The Competition Authority has imposed detailed conditions on the acquisition of Húsasmiðjan ehf. by Eignarhaldsfélagið Vestia, a subsidiary of NBI hf. (Landsbankinn), aimed at mitigating the potential competitive distortion arising from the bank's ownership of the company. Vestia and Landsbankinn have agreed to comply with the conditions set out in the decision, by signing a settlement. In processing the case, regard has also been had to complaints and comments received by the Competition Authority.
The main conditions are as follows:
- The Húsasmiðjan is to be sold within a specified period. The sale deadline is confidential, as such deadlines, if made public, could have an undue effect on the sales process and the sale price.
- It must be ensured that Húsasmiðjan operates as an independent competitor in the market. Thus, the ownership of Húsasmiðjan is held by a holding company which must be located outside the bank, and conditions are also set regarding board membership in both the holding company and Húsasmiðjan.
- Reasonable profitability requirements should be imposed on Húsasmiðjan. This is important to counteract the bank's incentive to increase Húsasmiðjan's value by financing undercutting bids or increasing market penetration, thereby expanding its market share. These conditions are also intended to limit the risk of managers and employees of the acquired company viewing the bank's ownership as protection against any form of adverse event (moral hazard).
- The bank is prohibited from interfering in transactions between Húsasmiðjan and other companies in which the bank holds a stake. This prevents Húsasmiðjan and other companies connected to the bank from directing business to one another, without the normal commercial terms being applied.
- The bank is prohibited from interfering in transactions between Húsasmiðjan and its customers. Furthermore, it must be ensured that the same individuals on the bank's behalf are not business managers for both Húsasmiðjan and its customers or competitors. Furthermore, it shall be ensured that sensitive information is not exchanged between these companies.
- The annual and half-yearly accounts of Húsasmiðjan shall be published publicly in accordance with the further instructions of the decision. Furthermore, various information on the activities of the holding companies and Húsasmiðjan, as well as information on the implementation of the conditions, shall be published.
- Thorough and ongoing supervision within the banks must be ensured, in addition to the supervision of the Competition Authority.
Breach of the above conditions may be subject to fines, in accordance with the provisions of competition law.
The Competition Authority has addressed the takeover of businesses by banks in several other cases, see, for example, the press release. 31 March 2010.
See the decision for details No. 10/2010.
