consumers. It is imperative that this be taken up for discussion again in the Icelandic Parliament.
The Competition Authority has pointed out that the exemptions under the Agricultural Produce Act could potentially extend to, and have a detrimental effect on, competition in closely related activities, such as the sale of inputs to farmers (e.g. fertiliser) or the importation and tendering for tariff quotas. The Director of SAFL emphasises in his article that the exemption should apply exclusively „for slaughter and/or processing of meat products and derived products, not for other goods or services“. The Chairman of the Parliament's Committee on Economic Affairs is of the same opinion and thinks that I maintain „Fake news in the air“.
It is positive that this is the understanding of those who advocate for and defend the newly introduced exemption powers. The Competition Authority's concerns, however, are that the exemption powers are open to wider interpretation, as they permit „a different kind of collaboration to keep down the costs of production, storage and distribution of meat products.“
The Competition Authority has, over the years, gained experience in anticipating the defences of companies under investigation. Should an investigation ensue, it is likely that meat processing plants will test the broad interpretation of these provisions. It does not help that the committee opinion which clarifies the provisions is contradictory and unclear.
For this reason, it is important that the exemption provisions are reconsidered by the Althingi and better implemented, in consultation with experts and stakeholders, including farmers. In this regard, a position must be taken, among other things, on whether and in what way meat processing plants or their corporate groups can make use of the exemption provisions, whilst at the same time being among the largest importers of meat.
The Chairman of the Industry Committee, in his article, emphasises the importance of the conditions set for the derogation powers. In my previous views, I have expressed the supervisory authority's concerns that these conditions will prove insufficient.
According to recently approved amendments to the Agricultural Produce Act, the Competition Authority is tasked with monitoring compliance with these conditions. However, the Industry Committee failed to consider the legal basis for this monitoring. For example, the powers of the Competition Authority to apply provisions of the Competition Act when obtaining information are not provided for, nor are the obligations of processing plants to provide information. Furthermore, there is no provision for the imposition of sanctions or for ordering changes. Consequently, breaches of the conditions carry no consequences under the law.
For this reason, monitoring the conditions is of little significance. It is therefore imperative that the newly adopted exemption powers are reconsidered by the Althingi and better specified, following consultation with experts and stakeholders, including farmers.
An article by the chairman of the Industry Committee reveals a serious misunderstanding of the purpose and procedure of merger control. The discussion gives reason to believe that the legislature's decision to permit meat processing plants to merge without scrutiny is based on misunderstanding and insufficient information.
The Competition Authority's merger control is directed, not least, at ensuring that customers, in this case farmers, do not suffer harm from reduced competition and, where applicable, enjoy the efficiencies that are the objective. In light of these significant interests of farmers, it is unheard of anywhere for merger control to be dismantled, as has been done here. None of our neighbouring countries believes it to be in the interests of farmers and consumers for processing plants to be able to merge without any hindrance and form a monopoly.
It is therefore important to review the exemption power in this respect.
In the opinion of Dr. In the opinion of Dr Carl Baudenbacher, referred to above, it is therefore established that Iceland has complete freedom to set its own rules on the production and processing of meat products and other products specifically excluded from the EEA Agreement, including with regard to derogations from competition law.
To my knowledge, there is no disagreement on this. Iceland is obviously not bound by how the EU or Norway conduct their agricultural legislation. However, the opinion confirms that the scope is limited to those activities and products that are specifically excluded from the EEA Agreement. It should be noted that certain agricultural products fall within the scope of the EEA Agreement.
The fact is that when the Committee on Fisheries amended the bill, this was not checked. In a letter from the Ministry of Food to the Parliamentary Committee on Fisheries, dated 8 April, it is pointed out that „The impact assessment of the original bill does not cover such extensive changes as were decided to be made to the legislation during its passage through Parliament.“
The question of whether the derogations, as they are implemented, are compatible with the EEA Agreement has therefore not yet been answered. It has recently been reported that the EFTA Surveillance Authority has approached the Ministry of Food and Agriculture and requested an explanation for these amendments to the Agricultural Produce Act.
It must be demanded that the Althingi takes a clear position on this.
Far too many people seem to approach the discussion as if farmers need to be looked after. I suggest that the government speaks more with the farmers themselves instead of talking over So. This is what the Competition Authority has tried to do, in part by commissioning opinion polls in which farmers express their personal views on the issues. These surveys reveal the truth that farmers are, for the most part, progressive and want to use the forces of competition to their advantage. They often reveal an attitude that is different from the one that spokesmen and other servants of interest groups want to promote.
All the best,
Páll Gunnar Pálsson
Director-General of the Competition Authority
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