On 11 March, the Competition Authority rejected Festi's application to sell the Kjarval store in Hella to a newly established private limited company owned by Sigurður Elías Guðmundsson.
The background to this case is that, following the merger of N1 Ltd and Festi Ltd, the merged company undertook agreement to the Competition Authority on 30 July 2018. In order to strengthen competition in Hella, Hvolsvöllur and the surrounding area, due to Festi's market strength, the company proposed and agreed to sell its shop in Hella. Festi recently announced that it had reached an agreement to sell its Kjarval store in Hella to a newly established limited company owned by Sigurður Elías Guðmundsson.
On 25 February, the Competition Authority received a reasoned opinion from an independent expert, in accordance with the settlement, on the buyer's fitness. In the opinion, the expert concluded that the purchaser in question did not meet the requirements for its suitability under the terms of the settlement, namely that the purchaser be independent of Festi and have no connections with the company. Furthermore, there was doubt as to the buyer's financial strength and incentive to provide Festi with significant competitive restraint in the area, as required by the settlement. Following an investigation and a review of the available evidence, the Competition Authority reached a substantially similar conclusion. For this reason, the Competition Authority refused Festi's application to sell the store in Hella to a newly-formed private limited company owned by Sigurður Elías Guðmundsson, in accordance with the procedure set out in the settlement.
If Festi hf. fails to sell the Kjarval store in Hella, the terms of the settlement provide for other assets of the company to be sold instead. The Competition Authority emphasises that it is crucial that companies comply with the conditions of mergers and that agreements in such matters are honoured. It is important that companies and parties to merger cases take seriously the conditions they propose and those set for mergers, not least in light of the fact that the companies themselves participate in their formulation. It is worth remembering in this context that the merging parties proposed the aforementioned conditions with the aim of strengthening competition in the area for the benefit of local residents and other users of the service in question.
Finally, it should be noted that the Competition Authority is now investigating possible breaches by Festi of the aforementioned settlement, including delays in the sale of the company's assets.
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