Today's Fréttablaðið reports that the state, as the seller of a stake in Lyfju, sold all its shares in the company for over a billion kroner less than the price Hagar had agreed to pay. That transaction did not go ahead due to the Competition Authority's annulment of the purchase.
On this occasion, it is appropriate to make the following statement:
- By decision no. 28/2017, the Competition Authority annulled the acquisition of Lyfju hf. by Hagar hf. The authority concluded that by acquiring Lyfju, Hagar had strengthened its dominant market position in the grocery market and that there had been a harmful concentration in the markets in which both Hagar and Lyfju operate, particularly in the cleaning products- and cosmetics market. The merger would have resulted in the elimination of the competition that currently exists between Hagar and Lyfju in that market. The merger would therefore have been likely to harm competition, to the detriment of the public and business life.
- The report states that Haga has appealed the Competition Authority's annulment of the acquisition. It is appropriate to note in this regard that in a stock exchange notice from Haga, dated 10 August 2017, it was stated that Hagar did not intend to seek to have the Competition Authority's annulment of the acquisition overturned by the Competition Appeals Board, which the company was fully entitled to do. Hagar could therefore have tested its view that the merger would not cause a loss of competition, but the company chose not to do so.
- Various reasons may lie behind the price difference discussed in the news article, such as changed operating conditions for companies, as referred to in the article. It is well-established in competition law that a merger can lead to a rise in a company's valuation when it results in a disruption of competition, which can manifest as higher prices for consumers if no action is taken. Such a price difference can therefore be an indication that it was entirely necessary for the competition authorities to intervene in the merger in question, in order to protect the public interest.
- In its rulings, the Competition Authority does not distinguish between a seller being a public or a private entity. The Authority's interventions are always aimed at ensuring effective competition for the benefit of customers and the public, regardless of which other stakeholders are involved. The authority must therefore take into account the public interest in long-term effective competition, and not the potential short-term interests of the seller, even if it is the state treasury.
- A report in Fréttablaðið states that SID's acquisition of shares in Lyfju was announced in February last year, and that the Competition Authority approved the deal a year later. The correct information is that the completed notification of the acquisition was received on 11 June 2018, and the investigation concluded with a settlement between the Competition Authority and the merging parties on 11 September 2018.
