The Competition Council has concluded that the exclusive CD purchasing agreement between Skífan hf. and Aðfangar hf. constitutes a serious breach of competition law by Skífan. By entering into the agreement, the company abused its dominant market position. The Competition Council has ordered Skífan to pay a fine of 25 million krónur to the state treasury for this infringement. Following amendments to the Competition Act which came into force a year ago, the general principle is that administrative fines should be imposed on companies that breach the prohibitions of the Competition Act.
Skífan and Hagkaup, on behalf of Aðfanga, entered into an agreement in April 2001, which was to be valid for two years, whereby Aðfanga purchased almost all compact discs for resale in Baug's stores from Skífan. The contract, with very few exceptions, excluded all other wholesale and distribution companies for CDs besides Skífan from selling CDs in Baug's stores until 2003. Japís hf. tried unsuccessfully to negotiate the distribution of CDs to Baug's stores. The agreement with Skífan prevented this. Japís and the Association of Icelandic Musicians submitted a complaint to the competition authorities regarding the barriers to competition created by the agreement between Skífan and Aðföng.
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