The Competition Authority has today issued an opinion (No. 2/2012) to the Minister for Industry and Innovation, which discusses the competitiveness of, on the one hand, fishing companies that do not carry out fish processing and, on the other hand, fish processing companies that do not also engage in fishing, in relation to vertically integrated fishing enterprises that engage in both fishing and processing.
The barriers to competition arising from the aforementioned position of advantage consist, on the one hand, in the incentive for vertically integrated fishing companies to quote the lowest possible price for the catch in internal transactions between the company's fishing and processing divisions. The lower the price for the catch sold to the fishing company's own processing plant, the lower the wages for the relevant fishing company and the harbour charges on the landed catch. Both the fishermen's catch share and harbour charges are based on the declared value of the catch. The above also means that less seafood passes through fish markets than would otherwise be the case, and price formation in these markets may therefore be distorted. However, a certain barrier to competition arises from the fact that, according to the Fisheries Management Act, quota entitlements may only be transferred between parties who own and operate fishing vessels. This arrangement puts parties that process fish but do not own any vessels at a disadvantage compared to vertically integrated fishing companies when it comes to obtaining raw materials.
The opinion recommends that the Minister should take steps to reduce the competitive problems arising from the legal framework for fisheries in this respect. In the opinion of the Competition Authority, there are at least four possible ways to reduce the aforementioned barriers to competition. Firstly, specific transfer pricing rules could be applied. The intercompany pricing rules are intended, in this case, to ensure that pricing for internal transactions between the fishing and processing divisions of a vertically integrated company is conducted as if the transaction were between two unrelated parties. Secondly, it would be possible to prevent a non-integrated fishing vessel from paying proportionally higher harbour charges by basing harbour charges on other objective criteria, e.g. landed quantity or fish prices determined by an independent public authority. Thirdly, it is proposed that the Minister amend the statutory framework of the Act on the Price Authority for Trawler Quotas so that shipowners are directly involved in the determination of the so-called Price Authority price, which is used by operators in internal transactions between the fishing and processing divisions of their businesses. Finally, it is proposed that the provisions for quota transfers be expanded, a change which would level the playing field for fish processors without a fishing fleet, compared to the fish processing arm of integrated fisheries, in their acquisition of raw material for processing.
The Competition Authority has simultaneously published a decision No. 28/2012, Complaint by the Association of Fish Producers and Exporters concerning vertically integrated fishing operations. The decision concludes that there are no grounds to order a financial separation of fishing and processing on the basis of Article 14 of the Competition Act, as the conditions for doing so are not met, contrary to the claims made by the association in the case. Furthermore, the Competition Authority concludes that the association has not provided sufficient evidence that the said fishing companies have abused their dominant market position, jointly or individually, nor have they provided sufficient evidence that the companies are in a dominant position. Furthermore, the Competition Authority's investigation did not reveal that the companies had breached Article 10 of the Competition Act through illegal collusion.
However, the investigation of the matter resulted in the Competition Authority forwarding the aforementioned opinion to the Minister of Industry and Innovation.
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