In the decision of the Competition Authority of 19 December last. No. 64/2008 it was concluded that Hagar (which operates the Bónus chain of supermarkets, among others) had abused its dominant market position through actions aimed at its competitors in the food market. The Competition Authority considered that Hagah's breach of Article 11 of the Competition Act was serious and liable to cause significant competitive harm to business and the public.
Haga's breach of competition law was considered to consist of so-called below-cost pricing that the company resorted to in 2005 and 2006. Predatory pricing essentially involves a dominant company selling its products below cost. Such abnormal pricing can, among other things, lead to smaller competitors being driven out of the market or to a reduction in price competition with the dominant company. Even if consumers benefit in the short term from receiving a product or service at a very low price, the disruption to competition caused by such an abnormal price reduction by a dominant undertaking, in the long term, leads to a reduction in competitors, higher prices for consumers, lower service or quality, and a reduction in consumer choice. Competition law is intended, among other things, to ensure that effective competition benefits consumers in the long term.
Haga's breaches occurred during the so-called price war between discount supermarkets, which began in late February 2005 when Krónan, owned by Kaupáss, introduced a price reduction of up to 25% on the most common categories of groceries. Hagar abused its dominant market position by selling milk and dairy products below cost in its Bonus stores for a long period. The main dairy products were sold at a substantial loss, which resulted in the Bonus stores as a whole operating at a loss. The Competition Authority therefore concluded that the pricing constituted an unlawful below-cost sale and that the conduct was intended to, and did, unlawfully maintain and strengthen Haga's position in the market for the sale of groceries in supermarkets. Furthermore, the investigation showed that the infringements were extensive. Haga's actions were intended to exclude its main competitors, such as the discount retailers owned by Kaupás (Krónan) and Samkaup (Nettó and Kaskó), from competition and thereby weaken them as competitors in the market. Given the serious nature of Haga's infringement and the significant consumer interest in competition in the food market, the Competition Authority considered in its decision that a fine of 315 million krónur was appropriate.
Hagar appealed the Competition Authority's decision to the Competition Appeals Tribunal, demanding that it be quashed or the fines be substantially reduced. In its appeal, Hagar made various observations regarding the Competition Authority's investigation and substantive conclusion.
In its ruling today, the Competition Appeals Board has upheld the decision of the Competition Authority. The board considers that the investigation of the case was proper and agrees that Hagar was in a dominant market position. The board also confirms Hagar's aforementioned breaches of competition law. The appeal board notes that Hagar's breaches were long-standing and on a large scale. The board agrees that a fine of 315 million krónur was an appropriate penalty in the case.
Decision of the Arbitration Committee No. 2/2009.
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