It was published today Report of the National Audit Office on the administrative review of the Competition Authority entitled „The Competition Authority – Merger Control and Success“.
The administrative review was based on a request from the Althingi for a report from the Auditor General, dated 19 May 2021. Doc. 1451 – Item 798. In the statement of reasons accompanying the application, it is argued in particular as follows:
The business community has long criticised the Competition Authority's processing times for merger cases and considers it urgent to speed up the process and minimise the costs for companies and the wider economy arising from proposed mergers. By comparison, the handling of merger cases at the European Union level and in Norway has been reported to be much more efficient and quicker than in Iceland.
In the administrative review, the National Audit Office examined the procedure and resolution of the 100 merger cases investigated by the Competition Authority during the period 2018-2020. The findings of the administrative review (p. 11, para. 2) state the following regarding the speed and handling of merger cases:
In the opinion of the National Audit Office, it does not appear that during the period 2018-2020 the processing time for merger cases was unreasonably long, or that persistent weaknesses in their handling undermined the efficiency, effectiveness and economy of the operation.
The findings, however, point out that difficult issues have arisen which have tested statutory time limits, and that an agreement has not proved to be a successful outcome from the perspective of the relevant merger parties. The findings then state:
However, in this context, it must be borne in mind that the Competition Authority's intervention in mergers is intended to protect the public interest under competition law. By its very nature, the outcome of such cases is therefore seldom in accordance with the merger parties' original intentions.
The review notes that in only two out of 100 cases were matters dealt with in Phase II that could have been resolved in Phase I. Delays in one of these cases, or 1% instances, could be attributed to inefficient case handling by the Competition Authority.
The report also concludes that the Competition Authority's recent changes to the rules on notification and procedure in merger cases no. 1390/2020 have generally been conducive to increasing efficiency, and that changes to the organisation's structure in 2018 were aimed at the same end. It is noted that the merger parties/stakeholders from whom the National Audit Office obtained information agreed that the development of procedures in recent years has been positive, but that transparency and predictability in procedures needed to be improved.
In addition to examining the handling of merger cases, the National Audit Office reviewed the Competition Authority's general framework, such as the role and work of its board, prioritisation, case processing times, performance metrics, and the assessment of the benefits of competition enforcement.
The report highlights that the volume of merger cases and the priority the Competition Authority is legally obliged to give to merger control has significantly constrained its other activities. At the same time, the report's content makes it clear that competition enforcement yields significant economic benefits, which typically amount to many times the annual funding provided for the activity.
The report contains various recommendations and suggestions for the Competition Authority aimed at strengthening its operations and framework. These include proposals to set out the board's activities in more detail in its terms of reference, improve the documentation of internal controls, and consider establishing an internal audit function, to continue on the path of assessing the benefits of its activities and further developing the existing performance indicators, to complete the ongoing review of the procedural rules and to strengthen the provisions on prioritisation within them.
The National Audit Office therefore encourages the Competition Authority to continue working on the development of guidance on competition matters, but notes that such guidance must not undermine the Authority's independence when assessing the competitive conditions in specific cases.
The National Audit Office also makes specific recommendations to the regulator on strengthening the merger framework. This includes a proposal to strengthen the guidance on communication channels with the authority and the procedures for the analysis and investigation of merger cases, as well as for the formulation and monitoring of merger conditions. It is also proposed that a more formal framework be established for independent experts/monitors appointed on the basis of conditions in merger cases. Furthermore, the National Audit Office considers it urgent that the institution responds with greater firmness to indications of incorrect or misleading information from the merging parties.
Furthermore, the National Audit Office makes several recommendations and suggestions to the Ministry of Competition, i.e. the Ministry of Culture and Commerce. It is therefore timely to review the merger fee with a view to ensuring its collection is proportionate to the scope of the case. Furthermore, the criteria for the turnover thresholds need to be analysed in more detail than has been done. The Comptroller and Auditor General also points out that Icelandic competition law does not fully meet the requirements set out in European law. Thus, EU Directive 1/2019 on the enforcement of competition law has not been implemented in Iceland, whereas, for example, the authority's powers to conduct searches are narrower than required by the aforementioned directive. Furthermore, there is no provision to suspend time limits in merger cases, and victims of competition law infringements enjoy poorer legal protection than victims in EU Member States.
The Competition Authority will endeavour to implement the recommendations and suggestions of the National Audit Office in order to further strengthen the framework, procedures and operations of the Authority. In this connection, the Competition Authority has compiled the attached Project plan for the Ombudsman's work related to the administrative review. The plan addresses the recommendations of the National Audit Office on pages 16-18 of the report, as well as various suggestions made in the main text of the report.
Í the project plan Specific projects and actions are discussed, and it will be updated as the work progresses. Furthermore, it may be subject to change following consideration of the report by the Althingi and the Ministry of Competition.
The Competition Authority also wishes to give stakeholders and other interested parties the opportunity to submit their views regarding the aforementioned project plan. It is requested that such views be submitted no later than On 30 September. At the end of the consultation period, the supervisory authority will hold a discussion with a group of stakeholders.
In addition to the above, the Competition Authority will report specifically to the Ministry of Competition on the aforementioned work, including those actions that require additional funding.
In parallel, the Competition Authority will seek the assistance of the EFTA Surveillance Authority in the formulation and implementation of measures concerning the recommendations of the National Audit Office, as the Competition Authority is tasked with ensuring consistency in the application of the competition rules of the EEA Agreement.
In connection with the report, the Competition Authority has launched information page where the report, the supervisory work plan and other detailed information are available. The information page will be updated as and when necessary.
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