Byko's serious breaches of competition law and the EEA Agreement confirmed, and fine increased

The Supreme Court of Iceland has today confirmed that Byko committed serious breaches of competition law and increased the imposed fine to 400 million krónur. See review

The background to the case is that in May 2015, the Competition Authority concluded that Byko had breached competition law and the EEA Agreement through extensive illegal collusion with the former Húsasmiðjan. This concerned price-fixing on important building materials. The case began when Múrbúðin approached the Competition Authority and reported attempts by Byko and the former Húsasmiðjan to get Múrbúðin to take part in the illegal collusion. The Competition Authority considered this to be a serious infringement and imposed a 650 million króna fine on Norvik, Byko's parent company.

Norvik and Byko appealed the decision of the Competition Authority to the Competition Appeals Board. In October 2015, the board concluded that Byko had participated in illegal price-fixing and breached competition law. However, the panel did not find that the provisions of the EEA Agreement had been breached. The panel also considered that Byko's infringement was not as serious as the Competition Authority had assumed. The panel therefore deemed it appropriate to reduce Byko's fine from 650 million krónur to 65 million krónur.

The Competition Authority therefore brought a case before the courts, arguing that the Competition Appeals Board had misinterpreted the EEA Agreement. Furthermore, the committee had not properly assessed the seriousness of Byko's infringements, and the committee's fine could not ensure an adequate deterrent effect.

In a judgment on 1 June 2018, the Reykjavík District Court found that Byko's offences had been serious and increased the company's fine to 400 million krónur. The court also found that the provisions of the EEA Agreement had been breached. Byko and Norvik appealed the case to the Court of Appeal. On 14 June 2019, the Court of Appeal ruled that Byko had committed serious breaches of competition law. However, the Court of Appeal considered the offences to be less extensive and also found that a breach of the EEA Agreement had not been demonstrated. Consequently, the fine was reduced to 325 million krónur.

The Supreme Court allowed the Competition Authority to appeal the ruling of the Court of Appeal. In its judgment today, the Supreme Court agreed with the Competition Authority that Byko's collusion was more serious than the Court of Appeal had found. It was also held that Byko had breached the EEA Agreement and that the fine should be increased. The Supreme Court's judgment states:

„Accordingly, the offences consisted of [Byko] in breach of Article 10 of the Competition Act and Article 53 of the EEA Agreement in the regular and frequent communications of the defendant, Byko ehf. and Húsasmiðjunnar ehf., where, among other things, information on prices was obtained, passed on to the companies“ management, and discussed at meetings of the executive board of the defendant, Byko ehf. Furthermore, in February 2010, the boards of directors of the defendant, Byko Ltd., and Húsasmiðjan Ltd. exchanged information regarding the latter's financial results and operations, and ideas for changes to its pricing policy for the autumn of 2010. Furthermore, there was an illegal consultation between the defendant, Byko ehf., and Húsasmiðjan ehf. in their attempt to persuade Múrbúðin ehf. to participate in the price-fixing. Finally, a transcript of a telephone conversation is available, which the Managing Director of the Professional Sales Division of the defendant, Byko ehf., had with an employee of Húsasmiðjan ehf. on 28 February 2011, in which a broad-based price-fixing agreement was encouraged. This telephone call reveals a determined will to engage in serious collusion and constituted a gross breach of Article 10 of the Competition Act and Article 53 of the EEA Agreement. All of the infringements by the defendant, Byko ehf., were serious and involved organised and systematic collusion between companies that were virtually monopolistic in the market concerned. The market in question is important to the public, and the infringements therefore targeted the significant interests of consumers. As has been set out, the ongoing collusion is considered to have lasted for the entire period of the case's investigation."

As previously stated, the Supreme Court considered that an appropriate fine for the above was 400 million króna.

Background information:

The offences in this case are not related to the current operators of Húsasmiðjan. The investigation into Húsasmiðjan's involvement in the case concluded in July 2014. In a settlement dated 9 July 2014, the former operator of Húsasmiðjan, Holtavegur 10 ehf., acknowledged that the old Húsasmiðjan had engaged in illegal collusion with Byko.

In accordance with its statutory role, the Competition Authority referred the directors and employees of Byko and the former Húsasmiðjan to the police for their part in the collusion. In a Supreme Court judgment in case no. 360/2015, eight employees of the companies were found guilty.

The EFTA Surveillance Authority considered this case for „raise important questions regarding the interpretation of EEA law.“It exercised for the first time in this country the power to submit observations in cases before the courts of the EFTA States. The EFTA Surveillance Authority submitted observations at all levels of appeal and, in addition, presented its views orally to the Supreme Court.

Under competition law, the Competition Authority is tasked with assessing whether the public interest, inherent in effective competition, requires that decisions of the Competition Appeals Board be referred to the courts. Furthermore, the Competition Authority is tasked with applying the competition rules of the EEA Agreement. In accordance with these duties, the Competition Authority brought proceedings before the courts to have an appeal board's decision reviewed.