Last November, the Competition Authority concluded that the meat-processing companies Síld og fiskur ehf. and Matfugl ehf. had breached the competition law prohibition on illegal collusion by having close cooperation with Bónus regarding Bónus's retail prices and discounts. The case involved an extensive examination of, among other things, email correspondence between Síld og fiskur and Matfugl and Bónus. This evidence showed that the cooperation between Síld og fisk and Matfugl, on the one hand, and Bónus, on the other, went far beyond a simple exchange of information on the pricing of meat and processed meat products. Provisions of competition law prohibit producers and retailers from consulting with each other on resale prices (vertical price-fixing). Were these infringements by Síld og fiskur and Matfugl liable to cause public harm through competition?.
The evidence showed, amongst other things, that this collusion resulted in consumers being misled regarding the pre-labelling of meat products. They consulted on what the „marked price“ should be and how much of a discount should be given from that price, ranging from 10% to 40%. However, it was clear that the marked retail price was never available to consumers, and therefore it was not a genuine price reduction. The Competition Authority considered it appropriate to impose a fine of 80 million krónur on Langasjó ehf. (the parent company of Síldar og fisks and Matfugls) for the infringements.
In the Competition Authority's decision, instructions were given to Síldar og fisks and Matfugl to cease all interference with retail prices, discounts from the retail price and the mark-ups of food retailers, and to stop labelling meat products with a retail price. These were the same instructions that applied to those meat-processing companies that had previously reached a settlement with the Competition Authority at the end of 2010 in similar cases, see decision No. 36/2011.
Langisjór appealed the Competition Authority's decision to the Competition Appeals Board, demanding that it be annulled. The company made various observations regarding both the substance of the Competition Authority's decision and its procedure. The company argued that the fines had been incorrectly directed at the parent company, that its right to be heard had been violated, and that the Competition Authority's investigation had been flawed. It was further argued that the communications referred to in the Competition Authority's decision could not constitute an infringement.
In a ruling yesterday, the Competition Appeals Board upheld the decision of the Competition Authority. The Board thus confirmed that when one party holds the entire shareholding of an infringing company, it is permissible to regard the owner as part of the economic unit, unless there are special circumstances. In the opinion of the panel, Langasjóv had not presented clear arguments and evidence that the subsidiary operated independently of the parent company. Furthermore, the Board considered that in all the instances referred to in the contested decision, the parties had engaged in discussions regarding the final retail price and that this constituted vertical price-fixing within the meaning of competition law, which is prohibited by Article 10 of the Competition Act. Furthermore, the Appeal Board considers that it was necessary to prohibit advance price marking as it stood in the case.
The appeal board's ruling states that the offences in question relate to extensive transactions and that, taking into account Langasjávar's total turnover, it sees no grounds to interfere with the decision on the amount of the fine. The Appeals Board, however, considers it appropriate to postpone the entry into force of the ban on the companies pre-labelling for supermarkets and the instructions on information provision to the Competition Authority. These conditions will come into effect on 3 April.
See the decision of the appeal board for further details. No. 13/2011.
Background information:
In December 2010, the Competition Authority published a decision detailing infringements by, on the one hand, the Bonus stores, and on the other, Sláturfélag Suðurlands, Reykjagarður, the Meat Processing Plant of Kaupfélag Skagfirðinga, Norðlenska, Kjarnafæðis and Kjötbankans in contravention of Article 10 of the Competition Act through a restrictive co-operation on prices. 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 processors had price-marked for Bónus.
These companies requested to settle the case with the Competition Authority. On that basis, the Competition Authority exercised its authority under competition law and entered into a settlement with each of them. The settlements involved, among other things, the companies admitting to breaches of competition law and paying a total fine of 405 million krónur for them.
Síld og fiskur and Matfugl requested conciliation talks with the Competition Authority, but these talks did not result in an outcome. The Competition Authority therefore had to take a position on the companies' actions in a separate decision, see decision no. 36/2011.
The settlement in question from 2010 has led to significant changes in the food market, as from 1 June 2010, Haga's stores stopped accepting all pre-labelled meat products, and the meat processing companies stopped such labelling for all their customers. Following this, some companies have, of their own accord, stopped pre-labelling, for example, the Cheese and Butter Company. The Consumer Authority has introduced special rules to ensure that retailers' price labelling is adequate, see Regulation No. 563/2011. Following a decision by the Competition Authority, which the Appeals Board has today confirmed, it is ensured that Síld og fiskur and Matfugl will also make the necessary changes to their operations. Further information about these changes is available find here.
The Competition Authority's report of 23 December 2011 discusses in more detail Abolition of price marking on meat products and its effects.
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