With judgement Supreme Court Today, a judgment of the Reykjavík District Court is confirmed, with reference to its reasoning, holding that Lyf og heilsa (L&H) abused its dominant market position when the company took action directed against Apóteki Vesturlands. It is confirmed that the infringements were serious, given that they were aimed at preventing the entry of a new pharmacy onto a market previously monopolised by L&h. The objective of the measures was to weaken the new competitor and distort competition, in accordance with the district court's findings. It is also confirmed that L&H must pay a government fine of 100,000,000 kr.
The background to the case is that the Competition Authority launched an investigation into alleged breaches by L&h with a search of the premises in September 2007. The investigation was launched following reports that the company had taken action to prevent Apótek Vesturlands (AV), which had just been established, from establishing itself in Akranes.
By decision No. 4/2010 The Competition Authority concluded that L&H had abused their dominant market position through an organised attack against AV which was directly aimed at distorting competition. L&h's actions consisted, on the one hand, of establishing a so-called loyalty club, which was intended to ensure that important customers would not start doing business with AV. On the other hand, the actions consisted of what L&h called „battle discounts“. These were substantial discounts on key medicines, available exclusively in Akranes. These measures were intended to drive AV out of the market and send a clear message to other parties that it was not worth trying to compete with L&h. The infringements were considered serious, and L&h was ordered to pay a fine of 130,000,000 kr.
L&H appealed the decision of the Competition Authority to the Competition Appeals Tribunal, demanding that it be overturned or the fines significantly reduced. In June 2010, the Competition Appeals Tribunal upheld the decision. Appeals Committee However, the Competition Authority concluded that L&H had been in a dominant market position and that the company's actions had constituted serious breaches of competition law. The Appeals Board considered fines of kr. 100,000,000 to be appropriate.
L&h appealed the appeal board's decision to the courts and by judgment District Court of Reykjavík In February 2012, the decision of the Competition Appeals Tribunal concerning L&H's infringement was upheld. The county court also rejected the application to reduce the fines.
In the summer of 2007, a new pharmacy, AV, began competing with an existing L&h-owned pharmacy in Akranes. Subsequently, the Competition Authority received a complaint that L&h had taken action to prevent AV from establishing itself in Akranes. The Competition Authority decided to investigate the matter and carried out a search at L&h on 17 September 2007.
These measures were not enough to prevent AV from starting operations, and L&h then took marketing action against its competitor. These consisted, on the one hand, of establishing a so-called loyalty club, intended to ensure that key customers would not start doing business with AV. The other measure, however, consisted of what L&h called „battle discounts“. These were substantial discounts on key medicines, available exclusively in Akranes. The extent of these discounts was determined with regard to the financial position of AV, whom L&h considered a weak competitor. The purpose of these measures was to drive the new competitor out of the market. In this context, the managing director of L&h believed in an email that AV „will definitely not be able to stand this for long.“ In another email from the managing director to the owners of L&h, sent on 7 July 2007, the representative of AV and measures against this new competitor were discussed, and it states, among other things:
„I find it unlikely he'll have the stamina for long under these conditions, but ideally I'd like to see his prescription count drop below 30%; then it's definitely over. He'll probably take on being unpaid or underpaid at some point, but that won't work in the long run.
The Competition Authority concluded that the market practices in question constituted a serious breach of competition law, as they were a coordinated attack on a new competitor that was expressly intended to distort competition. The measures were intended to send a clear message to other operators that it would not be worthwhile to try to compete with L&h. They were thus designed to protect and strengthen L&h's position in the market.
L&h failed to eliminate this competitor. The Competition Authority's decision addressed this, noting that L&h changed its behaviour after the search on 17 September 2007. Is it considered highly likely that L&H would have succeeded in driving AV out of the market if the company had believed it had the room to manoeuvre to continue exploiting its economic superiority over this competitor?.
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