Merger of Kaupþing and SPRON approved
The Competition Authority has been handling the merger of Kaupþing banki hf. (Kaupþing) and Sparisjóður Reykjavíkur og nágrennis hf. (SPRON). Information from the merging parties, which was necessary in order to be able to make a final assessment of the merger, was received on 25 September 2008. The Competition Authority has today published a decision regarding the merger. The decision, No. 50/2008, is available on the Competition Authority's website.
The merger of Kaupthing primarily affects the market for commercial banking services for individuals and small businesses. It is well known, both domestically and internationally, that it is in this area of banking services that mergers can create competitive problems. Mergers between two or more investment banks, or mergers between commercial and investment banks, do not usually distort competition due to international competition or a lack of overlap in activities.
The decision states the Competition Authority's assessment that the commercial banks; Landsbanki Íslands, Kaupþing and Glitnir banki are in a joint dominant position in the market for commercial banking services to individuals and for services to smaller businesses. A joint dominant position allows the companies concerned to coordinate their behaviour in the market without having to take competitors or consumers into account. Such companies are in a position to limit competition, increase prices or reduce the quality of their service.
The combined market share of these commercial banks is between 65% and 85% in the market for retail and small business commercial banking services. SPRON's share in the same market is just under 10%. SPRON and other savings banks have, to some extent, distinguished themselves in their market conduct, thereby fostering greater competition than would have been the case had only the three major commercial banks been operating in the market. The disappearance of SPRON from the market as an independent competitor strengthens the jointly dominant market position of the three commercial banks and is likely to cause competitive harm to consumers and businesses.
During the proceedings, it was argued that SPRON's position was difficult and that, for this reason, the merger should be approved. It is recognised in competition law that such a company's position can lead to a merger being approved. The reason is that in such cases, the constraints on competition do not arise from the merger itself, but from the difficult position of the acquired company.
The Competition Authority has assessed the financial position of SPRON, the possibility of another party buying the savings bank, and the competitive effects of all this. In the opinion of the Competition Authority, it is clear that the withdrawal of SPRON from the market as an independent competitor creates significant barriers to competition. With reference to the evidence and information presented, the Competition Authority is of the opinion that the change in the market resulting from the merger of Kaupthing and SPRON is unavoidable, given the situation SPRON finds itself in, as the company would otherwise disappear from the market as an independent competitor. Therefore, no other conclusion is possible than to approve the merger.
The Competition Authority approves Kaupþing's acquisition of a 70% shareholding in Sparisjóður Mýrasýslu.
On 3 September 2008, the Competition Authority received a notification regarding the merger of Kaupþing and Sparisjóður Mýrasýslu (hereinafter SPM). Information from the merging parties, which was necessary in order to be able to make a final assessment of the merger, was received on 16 September 2008. The Competition Authority has today published a decision in this merger case, decision No. 51/2008.
The Competition Authority considers that with Kaupþing's acquisition of the majority of SPM's share capital, it is possible that Kaupþing will attain a dominant position in the market for business banking services for individuals and small businesses in Borgarnes and the surrounding areas. Following the merger, there will be no other bank in this area providing a full range of commercial banking services, and consumers in Borgarnes will therefore have no alternative in their home town.
In this case, it is argued that SPM's position is difficult and that, for this reason, the merger should be permitted.
The Competition Authority has assessed SPM's financial position, the possibility of another party buying the savings bank, and the competitive effects of all this.
The Competition Authority considers that the withdrawal of SPM from the market as an independent competitor is likely to impede competition. Despite this, the Competition Authority concludes that SPM's difficult position means that there is no alternative but to approve the merger.
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