Star Agri's purchase of pig farm assets under review

In February last year, the Competition Authority made a decision No. 3/2011 due to the merger resulting from the acquisition by Stjörnugrís hf. of the assets of the subsidiaries of Arion banki, namely Rekstrarfélagsins Brautar ehf. and LS2 ehf. These companies have been involved in the operation of pig farms, with Braut running a pig farm at Brautarholt in 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 concluded that Stjörnugrísi's acquisition of the pig farms would create a dominant position for the company in pig farming and strengthen its dominant position in the market for pig slaughter. During the proceedings, the merging parties argued that the merger should be approved under the competition law 'failing firm defence'. It is recognised that such a situation can lead to a merger being approved. The reason is that in such cases, the impediment to competition does not arise from the merger itself, but from the difficult position of the company being acquired. The Competition Authority accepted the merging parties' view.

The case was referred to the Competition Appeal Tribunal. In its new ruling No. 1/2011 The conclusion of the Competition Authority that the merger would create and strengthen Stjörnugrís's dominant market position in the relevant markets is confirmed. However, the Competition Authority's decision not to take action regarding the merger is overturned, as it was not demonstrated that the conditions for a company in decline were present in this case. The burden of proof for this rests with the merging parties. The case is referred back to the Competition Authority for further proceedings and a new decision. The Competition Authority has already taken the matter back for reconsideration.