Í
Following the general meeting of Festi, the media have reported on an agreement between N1 and Festi.
(now Festi) made a complaint to the Competition Authority regarding the merger of the companies. In that connection
The sale of the Festi store in Hella and the work of an independent have been specifically covered.
an expert appointed on the basis of the settlement.
Í
For this reason, and in the interest of an informed debate on competition matters, it is appropriate to take
states the following:
About
settlement pursuant to competition law
If
mergers which the Competition Authority is investigating, which distort competition, can
Companies requested that an agreement be reached. This involves companies laying
to conditions intended to prevent the merger from hindering competition. If
The Competition Authority considers the conditions to be satisfactory when an agreement is reached and it is
binding on the relevant company when it has „approved and
to confirm its contents with her signature“, pursuant to Article 17(f) of the Competition Act.
The company is therefore allowed to carry out the merger in return for a promise to honour
its obligations. Has the Competition Appeal Tribunal stated that it is
urgent for companies „Value conditions for mergers and trust
may peace in such matters be more than just empty words.“ cf. decision in
Case no. 5/2011.
Excerpt
On conditions, the relevant company may be fined, see section 37.
competition law. In addition, Article 17(e) of the competition law states that if
The Competition Authority may authorise mergers by imposing conditions.
revoke such a decision if„The companies involved are breaching the conditions.
which mergers have been set.“
About
the settlement with Festi
We
Investigation into the merger of N1 and Festi submitted by the merging parties (now Festi) on their own initiative
They took the initiative to propose conditions which they believed would resolve them.
competition problems which the investigation by the Competition Authority revealed.
Among
otherwise, the merger partners' proposals included measures to create space for a new one
a competitor in fuel sales in the capital region (sales at Dælunni) and additional
resellers' access to wholesale fuel. The merger partners also proposed
the sale of Kjarval's shop in Hella to ensure competition in that area. Overview
The conditions can be accessed here..
Which
What problems did Festi's sales proposals for the store in the South of Iceland need to solve?
We
The competition authority's investigation into the effects of the merger specifically examined whether
the merger might have undesirable local effects on those areas where both
The merger partners operated. The investigation focused, among other things, on the effect of the merger on sales.
Groceries in Hella and Hvolsvöllur.
To
to explore the competitive restraint exerted by other shops, e.g. in the vicinity
A consumer survey was carried out for the municipalities to provide the merged company.
among customers of N1 and Festi in Hella and Hvolsvöllur. Her findings
demonstrated that N1 and Festi were close competitors in this area and would coexist
limited competitive restraint in the area following the merger. Distortion of competition due to
The merger could lead to higher prices, a smaller range of products, shorter opening hours and worse
service to consumers in this area otherwise. When mergers have
The Competition Authority must act against such harmful effects.
took
The Competition Authority to investigate whether the conditions proposed by Festi would be sufficient.
with the aim of securing the interests of residents in the area and other customers. Deemed
The Competition Authority so be it and looked, among other things, at the fact that the conditions state
make it clear that a new operator of a shop in the area would be able to provide
at least comparable service at a competitive price.
In detail
The findings of a study on this are discussed in the decision. No. 8/2019, Merger of N1 Ltd. and
Festi Ltd.,
See in particular chapter IV 12, pp. 251-263.
From
In what have the terms of sale not been fulfilled in accordance with their contents?
Sale
Establishing a shop in the area has not been successful. The main reasons for this are
twofold. On the one hand, it emerged that Festi had not secured authorisation to
to assign certain leasehold interests in property in the area. In preparation
As part of the settlement, Festi did not inform the Competition Authority that the company lacked
adequate rights in this respect.
The other
for this reason, the company has on at least one occasion entered into a sales agreement with a party that
did not meet the conditions of being an independent competitor that would provide Festi
competitive restraint. If the buyer is insignificant or affiliated with Festi, this applies.
a condition, not its aim. This is discussed in more detail. here.
From
Due to these allegations, Festi has not fulfilled the commitments it had made.
underwent it of its own volition. Are the deadlines that Festi had to sell the shop
Kjarvals on Hellu are now over.
Sales measures
of the settlement
Í
The settlement provides a remedy that can be taken in respect of the situation which
has arisen, i.e. that Festi has not sold the shop in Hella to within the deadline.
a buyer that can provide competitive restraint. This includes, amongst other things, that Festi
has committed to stepping back from attempts to sell the shop in Hellu
and agree that an independent party with full authority shall sell certain assets of Festi to
to ensure that the objectives of the settlement are achieved, in accordance with Article 17 of the settlement.
The precise implementation of this measure is, however, subject to confidentiality, pursuant to Article 15.
of the settlement.
Effects
possible closure of the shop in Hella
Í
The media have reported that Festi may close its shop on
Hellu, as the sale of the shop had not gone through.
According to
In the settlement, Festi committed to take action„more thorough measures“to
to ensure that the terms of the settlement are complied with and to achieve its objective, see 2.
and Article 28 of the agreement.
The Competition Authority
points out that the possible closure of the shop in Hella does not rule out that
Festi's commitment to prevent the merger from distorting competition in the region.
None of the proposals put forward by Festi, and approved by the Competition Authority,
had the aim of making consumers' position worse after the merger, but
contrary to protecting their interests. Should the shop be closed on
Hellu, without Festi having fulfilled its obligations in this regard, may
expect the Competition Authority to consider whether the closure entails
a breach of the peace.
Investigation
investigation into possible breaches of the agreement
As one
and it has been publicly reported that the Competition Authority launched an investigation last December
on possible breaches of the above-mentioned settlement. The following points are in particular
for investigation:
All
The above-mentioned conditions are intended to prevent harmful effects.
merger of Festi and N1.
Appointment
and the work of an independent skilled person
Right
is to emphasise that the appointment of a supervisor/expert in cases of this kind is
based on international precedents in competition law. Furthermore, it is appropriate to emphasise that
The instruction of a skilled person does not constitute a transfer of their role or duties.
of the competition authority, but consists in the fact that the relevant party has that task
to ensure that the relevant companies take timely action on them
measures that it has promised to take and also to consider
possible complaints and other matters that call for special attention. Is he often in
position to resolve issues that arise, as well as complaints from competitors
and customers, more swiftly than the competition authorities are able to.
Thus, the appointment of a skilled professional can lead to considerable savings for both
the relevant companies and competition authorities. In addition, as previously stated, support is provided
...and furthermore, that mergers, for example, do not cause harm to the public.
Í
In this matter, an expert has played an important role in shedding light on
the implementation of Festi on the terms to which the company committed to abide. In
In accordance with his duties, he has reported to the Competition Authority.
for possible breaches of the agreement. They are now under investigation, in accordance with
the above. According to the above, the work of a skilled person has concerned
many other factors besides the sale of the shop in Hella.
To
Regarding the appointment of an expert in this matter, it should be noted that, according to
Under the settlement, Festi committed to ensuring adequate supervision of
its implementation and select an independent expert for that purpose. Festi appointed three
individuals for that purpose. On 31 August 2018, Festi published News on Nasdaq
Iceland – Stock Exchange, where the appointment of a skilled person is reported.
States that on 9 August 2018 the CEO of N1 appointed „three
individuals whom the company considered suitable to act as the independent
of an expert. Following an assessment of competence, the Competition Authority agreed that Ludvík
Bergvinsson would be entrusted with the role of the independent expert.“ The other individuals nominated by Festi
did not meet the conditions for independence from Festi and supervisory functions
of the settlement.
Known
In competition law, the cost of the work of experts can be
different. This depends, among other things, on whether and how the respective companies proceed.
the commitments they have promised to abide by. The Competition Authority has
provide companies with guidance on cost containment through skilled personnel or supervisory committees
which operate under agreements with companies. It states, among other things, that companies are
It is right to show cost restraint to skilled professionals in a similar way as with others.
purchased services, without jeopardising the independence of the work.
More information
The appointment of an expert and cost control in relation to the work of experts are discussed.
or other comparable supervisory authorities in a news item on the supervisory authority's website, which
is available here.
About
The work of skilled professionals in general can be referred to as tourism, industry and
The Minister for Innovation answered a question in Parliament last session about supervision of
mergers. In preparing the response, the ministry requested information from
The Competition Authority. The answer is available here.
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