In his article in Morgunblaðið on 16 February, Ragnar Árnason, Professor Emeritus of Economics at the University of Iceland, for the second time discusses his position on competition law and competition supervision in Iceland.
In the interest of an informed discussion, Ragnar's writings are a cause to pause on a few points.
Competition law and the EEA Agreement
In his article, Ragnar argues that the macroeconomic choice when it comes to competition stands between two paths; on the one hand, to lock Icelandic business „in the prison of the inefficient small business“, but on the other, to allow companies to merge for the sake of economies of scale and then to tackle them if they abuse their market position. Ragnar advocates the latter course and then puts words in my mouth.
The fact is that, alongside the adoption of the EEA Agreement, the Icelandic authorities decided to align the rules of business with the competition rules that apply elsewhere in the European Economic Area. For this reason, both Icelandic businesses and consumers have benefited from having rules here that are comparable to those elsewhere in Europe.
This includes, amongst other things, that the decisions of the Competition Authority are supported by precedents from other competition authorities in the European Economic Area. The same applies to rulings by the Competition Appeals Board and the courts. Furthermore, the EFTA Surveillance Authority and the EFTA Court ensure the consistent application of the EEA Agreement's competition rules.
It should be emphasised in this regard that the Icelandic and European competition rules take into account economies of scale, among other things. Thus, companies are permitted to take advantage of economies of scale, provided that customers and consumers, and not solely the management and owners of the respective companies, benefit.
It is therefore incorrect that the Competition Authority can choose between different options when enforcing competition law. Ragnar's call for a change in the Competition Authority's practice (i.e. to set aside merger control) therefore in effect constitutes a demand for an amendment to the Competition Act and a departure from the rules on which the EEA Agreement is based.
Competition and the Icelandic fishing industry
In support of his argument, Ragnar cites the Icelandic fishing industry, believing its good fortune to lie in its exemption from competition law and, consequently, the „immense power“ of the Competition Authority.
In the interest of an informed discussion, it is right to inform Ragnar that the Icelandic fishing industry is not exempt from competition law and has therefore been subject to the same oversight as most other industries in this country.
As the decisions of the Competition Authority show, mergers between fisheries companies have repeatedly come before the Authority, as Icelandic competition law has applied to their activities in Iceland since the law was adopted.
It is also a great advantage for Icelandic seafood companies that they operate primarily in international markets and therefore benefit from competitive pressure from other international seafood companies.
The Icelandic fishing industry is therefore an example of how the opening of markets and competition from foreign companies can strengthen and improve the operations of Icelandic companies.
What do Icelandic companies want?
In his writings, Ragnar puts forward the perspective of large corporations that do not wish to be subject to competition law.
However, this is not the perspective that the Competition Authority encounters in its dealings with the majority of Icelandic companies. The vast majority of their managers, in fact, want the competition law and its enforcement to enable them to provide competitive restraint for larger companies and to ensure they have choices when buying or selling inputs, products or services. They are tired of being David in a battle against their Goliath.
This attitude is reflected, for example, in farmers' negative attitude towards meat processing plants, but the growth and prosperity of agriculture depends, in part, on farmers having choices when purchasing inputs and selling their produce. The same applies to all other business activities.
The Story of Mila
Ragnar finally cites the Competition Authority's decision regarding Ardian's acquisition of Míla as an example of a rigid and harmful application of competition law.
It is worth recalling in this context that the investigation of the matter revealed that the transactions were based on a wholesale agreement between Síminn and Míla, which was likely to harm the interests of businesses and the public for the long term. Operating companies in the market, as well as telecommunications authorities, made serious objections to these plans.
In investigating the case, the Competition Authority looked to precedents from European competition law and collaborated with foreign sister authorities. The outcome of the case was that the merging parties made significant changes to the underlying wholesale agreement. The aim of the changes was to facilitate continued competition in the telecommunications market, for the benefit of customers.
It has been publicly reported that the purchase price of Míla has been reduced as a result of this. This is logical, as changes to the underlying contract were likely to reduce the buyer's ability to justify a high purchase price by subsequently being able to generate increased revenue under the protection of barriers to competition. At the public's expense.
The article was first published as an article in Morgunblaðið on Tuesday, 14 February 2023, under the headline „Ragnar and the Competition Act“.
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