Today's Morgunblaðið contains a report on attempts by Festi, the parent company of Krónan, to sell the Krónan store in Hvolsvöllur on the one hand, and the Kjarval store in Hella on the other. As the report states, the attempts to sell stem from conditions that Festi laid down in agreement with the Competition Authority in 2018 regarding the merger of N1 and Festi. In light of this discussion, the Competition Authority considers it appropriate to provide the following information:
The Competition Authority's investigation into the merger of N1 and Festi revealed, among other things, that Festi's stores, Krónan in Hvolsvöllur and Kjarval in Hella, and N1 in Hvolsvöllur would have a near-monopoly position in the sale of groceries in Hella and Hvolsvöllur following the merger. To assess the competitive constraint that other stores, such as those in neighbouring municipalities, would provide to the merged company, a consumer survey was conducted among the merger parties' customers in Hella and Hvolsvöllur. Its findings indicated that the merger parties were close competitors in this area and would face limited competitive constraints in the area post-merger. The reduction in competition resulting from the merger would manifest itself primarily in the merged entity's altered incentives following the merger, for example, to compete on price, product range, opening hours and other customer service.
In response to the above, the merging parties (now Festi) voluntarily put forward proposals for conditions to remedy the aforementioned competition problems that would otherwise have arisen from the merger. These proposals involved the sale of the Kjarval store in Hella. As there was uncertainty regarding the marketability of the Hellu store, the settlement also provided that if the Hellu store could not be sold, Festi would be required to sell the company's other assets in the area on the same terms. Such a condition is a common method in competition law of addressing uncertainty regarding the possibility of selling the offered assets. The Competition Authority was of the opinion that the conditions offered by Festi provided a counterbalance to the harmful effects on competition that the merger would otherwise have for the residents and other consumers in the area.
It should be noted that in discussions with the Competition Authority, Festi guaranteed that they had verified the authorisation to transfer all rights related to the sale of the assets. As reported in Morgunblaðið, however, this appears not to be the case with regard to the Krónan store in Hvolsvöllur.
In light of the above, the Competition Authority is now considering, in view of the development of the case and other circumstances, how to ensure that the objectives of the settlement, including the protection of the competitive interests of consumers in Hella and Hvolsvöllur, are achieved. This is done on the basis of the procedure and case handling provided for by the settlement and the Competition Act.
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