Following the Supreme Court of Iceland's ruling in the case of the Consumer Association against Íslandsbanki, a discussion has arisen about the potential future impact of the judgment on interest rates. In some instances, bank staff or management have suggested that the ruling will lead to an increase in interest rates.
On this basis, the Competition Authority stresses that competitors in the commercial banking market must be required to make their own independent decisions regarding their interest rates. Under no circumstances should employees and managers of commercial banks disclose information to competitors about planned or likely changes to interest rates, whether publicly, in the context of trade associations, directly, or by any other means.
Competition law prohibits any form of collusion between companies which has the object or effect of preventing or restricting competition. For example, it can be considered illegal collusion if competitors discuss upcoming price increases or pass on information about each other, for instance, to the media.
For competition to thrive, companies need to operate under a certain degree of uncertainty about how their competitors will respond to external circumstances, such as price increases from suppliers, government decisions or court rulings. In a competitive environment, companies seek different ways to offer products or services at the most favourable price, such as streamlining their operations. However, if a company has knowledge of its competitors' responses, it reduces its incentive to compete and keep prices down.
For these reasons, competition law also prohibits all forms of anti-competitive conduct by business interest groups. This prohibition includes, for example, the exchange of information by groups about forthcoming price increases or their joint justification for such increases.
It is recognised that conduct of this kind is particularly harmful in oligopolistic markets.
Companies and their trade associations can expect the Competition Authority to treat indications of the anti-competitive conduct described here as a matter of serious concern. Breaches of competition law can result in severe penalties.
The Competition Authority has previously drawn attention to the importance of company directors complying with the above, see e.g. News on the Competition Authority's website on 18 December 2024. Further guidance for business interest groups and information on previous cases of this kind can be found on this instructions page.
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