The Competition Authority received a submission from partners within Frumtak, namely Frumtak GP ehf. and Frumtak slhf., requesting authorisation for a collaboration between the commercial banks Glitnir banki hf., Kaupþings banka hf. and Landsbanki Íslands hf. regarding venture capital investments in start-up companies through the joint venture company Frumtak would be granted an exemption from the prohibition in Article 10 of the Competition Act No. 44/2005 on the basis of Article 15 of the Competition Act. The background to the case was that the Innovation Fund Iceland had authorisation under the law No. 61/1997 on the Innovation Fund for the Business Sector, cf. also Act No. 133/2005 on the Disposal of the Proceeds from the Sale of Landssíma Íslands hf., to establish a joint fund to support venture capital investments in innovative and start-up companies. Pursuant to Article 5 of the Act No. 133/2005 The Innovation Fund should receive a total additional contribution of 1,500 million króna over the years 2007–2009 to cover its share in the establishment of such new joint funds with pension funds and other investors in innovationand start-up companies, provided that the shareholding of others besides the Innovation Fund in such a fund amounts to at least 50%. In accordance with the assumptions of the aforementioned legal provision, the Innovation Fund therefore approached the commercial banks Glitnir banki hf., Kaupþing banki hf., Landsbanki Íslands hf. and several of the country's main pension funds, to participate in the project. The three commercial banks agreed to participate in the joint project and each provided a contribution of 500 million krónur. Due to this joint project, the commercial banks applied to the Competition Authority for an exemption from the provisions of the Competition Act prohibiting cooperation between competitors.
In its decision, the Competition Authority considered that the collaboration was likely to distort competition and noted in this context that the Icelandic banking market was a duopoly market where banks and savings banks operate primarily in the same markets and enjoy a dominant position there. The Competition Authority nevertheless decided to grant the collaboration a temporary exemption, but imposed conditions on the exemption which the partners agreed to comply with. These conditions are intended, among other things, to prevent the cooperation of the commercial banks through Frumtak from leading to further collusion between the banks, which could manifest itself in, for example, market sharing or the binding of parties, in which Frumtak invests, to further transactions or other additional obligations not related to the subject matter of the agreements.
DecisionNo. 20/2008.
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