Press release – Minister for Agriculture urged to abolish the tariff on compound feed as soon as possible

In an opinion published today, the Competition Authority has recommended to the Minister for Agriculture that he press for the abolition of tariffs on compound feed.

There is significant oligopoly in the market for the production and sale of feed for ruminants, pigs and poultry in Iceland. For years, there have only been two companies in Iceland that produce and sell feed. Importing compound feed makes it possible to provide domestic producers with competitive pressure. However, a regulation imposes a duty of 3.90 kr. per kg on imported compound feed. This tariff works against the entry of new competitors who would be interested in selling ready-made feed mixtures on the domestic feed market.

The Competition Authority's opinion notes that feed tariffs are designed to protect domestic feed producers and maintain a restrictive oligopoly in the feed market. This tariff therefore runs counter to the objectives of competition law. In the opinion of the Competition Authority, the abolition of the feed duty would promote increased competition in the feed market, to the benefit of farmers and consumers. Similarly, the aforementioned measures would contribute to a reduction in farmers' production costs and, consequently, to lower food prices for consumers.

Recently, there have been significant price increases for feed in this country and, due to this among other factors, price increases for agricultural products have been announced. In light of this, the opinion draws the Minister of Agriculture's attention to the fact that it is extremely important to abolish the aforementioned protective duty as soon as possible, thereby creating the conditions for increased competition in the Icelandic feed market.

Background to the Competition Authority's opinion
In the wake of report the Nordic competition authorities on food markets in the Nordic countries, In 'Nordic Food Markets – a taste for competition', published in December 2005, the Competition Authority set out its own priorities for food markets with the aim of increasing effective competition and lowering food prices. One of the issues the Competition Authority considered worthy of comment and further examination was import protection for agricultural products, and this opinion is part of that examination. The Competition Authority is examining other import restrictions in this area.

Opinion No. 1/2008.