The Competition Authority approves the merger of N1 and Festi, but imposes conditions on the merger to strengthen and protect competition in the fuel and grocery markets.

The Competition Authority has today authorised the acquisition of Festi hf. by N1 hf. The merger is subject to conditions agreed between the Competition Authority and the merging parties. Under the conditions, the merging parties commit to measures aimed at strengthening and protecting effective competition in the fuel and grocery markets and addressing the competition concerns that the merger would otherwise raise.

N1 undertakes, among other things, to sell petrol stations to a new competitor, sell the Kjarval convenience store in Hella, increase resellers' access to storage space, distribution and wholesale fuel, and ensure the company's competitive independence. These are more extensive measures by N1 than have previously been announced in the course of the proceedings.

Specifically, N1 undertakes, among other things, the following actions:

1. Sale of petrol stations – a new competitorN1 undertakes to sell certain petrol stations, the „Dælan“ brand, and to take other specified measures to enable a new independent operator to enter the fuel market and compete effectively. N1 also undertakes to ensure that the sale of assets to a viable competitor is successfully completed. (See section IV of the settlement for further details.)

   These measures address the Competition Authority's conclusion that with N1's acquisition of Festi, the latter company is ceasing to be a potential independent competitor in the fuel market, as Festi had, as is well known, plans to do so.
    

2. Retail sale of groceries: N1 undertakes to sell the business of the Festi (Kjarval) store in Hella and to take specific measures to ensure that this sale is completed. (See section IV of the settlement agreement for further details.) This addresses the Competition Authority's assessment that the merger would have a detrimental effect on competition in Hvolsvöllur and Hella, where the merging parties operate a total of three shops.
3. Increased access for resellers to wholesale fuel and increased access to the services of Olíudreifing hf. (ODR)N1 undertakes to sell to new resellers who request it all types of fuel in bulk on a commercial basis, on specified terms. N1 is obliged to observe equality and objectivity towards those who purchase fuel in bulk. (See section II of the settlement for further details.) 

   Furthermore, N1 undertakes, as one of ODR's principal owners, to take certain measures to ensure fuel suppliers have access to storage capacity and services at ODR. (See Chapter III of the settlement for further details.)

   These measures address the competitive distortion resulting from the integration of fuel and grocery companies, i.e. between N1 and Festi, and pave the way for more effective competition in the fuel market.
    

4.  N1's competitive independenceN1 undertakes to take certain measures to ensure its competitive independence, such as the independence of its board and key personnel, the separation of interests, and specific procedures aimed at this. (See Chapter VI of the settlement for further details.)

   These measures, among other things, address the harmful effects of ownership links on the grocery and fuel markets, as the same parties are known to hold significant ownership stakes in more than one competitor in these markets.

   The settlement provides that the largest shareholders of the combined company must also commit to taking appropriate action regarding their holdings in more than one competitor in the same market. N1 commits to contributing to the cost of such measures, but discussions on this with the relevant pension funds are ongoing.
    

5. Review of the relationship and cooperation between N1 and SamkaupA commercial agreement is in effect between N1 and Samkaup for the joint operation of Samkaup stores and N1 fuel stations at certain locations across the country. Through the settlement, N1 commits to certain measures to counteract any distortion of competition that may arise from this cooperation, particularly given that N1 and Samkaup will now be competitors in the grocery market. It is the responsibility of competitors who are parties to a collaboration to assess whether their collaboration is compatible with the provisions of competition law and, where applicable, whether an exemption for the collaboration is required. (See section V of the settlement agreement for further details.)
6. Supervision and management by an independent party: Pursuant to the settlement, an independent expert will be appointed to monitor and oversee the actions and directives set out in the settlement. (See Chapter VII of the settlement for further details.)

Agreement The merger notification to the Competition Authority can be found here, with provisions subject to confidentiality redacted.

Á næstunni mun Samkeppniseftirlitið birta fullbúna decision vegna málsins, en þar verður nánari grein gerð fyrir meðferð málsins, undirliggjandi rannsóknum og þeim aðgerðum sem framangreind sátt mælir fyrir um.

In handling the case, the Competition Authority has taken into account the applicable rules, guidelines and precedents in the European Economic Area, such as those concerning investigations of mergers of this kind and the formulation of conditions, for example regarding the sale of assets.

More about the merger investigation – Timeline

This merger has been investigated by the regulator on two occasions, but towards the end of the first investigation, the merging parties decided to withdraw their merger notification and re-notify the merger. In the latter notification, N1 put forward proposals for conditions which, in its view, would eliminate the possibility of a competition concern.

For clarity, here is a timeline of the investigation to date:

• 31 October 2017: The Competition Authority receives the initial notification of the merger. An extensive investigation is launched, during which evidence and views are gathered from competitors and stakeholders in the grocery and fuel markets. The investigation concluded on 17 April 2018, as detailed below.
• 23 November 2017: The Competition Authority publishes News on its website, where it outlines the supervisory authority's focus in investigating the case and seeking perspectives. Subsequently, the information gathering and investigation of the case continued.
• 24 February 2018: The Competition Authority publishes an objection letter to the merger parties, setting out a reasoned preliminary assessment of the merger. Accordingly, it is considered that the merger would lead to serious competition concerns which must be addressed, either by the annulment of the merger or by conditions that eliminate the said concerns. N1 sends notification to the stock exchange regarding the status of the matter on 25 February 2018.
• 5 March 2018: N1 requests to enter into conciliation talks with the Competition Authority, etc. notification to the stock exchange on 7 March. Subsequently, N1 submitted comments on the objection document, in which, among other things, it expressed the view that there was no reason to impose conditions on the merger. Despite this assessment, N1 put forward proposals for conditions.
• 14 March 2018: After reviewing N1's comments and proposals for conditions, the Competition Authority informs N1 that there are no grounds for settlement talks, as the company disagrees with all substantive aspects of the authority's preliminary assessment and considers it unnecessary to impose conditions on the merger. N1 announces ...to the stock exchange on the same day. Following comments made, the Competition Authority launched an additional investigation into specific aspects of the case.
• 9 and 12 April 2018: N1 puts forward proposals for conditions which the company believes could increase competition and form the basis of a settlement in the case. Subsequently, the Competition Authority states that the proposals were submitted too late, as it is clear that it is not possible to conduct a sufficient investigation into the effects of the conditions within the statutory deadline. Furthermore, there is a significant question as to whether they are sufficient. It was announced that the Authority would make a decision in the matter within the deadline.
• 17 April 2018N1 withdraws its merger notification, just before the publication of a decision in the case. At the same time, the company announces that the merger will be notified again, with proposed conditions designed to remove competition concerns. See more News The Competition Authority and notification N1 to the stock exchange, dated the same day.

New merger case:

• 16 May 2018N1 notifies the merger again and proposes conditions. The new notification is based on the previous notification of the merger and on the investigations and data from the previous case. The statutory deadlines in the new case begin to run. The case is then taken under investigation. Subsequently, discussions take place on the conditions in preparation for consulting interested parties.
• 13 June 2018: The Competition Authority sends a request for comments to stakeholders on proposals for conditions.
• 26 June 2018: The Competition Authority is calling for the views of other parties. See more details. News of the Competition Authority. Subsequently, further discussions will take place regarding a possible settlement.
• 30 July 2018: The Competition Authority approves N1's acquisition of Festi, by signing a settlement with N1, see this news item.

 Samkeppniseftirlitið hefur birt ákvörðun í málinu sem má nálgast here