Appeals Authority for Competition confirms serious breaches by Medicine and Health

The background to the case is that in the summer of 2007, a new pharmacy in Akranes, Apótek Vesturlands (AV), began to compete with a pharmacy owned by Lyfja og heilsa (L&h) that was already established in the area. Subsequently, the Competition Authority received a complaint that L&H had taken action to prevent AV from establishing itself in Akranes. The Competition Authority decided to investigate the matter and conducted a search at L&H in September 2007.

Following an investigation, the Competition Authority found that L&h had abused its dominant market position through an organised attack against AV which was directly aimed at distorting competition. L&h's actions consisted, on the one hand, of establishing a so-called loyalty club, which was intended to ensure that important customers would not start doing business with AV. On the other hand, the actions consisted of what L&h called „battle discounts“. These were substantial discounts on key medicines, available exclusively in Akranes. These measures were intended to drive AV out of the market and send a clear message to other parties that it was not worth trying to compete with L&h. The infringements were considered serious, and L&h was ordered to pay a fine of 130,000,000 kr.

L&H appealed the Competition Authority's decision to the Competition Appeal Tribunal, demanding that it be overturned or the fines significantly reduced. The company, among other things, made observations regarding the definition of the relevant markets, its market position, and disputed that it had breached competition law.

In a ruling published today, the Competition Appeals Board upheld the Competition Authority's finding that L&h is in a dominant market position and that the company's actions constituted serious breaches of competition law. The Appeals Board considered fines of kr. 100,000,000 kr. to be appropriate. In support of lower fines, the Board pointed out that the infringements were largely confined to a narrow market. Consideration was also given to the changed circumstances in the nation's economy.

See the decision of the Competition Appeals Board for further details. No. 5/2010.