Yesterday and today, the media has reported on the contractual terms surrounding Landsbankinn's sale of its stake in Borgun in 2014. In the media, the Governor of Landsbankinn has, among other things, referred to the demands and pressure exerted on the bank by the Competition Authority. In light of this, it is appropriate to recall the following:
On 18 December 2014, the Competition Authority announced on its website that Arion Banki, Íslandsbanki, Landsbankinn, Borgun and Valitor had each entered into a settlement with the Competition Authority regarding its investigation into restrictive practices in the payment card market. Through the settlements, these parties acknowledged that certain conduct in the payment card market had not been in accordance with competition law. Furthermore, these parties agreed to make changes to their operations and paid fines totalling 1,620 million króna.
The aforementioned settlements are intended to lead to significant changes in the payment card market. Their main purpose is to promote greater efficiency in payment card services by creating a foundation for stronger customer oversight, and to promote a level playing field for competitors in the areas of acquirer and issuer services, reduce the risk of conflicts of interest in the activities of financial institutions in the payment card market, and otherwise contribute to more effective competition in the field of card issuance and acquirer services.
In order to remove barriers to competition, the banks committed, among other things, to making permanent changes to the ownership of the card companies. Thus, each of these banks is now prohibited from holding a share in a payment card company with another Icelandic commercial bank. As is well known, the two payment card companies had long been jointly owned by competitors in the financial market. In the opinion of the Competition Authority, this arrangement was one of the main causes of the competition barriers that have been demonstrated.
With regard to the banks' ownership of Borgun, it should be noted that it was not a condition of the Competition Authority that Landsbankinn, rather than Íslandsbanki, should sell its stake in the company, as evidenced by the following from clause 2.4 of the settlement agreement between the Competition Authority and Íslandsbanki:
„Íslandsbanki is authorised to enter into negotiations with Landsbankinn regarding either bank buying out the other's share, or the sale of a share held by both or either bank to a third party.“
Before the Competition Authority concluded a settlement with Landsbankinn in the case, the bank had sold its stake in Borgun and Valitor. It was not necessary for the Competition Authority to set a deadline or other binding conditions for the bank regarding the arrangement of the sale of its shares. The sale of Landsbankinn's shares in Borgun and Valitor, and its arrangement, was therefore entirely at the discretion and responsibility of Landsbankinn.
A report in the Fréttablaðið newspaper today also quotes the bank manager as saying that Landsbankinn had limited access to information about Borgun due to a settlement with the Competition Authority. In this regard, it should be noted that the Competition Authority cannot agree that its measures had an impact on the terms or commercial conditions of the sale in question.
Further information can be found on this page.information page.
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