On this page is the review by the Competition Authority, dated 5 May 2020, of the bill on amendments to the Competition Act, which has been submitted to the Althingi (parliament) (Doc. 1029, Matter 610).
Also included is the Competition Authority's review, dated 8 November 2019, of the draft bill when it was presented on the Government's Consultation Portal. Other material that may be useful in the discussion on the Competition Act and its drafting is also available here.
The Competition Authority is inevitably involved in the debate on the formulation of competition law, as it is, among other things, the Authority's role to point out to the government ways to make competition more effective, see c-item of the first paragraph of Article 8 of the Competition Act.
As will be set out in more detail below, the Competition Authority is opposed to these draft bills being presented in their current form. In particular, the following points are noted:
The Competition Authority believes that these two changes would constitute a significant weakening of competition law, which would harm the public interest and weaken the competitiveness of the Icelandic economy.
The Competition Authority has considered the possibility of abolishing its power to grant immunity from illegal collusion, and instead relying on companies' own assessments, a similar change was made by the European Commission in 2003. The Competition Authority, however, warns of the detrimental effects should this be accompanied by a reduction in its other powers. It is pointed out that when the said changes were made at the level of the European Commission, they were accompanied by a significant strengthening of the Commission's powers. Furthermore, the Competition Authority considers it extremely important that the change is not presented as involving any alteration to the substance of competition law from its current form.
The Competition Authority considers that it may be appropriate to increase the turnover thresholds for merger notification in the manner proposed in the draft bill. The Authority, however, considers it unsafe to restrict its power to call for merger notifications for smaller mergers in markets where it is important to protect consumers.
Furthermore, the Competition Authority has no objections to the amendments to the draft bill, which are intended to make it easier for companies to notify mergers through shorter merger notifications. Furthermore, the Competition Authority supports proposals concerning deadlines in merger cases and the handling of the merger fee.
The Competition Authority considers it important to draw attention to developments in competition law on the international stage and proposes amendments aimed at strengthening competition law in line with precedents in neighbouring countries.
This review provides further justification for the above, and also discusses the Competition Authority's position in more detail on other provisions of the draft bill.
The following documents are attached to this opinion:
Letter from the Chairman of the OECD Competition Committee and the Competition Authority's inquiry.
II Memorandum on the effects of competition on living standards and welfare.
III Memorandum on the Competition Authority's power of appeal in the public interest.
IV Memorandum on the Competition Authority's power to improve the functioning of markets.
Overview of the content of the new EU Directive 2019/1, on strengthening competition law enforcement (ECN+).
VI Memorandum on EU Directive 2014/104 on damages.
The explanatory notes to the draft bill state that it is important that competition law is kept under constant review and is structured in such a way as to ensure the public interest inherent in effective competition and to meet the needs of business and consumers at all times. The Competition Authority concurs.
The explanatory notes also state that the changes proposed in the bill are intended to increase efficiency and transparency to„benefits for business“It also states that the Bill is specifically aimed at simplifying the implementation of competition law. In this context, repeated reference is made to the collective bargaining agreements of the Federation of Icelandic Employers and the affiliated associations of the Icelandic Trade Union Federation and the National Union of Icelandic Shopworkers from April this year. It is stated that consideration has been given to suggestions from representatives of the business community, and changes have been proposed which are intended to simplify the implementation of the law for the benefit of Icelandic companies and „to work in a way that furthers the objectives of competition law to promote effective competition“.
The Competition Authority can agree on the importance of looking at ways to increase the effectiveness of the implementation of competition law. However, the Authority is disappointed that the explanatory notes to the draft bill do not set out clear and unequivocal objectives for strengthening competition law in light of Iceland's economic interests, the interests of consumers, wage-earners and smaller businesses, which have much to gain from a reduction in barriers to competition. For example, it is clear that one of the preconditions for collective bargaining agreements to function as intended is that the prices of goods and services support the improvement of workers' living conditions.
A reduction in competition is likely to lead to higher prices in Icelandic markets, which will affect purchasing power and the inflation-indexed debts of households and businesses. Research also suggests that increased competition reduces unemployment, lessens inequality, and increases economic growth, productivity and innovation. The aforementioned interests should be the starting point when assessing what changes need to be made to competition law. It should be borne in mind that the benefits of enforcing competition law can be substantial. The Competition Authority has compiled an overview of known studies and measurements of the benefits of competition and the enforcement of competition law, including in this country. The overview can be found in Annex II in reviewing this.
When assessing the current competition law, it is necessary to look to the competition rules in our neighbouring countries and the developments taking place there. It should be borne in mind in this regard that membership of the EEA Agreement entails an obligation to implement the agreement's competition rules and to ensure they are enforced in the same way here as in the neighbouring countries.
Last January, a new EU Directive (No 2019/1) on strengthening competition authorities was adopted. Work is underway to implement this Directive into the EEA Agreement. Although the Directive has not yet become part of the EEA Agreement, it is established and acknowledged that it contains basic standards concerning the framework and powers of competition authorities in the European Economic Area. Monitoring its implementation is aimed at ensuring that competition rules are enforced in a comparable manner here and elsewhere in the European Economic Area, and at the same time contributes to the competitiveness of Icelandic business. The current draft bill does not attempt to align Icelandic law with this. It is important that this is rectified during the further processing of the bill. In Annex V A summary of the main substantive provisions of the Directive can be found. The most important changes in this regard are set out in Chapter 10 below.
It is recalled that Iceland has not yet implemented the necessary legal reforms to make it easier for victims to claim compensation for breaches of competition law. In this respect, Iceland lags far behind most of its neighbouring countries, whereas the EU Directive on this matter, No. 2014/104, has been transposed into EU Member States' legislation. The competition law framework in Iceland is therefore weaker than in most of our trading partners, which threatens both the interests of consumers and other victims of infringement, as well as the competitiveness of the Icelandic economy. The fact that the Directive's rules have not yet become part of the EEA Agreement does not prevent these important legal reforms from being implemented. This is discussed in more detail in Chapter 10 and Annex VI.
In the explanatory notes to the draft bill, it is argued that the current competition law is more burdensome in this country than in comparable countries with regard to the authority of the competition authority to intervene to improve the functioning of markets (provision of c. sub-paragraph 1. subsection 16 of the Competition Act). The Confederation of Icelandic Businesses and the Federation of Icelandic Industries have argued that competition law in Iceland is stricter than in neighbouring countries. This argument is, for the most part, unfounded. This is explained in more detail below and in Annex IV.
This discussion has also been linked to the discussion on regulatory burden, and it has been suggested that the proposed amendments to the draft bill are a measure to comply with OECD recommendations to reduce regulatory burden.
The Competition Authority is a member of the OECD Competition Committee, which conducts research, data collection and discussion on competition issues at an international level. In this light, the Authority sought information from the Chairman of the Committee regarding, among other things, the interaction between competition law and regulatory burden. In a letter of response from Dr Frédéric Jenny, the Committee's Chairman, the following is stated, among other things: „The general competition rules and powers of competition authorities do not amount to regulatory burdens, and should not be removed on that basis.. On the contrary, such rules and powers are fundamental to promoting competition and ensuring that it takes place on a level playing field.“
The letter is published in Annex I with this review.
The above is in line with the OECD's recommendations to the Icelandic government in 2015, which state, among other things, the following: „Fostering competition can be a challenge given the small size of the Icelandic economy. In a number of important sectors, such as financial services, food and telecoms, only a few firms operate. This makes abuses of dominance and cartels more likely. Effective implementation of competition law by the competition authority with the support of the government is therefore especially important.“
In light of all the above, the Competition Authority considers it important that the objectives on which the draft bill is based are carefully considered. Thus, the assessment of the Competition Authority's powers is based on the overall interests of the public and the economy in ensuring that a vibrant competition exists here. It is important to ensure that competition law in this country is strengthened, at least in line with best practice in the European Economic Area. The current legal framework does not fully meet these requirements, and the draft bill represents a step backwards that would be detrimental to the public interest and the competitiveness of the Icelandic economy.
The Competition Authority strongly opposes the repeal of its authority to appeal decisions of the Competition Appeals Board to the courts, as provided for in Article 12 of the Bill. The Competition Authority has repeatedly drawn the attention of the Ministry of Competition to the fact that, in certain circumstances, the existence of the right of appeal is a prerequisite for the public interest and the interests of smaller businesses to obtain final redress before the courts.
In this regard, the Competition Authority wishes to specifically emphasise the following:
With Act No. 14/2011, the Competition Act No. 44/2005 was significantly strengthened. One of the main changes was that the Competition Authority was granted the power to appeal the decisions of the Competition Appeals Board to the courts. The bill that became the law stated that this „The fact that the Competition Authority does not have the right of appeal to the courts limits its ability to protect the public interest in competition matters. The authority's role includes, among other things, protecting the legally protected public interest inherent in effective competition, and it is therefore anomalous that it cannot pursue the public interest in the courts..“
The current draft bill does not provide a justification for what has changed in this regard. In the opinion of the Competition Authority, this change would seriously weaken the competition law.
A communication from the EFTA Surveillance Authority (ESA) to the Norwegian Ministry of Trade, dated 28 October, leaves no doubt as to the importance for the application of the EEA Agreement's competition rules in Iceland of the Competition Authority's right of appeal remaining legally guaranteed.4 In the aforementioned letter, which is published on the ESA's website, it is made clear that a lack of appeal rights would hardly be considered compatible with EEA law and could create problems for the application of the EEA Agreement's competition rules. It also follows from the communication that the abolition of the right of appeal here would be contrary to the new EU Directive 2019/1.
It has been established that all competition authorities in EU Member States either already have the right of appeal or are in the process of being granted such a right. This is the conclusion of a survey conducted by the Competition Authority among competition authorities in EU Member States. Specifically, the Commission asked whether the relevant authorities could pursue the case if a company appealed the Commission's decision and the first-instance appeal body (a court or an appeals board) annulled or amended it, see. Annex III . The Competition Authority received the same answers from the OECD Competition Committee in response to an enquiry on this matter, see. Annex I.
It is therefore incorrect, as has been stated in discussions of the draft bill, including by the Business Council of Iceland, that the right of appeal in Icelandic competition law has few precedents abroad. Furthermore, the Norwegian Ministry of Trade has stated that it intends to grant the local competition authority the right of appeal, with regard to the public interest, but the current legislation in Norway is cited in the draft bill in support of abolishing the right of appeal here.
Likewise, it is incorrect, as has been claimed, that the right of appeal has hardly any precedent in Icelandic law. There are several examples of this in Icelandic law, as noted in Annex III.
Finally, a comment must be made on the argument, which appears in the explanatory notes to the draft bill, that the Competition Authority's right of appeal generally prolongs the proceedings. The right of appeal has only been exercised on three occasions since the provision came into force in 2011. In all cases, the companies concerned appealed the appeals board's decision. It is therefore incorrect to claim that appeals have lengthened proceedings to the detriment of companies.
With the above in mind, the Competition Authority makes serious objections to the removal of Article 12 from the draft bill, pointing out that it would in all likelihood be in contradiction with Iceland's obligations under international agreements. The Competition Authority requests that it be removed from the bill. In Annex III The right of appeal is discussed in more detail, including its legal basis, its application to date, a comparison with neighbouring countries, etc.
The Competition Authority strongly opposes Article 4 of the draft bill, which proposes the repeal of the provisions of the current paragraph c of Article 16(1). Article 16(1)c of the Competition Act, which authorises the Competition Authority to intervene to improve the functioning of markets. The provision, its basis, application and benefits are discussed in detail in Annex IV. The main viewpoints of the supervision will now be summarised.
The memorandum accompanying the draft bill states that in this matter, „Taking into account suggestions from representatives of business“The arguments put forward for the repeal of the provision otherwise appear to be principally as follows:
The explanatory notes to the draft bill do not address the underlying rationale for the said intervention power to improve the functioning of markets. For this reason, it is worth recalling that the provision was enacted by Act No. 14/2011 amending the Competition Act. In the explanatory notes to the provision that became the aforementioned Act, it was made clear that the aim of the provision was to strengthen the Competition Act. This was based on an analysis of the need for the provision in question. The explanatory notes to the bill stated, among other things, that competition restrictions could „In certain cases, their root can be traced to matters other than mergers or breaches of the prohibition rules of competition law.“It then states that the distortion of competition which may result from the above-mentioned may be„equally serious for consumers and the restriction of competition that results from a breach of the prohibition provisions of competition law“. These provisions shall be in addition to, and laid down alongside, the rules„in order to be able to respond to any conduct or circumstances that limit competition and thereby harm the public's interests“.
During the consideration of the aforementioned bill in the 139th Parliament, it was thoroughly examined whether the said authorisation would contravene Article 72(1) of the Constitution on the inviolability of property rights. A memorandum from the Ministry of Economy and Commerce concluded that this was not the case. It states, inter alia: „To the extent that a decision to break up a company creates the conditions for effective competition, the profit from the company's monopoly position in its entirety (its combined assets) might decrease from what it would be under the monopoly position to the profit that results from effective competition. It would not be considered unfair to deny a company the „right“ to future monopoly profits.“.
In the application of competition law since the entry into force of Act No. 14/2011, nothing has emerged to suggest that the aforementioned fundamental assumptions for the existence of the authorisation have changed. The current draft bill does not provide a justification as to why this remedy is no longer necessary to protect the public interest.
The draft bill states that the authorisation has not been exercised„Although one has been carried out, it is still unfinished.“This description does not give a true picture. The Competition Authority thus applied the provision in question by conducting a comprehensive market study of the fuel market. Without the authorisation, that study would never have taken place. It concluded with respect to the public sector element with four reasoned opinions in April 2017. In 2018, significant changes were made to the structure of the fuel market, in connection with investigations into two mergers in the fuel and grocery markets. By its nature, the market investigation was utilised in the investigation and intervention concerning the relevant mergers.
There is reason to believe that the aforementioned market study has had a significant and positive effect on the competitive conditions in the fuel market, as is further detailed in Annex IV. It is also positive that it was not necessary to resort to specific intervention to achieve the aforementioned changes, which is consistent with the principle of proportionality in the exercise of the power.
As previously stated, the draft bill notes that the power to improve the functioning of markets may reduce the competitiveness of Icelandic business. The Federation of Icelandic Businesses and the Business Council of Iceland have argued that the authorisation entails excessive regulatory burden, and the OECD has been cited in this context. The OECD's 2015 recommendation, which is cited in Chapter 1, and the response from the Chair of the OECD Competition Committee show that a weakening of competition law cannot be justified by reference to excessive regulatory burden or OECD recommendations.
In preparing this opinion, the Competition Authority also requested information from the chairman of the OECD Competition Committee on whether market investigations and examinations were considered an important part of the work of competition authorities, and whether powers of intervention based on them were desirable. In the Chairman's reply, the following is stated, among other things: „Market studies usually involve an in-depth assessment of market structures and competitive conditions in a given sector; and aim to detect inefficiencies arising from weak competition, even if they do not identify behaviour that violates competition laws. As a result, An increasing number of competition agencies around the world are empowered to pursue market studies“He also points out that there are obvious advantages to being able not only to identify barriers to competition through such investigations, but also to take action.
In support of repealing the power to improve the functioning of markets, the draft bill refers to the fact that competition authorities in the EEA generally do not have such a power. The Ministry of Trade maintains that a power of this kind does not exist in the Nordic countries, and the Federation of Icelandic Industries emphasises that competition law in Iceland is more restrictive than in other European countries.
The core question here is whether the state concerned considers that additional remedies (i.e. remedies other than the merger and prohibition rules of competition law), to promote the functioning of as many markets as possible as efficiently as possible for the benefit of society, are necessary or not.
As stated in the response from the Chairman of the OECD Competition Committee, it is increasingly common for competition authorities around the world to have such additional powers, which consist of the authority to investigate individual markets or sectors of the economy as a whole. Such investigations are not aimed at finding and rooting out individual company infringements, but are instead intended to provide a comprehensive assessment of the functioning of competition in the relevant market, with the aim of improving it.
The Competition Authority turned to the competition authorities in the EU member states and enquired about their powers to investigate individual markets or sectors of economic activity as a whole. The conclusion is that all states within the European Economic Area have specific powers to investigate individual markets or sectors of the economy as a whole, see more details Annex IV.
As the Chairman of the OECD Competition Committee pointed out in his response, however, the powers available to individual competition authorities once such an investigation has concluded vary. Likewise, the investigative powers available to competition authorities in such market investigations also vary. When the Competition Authority applies Article 16(1)(c) of the Competition Act, it can, for example, only direct written enquiries to the relevant undertakings and cannot conduct a search. The European Commission, however, can initiate such an investigation with a search. On the other hand, the European Commission and various Member States do not have the authority to take binding intervention measures if such an investigation reveals restraints of competition that do not stem from an infringement of the competition law prohibition rules. However, such a power is found in Article 16(1)(c) of the Competition Act and in other European countries (the United Kingdom, Norway and Spain) and on other continents (e.g. the United States, Australia and Mexico). In other countries (Belgium, the Netherlands and Luxembourg), such authorisations have been called for, see discussion in Annex IV.
When Act No. 14/2011 was enacted, the United Kingdom was particularly looked to as a model. In this regard, it is interesting to note that in the UK, where a comparable power has been successfully applied, it is estimated that around three-quarters of the direct benefits from the work of the competition authorities can be attributed to the use of this power. It should be borne in mind that market investigations in that country typically cover markets of significant macroeconomic importance.
In this light, it is clear that the view that the intervention power harms Iceland's competitiveness is not supported by the facts. There is no basis to suggest that a power of intervention, which is widely used around the world and is primarily intended to prevent companies from profiting from monopolistic or oligopolistic positions to the detriment of consumers, could harm Iceland's competitiveness. It is interesting in this light that when the said power was introduced into British law, one of the aims of the changes was to strengthen the competitiveness of the United Kingdom. The provision in British law was thus an important factor in increasing competition and promoting greater competitiveness for British business. In Iceland, however, it is asserted that a comparable provision in the competition law has the opposite effect.
When discussing the power of intervention, it is important to consider the circumstances in which it can be used. The following examples can be cited:
With the repeal of the authority, the Competition Authority will in many cases lack the means to safeguard the public interest in effective competition. This change would thus constitute a serious weakening of competition law.
Attention is then drawn to the fact that the Media Commission, in its review of 4 November 2019, rightly raises objections to the draft bill, pointing out, inter alia, that the said authorisation forms the basis for remedies under the Media Act, see. Further details of the committee's report, published on the government's consultation portal.
With the above in mind, the Competition Authority has serious reservations about Article 4 of the draft bill and requests that it be removed from the bill. This is discussed in more detail in Annex IV.
The draft bill proposes an amendment to section 15 of the Competition Act so that „that a company itself assesses whether the conditions for an exemption under Articles 10 and 12 of the Competition Act are met, instead of the Competition Authority granting such an exemption by a separate decision.”The explanatory memorandum to the draft bill states that this amendment is based on similar changes made at the level of the European Commission in 2003.
The Competition Authority considers that this change could be considered and has no objection to it as such. However, it is important to bear in mind that the abolition of the European Commission's exemption regime, which serves as the model for these changes, was part of a complete review of the EU's competition rules. That overall assessment included, amongst other things, that in parallel with the repeal of the exemption, the Commission was granted enhanced investigative powers and resources. These included, amongst other things, broader powers to obtain information, a new power to take statements from individuals, and broader powers in relation to searches, including the power to conduct searches of company employees' homes. Last but not least, the Commission was given the power to break up companies. This was done, among other things, to counteract the slack that arises from the abolition of the exemption power.
The draft bill does not address this. On the contrary, it proposes a weakening of competition law, see sections 2 and 3 above. Although the draft bill's memorandum correctly states that the abolition of the exemption power does not mean that the requirements for cooperation are being lowered, statements elsewhere in the memorandum can be interpreted differently. It is also a cause for concern that comments from representatives of the Confederation of Icelandic Businesses and the Business Council of Iceland could be interpreted as them concluding that the scope for cooperation will be broader following the amendment and that the Competition Act will be less stringent„overwhelming“.
In the opinion of the Competition Authority, it is extremely important that the same considerations regarding strong competition law and competition enforcement are taken into account when repealing the exemption authority in this country, as was done in connection with similar changes at the level of the European Commission. Otherwise, there is a significant risk that the self-assessment system will not function adequately, to the detriment of the public and the country's competitiveness.
In this regard, it is also important to amend the explanatory memorandum of the draft bill to ensure that the following is clear and unequivocal:
In the general debate on the sea, ideas have been put forward that the Competition Authority should be required to give companies that request it a binding opinion that a specific collaboration does not breach Article 10 of the Competition Act and Article 53 of the EEA Agreement. However, that path is not viable.8 Regulation (EC) No 1/2003 provides that when a self-assessment system is adopted, competition authorities are not permitted to have rules in law concerning notifications of agreements or any form of binding opinion on the lawfulness of cooperation agreements.
In light of the above, the Competition Authority has no objections to the proposed amendment to section 15 of the Competition Act. The Competition Authority, however, emphasises the importance of the explanatory memorandum clearly stating that the amendment does not grant additional powers for cooperation, and that a thorough assessment must continue to be made as to whether the conditions for such cooperation are met. that the relevant undertakings bear the burden of proof for this, and if the undertakings make an incorrect assessment in this regard, they and their management may be subject to sanctions under the provisions of the Competition Act.
Articles 5 to 8 and 10 of the draft bill propose amendments to the provisions of the Competition Act on merger control. The following sets out the Competition Authority's position on the said proposals.
Thresholds for notification requirements
The Competition Authority considers it appropriate that the turnover thresholds of the Competition Act are reviewed regularly. After careful consideration, the Authority has no objections to the change set out in Article 5 of the draft bill, requiring the notification of a merger if the combined turnover of the merging parties is 3 billion króna or more in Iceland (2 billion króna now) and at least two of the merging parties have a turnover of 300 million króna or more in the country (200 million króna now).
However, it is worth noting that the current turnover thresholds are among the highest in the Nordic countries in relation to gross domestic product (higher than in Sweden, Norway and Denmark) and will be even higher if the change becomes law. In this context, it is appropriate to endorse what is stated in the explanatory memorandum to the bill:„that market conditions in this country, given the small size of the Icelandic markets, are such that mergers with different turnovers may be liable to hinder effective competition.“.
Chapter 3 addresses the fact that the Competition Authority's power to intervene to improve markets (without a breach) can be useful for previous mergers that, for example, have not been notified. This is reiterated here.
Scope of the authority to request a merger notification
The draft bill also proposes to increase the turnover threshold which determines when the Competition Authority is permitted to request a merger notification for mergers that are not otherwise reportable. This amount is increased from 1 billion króna to 1.5 billion króna. In this regard, it is worth noting what is stated in the explanatory notes to the draft bill, that intervention in mergers has occurred almost regardless of total turnover. Since 2011, the Competition Authority has called for merger notifications in at least six cases, and of these, it has had to intervene in four.
It should be borne in mind that the aforementioned power to call for merger notifications is of considerable importance for consumers in smaller communities, particularly in rural areas, where markets are often small. It should be noted that in Norway, no minimum turnover thresholds are stipulated for the same authority.
In light of the above, the Competition Authority is opposed to an increase in these specific turnover thresholds.
Short notices
The Competition Authority has no objections to Article 6 of the draft bill, which proposes amendments to the conditions of Article 17a of the Competition Act concerning the authorisation to file a short merger notification and the requirements for such notifications in four points. The changes mean that the scope for submitting a short notification will be significantly broader here than in neighbouring countries and in European competition law. Furthermore, the substantive requirements for short-form notifications will be significantly less onerous than in neighbouring countries. However, the Authority does not consider that this fact diminishes the protection afforded by the rules to consumers.
The legal basis for short merger notifications was established in this country in 2008. Since 2012, around 62% mergers have been notified in this way. This procedure is therefore a significant concession for the merging parties.
Statutory deadlines
The Competition Authority has no comments on Article 8 of the draft bill, which deals with time limits for the investigation of merger cases. In the Competition Authority's view, the changes are clarifying for both the Authority and other stakeholders, and should also be conducive to improving and facilitating the handling of merger cases where the merging parties submit proposals for conditions.
Consolidation fee
Article 10 of the draft bill proposes amendments to the provision of Article 17 of the Competition Act concerning the merger fee. The merger fee is intended to cover part of the costs incurred by the Competition Authority in investigating mergers. The manpower requirements and other costs for investigating merger cases have increased significantly for the Authority in recent times. Thus, the Competition Authority spent over 40% of its disposal time on merger investigations in 2017 and 2018, compared to around 15% in the preceding years. For this reason, the Authority welcomes the proposal in the draft Bill that the merger fee paid will be returned to the institution's operations. However, in the Authority's view, it must be borne in mind that the proposed merger fee only partially corresponds to the actual cost of investigating merger cases and therefore only partially offsets the fluctuations in the Authority's operations resulting from the number and scale of notified mergers.
Consolidation provisions of the media law
The draft bill does not address the merger provisions of the Media Act No. 38/2011, nor the effects that the proposed amendments may have on them due to the connection between the legal frameworks. In this context, for example, it should be noted that the removal of the Competition Authority's power to conduct market investigations and to appeal to the courts will affect the handling of cases falling under the media law regulations. The Competition Authority draws the Ministry's attention to the above and Opinion of the Media Commission of 4 November 2019.
Other desirable changes to the merger rules
The Competition Authority draws the Ministry's attention to the fact that in the draft bill (p. 12) discusses the authority of the competition authorities in the Nordic countries to suspend statutory deadlines for merger investigations in cases where the merging parties fail to provide information or satisfactory answers to the competition authorities (e. Stop the clockIn the opinion of the Competition Authority, it is important that such a provision is added to the draft bill.
Finally, it should be noted that the Competition Authority is considering changing its rules and procedures in order to improve efficiency in merger cases.
Article 9 of the draft bill proposes that Article 17(f) of the Competition Act be amended to include the power to conclude proceedings concerning possible infringements of Article 10, 11 and/or 12 of the Competition Act, by means of specific undertakings by the parties to the proceedings, without a final decision being reached or the parties admitting a breach of the provisions.
The Competition Authority has no objection to the said provision being incorporated into the law. However, the Authority wishes to emphasise that settlements with parties to a case, where a final decision is not reached, are entirely permitted under current legislation, see rulings of the Competition Appeals Board in cases no. 3/2013, Nova Ltd v. The Competition Authority, 1/2017, Póstmarkaðurinn ehf. v. The Competition Authority, 3/2017, Samskip hf. v. The Competition Authority. In that sense, the provision is unnecessary, although it may be useful for the wording of the law to explicitly reflect this possibility to conclude an investigation.
The Competition Authority considers it important that the legislative documents clearly state that the Bill is not intended to change the legal practice which has developed under the current legislation. Furthermore, the explanatory notes should emphasise that the new provision is in no way intended to restrict the Competition Authority's ability to settle cases. The sole purpose of the provision is for the Act to reflect current law more clearly.
In Article 1 of the draft bill, it is proposed that a new paragraph be added to the objectives provision of Article 1 of the Competition Act, to the effect that the implementation of the Act is intended to promote a healthy competitive environment for the benefit of consumers. In the explanatory memorandum to the Bill, this change is linked to the importance of the Competition Authority engaging in discussion, presentations and guidance on competition matters, and it is stated that this role of the Authority needs to be given greater weight.
The Competition Authority has, like most competition authorities in the world, regarded it as its role to be an advocate for the objectives of the competition law (called in English Competition advocacy). Furthermore, competition law provides that the core role of the regulator is to enforce the law, i.e. to investigate barriers to competition and take appropriate action where necessary. This also contributes to a healthy competitive environment for the benefit of consumers.
It is also worth noting that a healthy competitive environment benefits not only consumers in the narrow sense of the word, but also has wider implications for the nation's economy. Effective competition promotes a dynamic business sector, innovation, reduces inequality, and improves national competitiveness and the general standard of living. It is at least appropriate that this is emphasised in the legislative materials.
In light of the foregoing, the Competition Authority has no objections to the provision.
In Article 2 of the draft bill, it is proposed that paragraph 1 of Article 6 of the Competition Act, concerning the appointment of the Director, be amended so that his appointment will be for a fixed term of five years at a time and that the same person cannot be appointed Director more than twice. The explanatory memorandum to the draft bill states that the proposed change takes into account the recently enacted legislation on the Central Bank of Iceland. It also states that the permanent appointment of the director is an exception to the general rule for the appointment of heads of organisations.
The Competition Authority has no objections to the appointment of the Director being for a fixed term of five years, but notes that the current arrangement is in line with that of other institutions where the board appoints the Director, e.g. the Bank Supervisory Authority and the Innovation Fund for the Business Sector. It is also important that the appointment of members to the supervisory board is reviewed at the same time. As the law currently stands, the term of office for all board members expires at the same time. If the amendment is passed as is, a situation could therefore arise where both the board and the director-general begin their terms at a similar time. Such a situation could weaken the institution in terms of the knowledge and experience of those who run it, and diminish its independence.
The explanatory memorandum to the Bill rightly refers to the new EU Directive (EU) 2019/1 of 11 December 2018 on the coordination and strengthening of the powers of competition authorities of the Member States. It provides, among other things, for the independence of competition authorities. It is important that a thorough review is undertaken to determine whether the arrangement provided for in the draft bill fulfils the requirements for the necessary and credible independence of the Competition Authority. This is of significant importance for the enforcement of competition law.
The change that the same CEO can only serve for two terms is a deviation from what is generally the case for the heads of state-owned enterprises, whether they are appointed by a board or by a minister. The comparison with the position of Governor of the Central Bank is not justified, and it should be pointed out that a different framework applies to that post with regard to the procedure for appointment, determination of remuneration, and pay. The Competition Authority therefore considers that this change needs to be examined in a wider context and further justified.
The Competition Authority strongly supports the introduction of changes aimed at enabling the implementation of a new agreement on cooperation between the Nordic competition authorities in this country. Following a thorough review, the Competition Authority now wishes to raise two further amendments which would further ensure the effective implementation of the agreement.
On the other hand, the supervisory authority proposes that paragraph 2 of article 35 of the current Act be repealed. However, the Authority proposes that a provision be added to section 19 of the Act to make it even clearer that the provision includes data collection aimed at fulfilling obligations under international agreements. Both of these proposals are in line with corresponding changes in Norway. The Competition Authority will submit further comments on this to the Ministry.
As set out in Chapter 1 above, the Competition Authority considers it important that any amendments to competition law are based on clear objectives to strengthen the competition framework in line with Iceland's economic interests, the interests of consumers, employees and smaller businesses who have a great deal at stake in the reduction of barriers to competition. Among other things, it is important to consider the new Directive 2019/1 (ECN+), which contains basic standards for the framework and powers of competition authorities in the European Economic Area. Chapter 4 also points to the importance of the Competition Authority's exemption from illegal collusion being abolished being accompanied by a strengthening of competition law, in the same way as was done with corresponding changes at the level of the European Commission.
With the above in mind, the Competition Authority emphasises that consideration be given to the following amendments, which are not included in the current draft bill.
Authorisation for a house search
Firstly, it is important that the Competition Authority's powers to access data are strengthened in line with Directive no. 2019/1. Under current legislation, the Competition Authority does not have the power to search and seize data from locations other than the premises of the company in question, for example, at the homes of company executives. The Competition Authority is one of the few competition authorities in Europe that does not have the power to search for and seize documents outside its premises. Article 7 of EU Directive 2019/1 explicitly states that competition authorities must have this power. Following the implementation of the Directive, all relevant competition authorities will meet the Directive's requirements in this regard. It is essential that this is rectified.
Ban on business operations
In several countries in the European Economic Area, competition authorities can apply to the courts to disqualify directors of companies that have been found guilty of repeat and/or serious breaches of competition law from managing a company for a specified period. Provisions to this effect can be found, for example, in the UK, Finland and Sweden. Such a provision is designed to increase the deterrent effect and thereby promote greater competition.
In this regard, it should be borne in mind that under Act no. 59/2019, on amendments to the Criminal Code, the Companies Act, the Limited Liability Companies Act and the Act on Non-profit Organisations Engaged in Commercial Activities (misuse of corporate form and eligibility requirements), provides that individuals may be sentenced to a ban on conducting business for up to three years for breaches of the Act. Similarly, provisions regarding exclusion from participation in public procurement can be found in Article 68 of the Public Procurement Act No. 120/2016.
Victim's remedies
Iceland has not implemented the necessary legal remedies to facilitate it for victims of competition law infringements in Iceland to claim damages from infringing companies, in accordance with EU Directive 2014/104. This is addressed in section 1 above. The Directive provides, amongst other things, for a presumption of damage from illegal agreements, the obtaining of evidence by victims, rules on the evidential value of competition authority decisions in damages actions, clearer limitation rules, full compensation for victims, etc.
The Competition Authority draws special attention to the fact that, until the rules of the Damages Directive are implemented here, the private enforcement remedies for victims of competition law infringements are significantly weaker here than in our neighbouring countries. This threatens both the interests of consumers and other victims, as well as the competitiveness of the Icelandic economy. The fact that the Directive's rules have not yet become part of the EEA Agreement is no excuse for consumers and other victims to miss out on the remedies provided by the amended rules. These remedies are discussed in more detail in Annex VI.
Insufficient information in merger cases
As set out in section 5 above, the Competition Authority's ability to respond to inadequate information provided by the merger parties is limited. In the Competition Authority's view, it is desirable that the Competition Act be amended to include a power to suspend time limits for the investigation of merger cases in those limited cases where the merging parties fail to provide satisfactory responses to the Authority's requests for information, known as „Stop-the-clock“ in English. The Competition Authority will, upon request, provide further information on this proposal, its application in Europe, as well as its necessity and purpose.
Amendments concerning the Nordic Cooperation Agreement
Chapter 9 above discusses desirable amendments to the legislation to ensure the smooth implementation of the Agreement on Cooperation between the Nordic Supervisory Authorities. This refers to that discussion.
The above proposals are not exhaustive, and the Competition Authority is ready to work with the ministry on a more detailed analysis of what changes are desirable in light of the above-mentioned strengthening and implementation in the European Economic Area. It is important that competition law meets the minimum standards required in this regard.
Here you can access the Consultation Portal.
Earlier this week, on 28 October, the EFTA Surveillance Authority (ESA) address to the Norwegian Ministry of Trade, setting out the EEA Supervisory Authority's clear position that the aforementioned lack of appeal rights for competition authorities cannot be considered compatible with the competition rules of the EEA Agreement-law and can create problems for the application of the EEA Agreement's competition rules in Norway. Furthermore, the ESA points out that the arrangement is contrary to the new EU Directive 1/2019, on the harmonisation and strengthening of the powers of competition authorities, which explicitly requires that competition authorities have the power to appeal. Read more
An article by Innherji in the business supplement of Morgunblaðið misrepresents the Competition Authority's investigation into the exemption application concerning the cooperation between Eimskipafélagið and Royal Arctic Line (RAL). Read more
In the Confederation of Commerce's report yesterday, the facts are not handled correctly in various instances when it is asserted that the country's competition legislation is, in certain respects, stricter and more onerous than in any of the other Nordic countries.
The Competition Authority is currently compiling information on a comparison of competition rules in this country and elsewhere in Europe. This will be published in connection with the Authority's review of the current bill. This is important to ensure that the discussion on the Competition Act and any potential changes to it can be based on accurate information. Read the news here
In response to enquiries regarding its position on the bill, the Competition Authority wishes to make the following statement:
The draft bill presented yesterday is a great disappointment, as it proposes a significant weakening of competition law which will worsen the public's terms.
It is serious that the Bill proposes to abolish the Competition Authority's power of appeal to the courts to protect the interests of the public and businesses that may have suffered from harmful barriers to competition. This would make it impossible for the Competition Authority to ensure that the interests of these parties receive a final resolution in the courts. Large companies dissatisfied with the decisions of the Competition Appeals Board can appeal them to the District Court, the Court of Appeal, and, where applicable, the Supreme Court. However, if the bill becomes law, no guardian of the public interest will be able to take the board's rulings to the courts. This will create a system where the advocacy of powerful companies is, in this respect, prioritised and given precedence over the interests of consumers and smaller businesses.
In its report to the minister, the Competition Authority will strongly warn against the bill being enacted in its current form. Read more
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