270 million kr. paid in fines
-Hagar takes measures intended to strengthen competition
The Competition Authority has been investigating whether, on the one hand, the Bónus stores owned by Haga, and on the other hand, eight meat processing companies, have breached Article 10 of the Competition Act. The companies did this through bilateral agreements or concerted practices in connection with the retail pricing of meat and processed meat products that the meat processing companies have pre-labelled for Haga (so-called pre-labelling).
Following an extensive investigation, including into email communications between the meat processing companies and Haga, the Competition Authority presented its preliminary findings last July. The companies in question were presented with the preliminary conclusion that Hagar and individual butcher's shops had breached competition law in relation to the retail pricing of meat products in Bonus stores. The butcher's shops and Hagar were given the opportunity to comment on this preliminary conclusion.
Subsequently, Hagar turned to the Competition Authority and requested to settle the matter. On that basis, the Competition Authority has exercised its authority under competition law and entered into a settlement with Hagar. The settlement includes the following:
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Hagar admit to having breached Article 10 of the Competition Act through agreements or concerted practices with the said meat processing companies in relation to the pricing of meat products at retail.
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Hagar agrees to pay a government fine of 270 million króna for the offences.
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Hagar agree to take measures intended to enhance competition in the sale of meat products for the benefit of consumers. This includes, amongst other things, Hagar's commitment to cease all communication with meat processing companies regarding retail prices in Hagar's stores and to phase out the acceptance of products from them that are marked with a suggested retail price. Furthermore, Haga's stores are prohibited from advertising discounts on meat products unless it represents a genuine reduction from the current retail price.
It should be noted that Hagar has, in its communications with the Competition Authority, emphasised that the company had no intention of distorting competition and that, when assessing the nature of the matter, the long-standing tradition of pre-labelling among all companies in the food market must be taken into account.
This also facilitates the Competition Authority's investigation, and furthermore brings about a change in the market much sooner than would otherwise be the case, with positive effects for competition and consumers.
The matter is concluded with the settlement regarding Hagar. The role of the meat processing companies (Kjarnafæði hf., Síld og fiskur ehf., Sláturfélag Suðurlands svf., Norðlenska ehf., Kaupfélag Skagfirðinga svf., Kjötbankinn ehf., Reykjagarður hf. and Matfugl ehf.) is still under investigation.
The settlement with Haga is part of the Competition Authority's general effort to ensure that cooperation between, for example, meat processing companies and supermarkets does not distort competition. The measures involve suppliers ceasing their involvement in the labelling of Haga's retail prices in the areas covered by this case, as well as changes to business practices in the food market. The supervisory authority is expected to take further action in this area and against companies not involved in the aforementioned administrative case.
Background information:
- In May 2008, the Competition Authority issued report on business agreements between suppliers and other forms of collaboration between companies in the food market. The report found, among other things, that competition in the sale of pre-priced meat products, i.e. packaged meat and other more processed meat products (e.g. sliced meats, sausages, pâtés and more), which are pre-priced for retailers with a so-called suggested retail price. The report did not take a position on whether this constituted a breach of competition law, but announced that separate administrative investigations would be launched subsequently to assess whether the competition law had been breached.
- The investigation and delimitation of this specific case began following the publication of the aforementioned report. The Competition Authority has obtained extensive information for the investigation from the parties concerned. Furthermore, data obtained by the Competition Authority during a search of Haga's premises has shed light on communications between suppliers and Haga regarding pre-labelling. This investigation led the Competition Authority to present its preliminary findings on a breach of competition law to Haga and the relevant meat processing plants last July.
- Under the provisions of competition law, the Competition Authority can conclude cases by settlement if companies under investigation come forward and admit to breaches of competition law. Such co-operation and a willingness to make positive changes to market conduct speed up the investigation and resolution of cases.
- The provisions of Article 10 of the Competition Act prohibit all agreements or concerted practices between undertakings which may distort, inter alia, price competition.
- Illegal agreements or concerted practices between producers and retailers (vertical co-ordination) concerning retail prices do not fall under the criminal provisions of competition law, but only subject the companies concerned to administrative fines.
