In October 2011, the Competition Authority decision regarding the merger of Íslandsbanki and Byr. The regulator's decision stated that there was strong evidence that this merger would increase harmful competition. The merging parties, however, have argued that the merger should be approved due to the competition law rule concerning a failing firm (the 'failing firm defence'). Reference was made in this regard to the serious situation of Byr. It is recognised that such a situation of a company can lead to a merger being permitted. The reason is that in such cases, the impediments to competition do not stem from the merger itself, but from the difficult position of the company being acquired.
The Competition Authority's conclusion was that Byr's financial position was very poor and that there were no realistic possibilities for a sale to a party other than Íslandsbanki. It is also of significant importance that information from the Financial Supervisory Authority showed that if this merger did not go ahead, the authority would exercise its powers and transfer Byrs's deposits and loans to one of the major commercial banks. The conditions for a company in distress were met, and the Competition Authority therefore had no legal grounds to take further action regarding the merger.
The decision of the Competition Authority was appealed to the Competition Appeals Board by MP Bank. The bank argued that the decision was based on incorrect premises and demanded that it be overturned. However, in its ruling today, the Competition Appeals Board concluded that it had been demonstrated that the concept of a failing firm was applicable in the case, and therefore upheld the decision of the Competition Authority.
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