The Competition Authority has been handling a merger consisting of the acquisition of Stjörnugríss Ltd. on the assets of Arion Bank's subsidiaries, i.e. Rekstrarfélagsins Brautar ehf. and LS2 ehf. These companies have been involved in the operation of pig farms; Braut ran a pig farm at Brautarholt on Kjalarnes, while LS2 operated pig farms at Hýrumel and Stafholtsvegur in Borgarfjörður, which previously belonged to the company Grísagarður. These pig farms had come into the ownership of Arion Bank after the companies that ran them went bankrupt. These assets were sold to Stjörnugrís after the bank had sought bids for them.
The Competition Authority has now concluded its review of the merger following a thorough investigation. In the authority's decision, published today, it is concluded that the acquisition Star-rated grises on the pig farms would strengthen the company's dominant position in pig farming and strengthen the company's dominant market position in the pig slaughter market. This, together with the group's strong position in the egg market, also strengthens its position vis-à-vis feed suppliers, meat processors and supermarkets.
During the proceedings, the merging parties argued that the merger should be authorised on the basis of the competition law 'failing firm defence'. It is recognised that such a situation can lead to a merger being permitted. The reason is that in such cases, the restrictions on competition do not arise from the merger itself, but from the difficult position of the company being acquired.
The Competition Authority has assessed the situation of the pig farms in question and the circumstances in the pig farming sector, which has been experiencing significant difficulties. Furthermore, the sales process of Arion Bank was investigated and it was assessed whether there was a realistic possibility of the pig farms being sold to parties other than Stjörnugrís. In addition, an assessment was made of the likely competitive effects of the transaction, both in the event the merger proceeded and if it did not. In the Competition Authority's view, it is clear that Stjörnugrís's acquisition of the pig farms creates significant barriers to competition. However, with reference to the evidence and information presented, the Competition Authority's assessment is that the change in the market resulting from the merger is inevitable given the circumstances of the case. Therefore, under competition law, it is not possible to annul the merger.
The above-mentioned investigation by the Competition Authority shows that the market for pig farming and other related markets are very vulnerable in terms of competition, and with the merger, Stjörnugrís has achieved a very strong position. The Authority therefore intends to use a provision of the Competition Act which allows for the regular monitoring of specific markets. Accordingly, it is possible to require a dominant undertaking to notify in advance of any significant changes to its market conduct, for example, changes to commercial terms or discounts. The purpose of this remedy is, among other things, to prevent a dominant undertaking from inflicting competitive harm on its rivals or customers.
See the decision for details No. 3/2011.
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