The Competition Authority's powers to intervene in corporate mergers have proven to be a valuable tool for curbing the banks' dominance over companies and thereby accelerating the recovery of the business sector. However, the Competition Authority is sometimes criticised for taking a long time to investigate merger cases. This was discussed in the last issue of the Viðskiptablaðið.
It is pleasant and relevant to present viewpoints and information that are useful in this discussion.
First, it should be noted that the handling of merger cases is subject to statutory time limits. Once these have expired, the Competition Authority is not permitted to take action. They are therefore set with the interests of the merging parties in mind.
However, the deadline does not begin to run until the Competition Authority has received a sufficient merger notification, which must contain the necessary information to assess the merger's competitive effects. It is all too common for the merging parties to fail to provide adequate information. They have little grounds to criticise the Competition Authority for delays when the explanation lies in their own poor preparation. There is reason to urge company managers and their lawyers to pay close attention to this.
In the three-year period following the collapse, or from 2009 to 2011, the Competition Authority made nearly 80 decisions in merger cases. The vast majority concerned the restructuring of the business sector, directly or indirectly. Just over half of them dealt directly with banks taking over companies.
Around a third of the decisions were processed within 25 days, which is the deadline the Competition Authority has to inform the parties whether the merger requires further investigation. It has been noted that a much higher proportion of merger cases is cleared within a comparable timeframe within the European Union.
That is correct, but the explanation is obvious: Nowhere else do competition authorities have to intervene in as many mergers as they do in this country. During the aforementioned three-year period, the Competition Authority has intervened in half of all merger cases, of which 35 mergers have been subject to conditions and five have been blocked. It is obvious that the handling of harmful mergers takes longer than that of harmless ones.
After the aforementioned 25-day period, the Competition Authority has 70 working days for further investigation. This period was activated in just over 50 of the 80 cases during the period. In 20 of these, the Competition Authority used fewer than 50 days of the said 70-day period. It is therefore not the case that the statutory period is always fully utilised.
It should be added that the Competition Authority has in many cases granted an exemption from the prohibition on carrying out a merger while an investigation is underway. In such cases, the wait for a decision is not as burdensome.
The Competition Authority therefore considers that the handling of merger cases is generally in good order, although of course there is always room for improvement. However, due to the statutory deadlines in merger cases, there is a much greater risk that the Competition Authority's other projects will not receive sufficient attention. In this regard, it is significant that since 2008, the authority's funding has decreased by 81% in real terms, while the number of cases has increased by 801%. Due to insufficient funding, the Competition Authority has therefore had to prioritise its tasks to a large extent.
It is clear that by cutting funding for the competition authority, the government has missed an opportunity to further accelerate the recovery of the business sector and economic recovery.
Páll Gunnar Pálsson
Director-General of the Competition Authority
[This column was published as an article in the Viðskiptablaðið on 8 March.]
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