The Competition Authority approves the merger of Norðlenska, Kjarnafæða and SAH Afurða, subject to conditions.

The Competition Authority has today authorised the merger of the meat processing companies Norðlenska, Kjarnafæða and SAH Afurðir, subject to conditions. The merging parties responded to the Authority's assessment of the merger's detrimental effects on competition by proposing conditions designed to address the Competition Authority's concerns. but at the same time allow the merging parties to implement the merger and achieve its objectives.

Subject to the conditions set out in the settlement between the merging parties and the Competition Authority, the parties undertake to take the following measures:

Measures to strengthen and secure the negotiating position of farmers

The merged company undertakes not to prevent farmers from transferring their business from the merged company to its competitors. Furthermore, farmers' right to negotiate for specific services with the merged company, such as slaughtering, is guaranteed, while other services, such as processing, may be provided by third parties.

Measures concerning the pricing of individual service components

The merged company undertakes to account separately for slaughtering and processing, and to be subject to restrictions and rules on the pricing of slaughtering and other specifically defined services for a specified period. Thus, farmers will benefit from the efficiencies the combined company intends to achieve and will not have to endure price increases that can inevitably result from anti-competitive mergers. The conditions are also designed to support farmers' negotiating power and thereby strengthen the leverage they can exert over meat processing plants.

Measures to break the ownership ties with smaller processing plants through the sale of a stake to farmers

The merged company undertakes to sell its shares in Fjallalambi on the one hand and Sláturfélagi Vopnfirðinga on the other. The shares are to be sold to farmers, or to companies majority-owned by farmers. The sale is subject to a specific deadline, which is confidential.

Measures to prevent the reduction of farmers' competitors and negotiating partners

Kjarnafæði has had business dealings with the meat processing plants B. Jensen and Sláturfélag Vopnfirðinga. The merged company undertakes to maintain ongoing business dealings for a specified period with B. Jensen and Sláturfélag Vopnfirðinga. These transactions are important for the continued operation of these companies, which might otherwise disappear from the market. The aforementioned commitment aims to ensure that the companies have the room to manoeuvre to respond to changing market conditions and continue to operate as independent competitors.

Measures to promote the competitive independence of the combined company

The merged company undertakes to adopt a competition policy, take measures to ensure compliance with the settlement in its day-to-day operations, ensure independence from competitors at board level and among key personnel, and maintain a record of all contacts with competitors. Are these measures sufficient to ensure that the merged entity complies with the prohibition on anti-competitive practices under competition law and to prevent the harm that can result from increased concentration in the sector?.

Páll Gunnar Pálsson, Director-General of the Competition Authority:

„It is in the interests of Icelandic consumers and farmers that there is active competition in the markets for animal slaughter, and in the wholesale and processing of meat products. Surveys among farmers indicate widespread support for measures to protect competition in this area.

The Competition Authority is of the opinion that its settlement with the merger parties protects the interests of farmers and consumers and at the same time enables the combined company to strengthen and prosper on the basis of effective competition and oversight by farmers.“

Barriers to competition

The above-mentioned measures are intended to offset the harmful effects that the Competition Authority believes the merger would otherwise have. It is the conclusion of the investigation that without the aforementioned conditions, the merger could have the following harmful effects:

1. Competition distortion due to increased concentration, to the detriment of consumers and farmers.
2. Barriers for smaller competitors in slaughtering and processing, and that the merger could lead to smaller competitors being driven out of the market.
3. Farmers would not be guaranteed a share of the benefits from the efficiencies the merged company intends to achieve, as they would not have the opportunity to provide sufficient oversight of the combined company. Furthermore, the barriers to competition resulting from the merger would prevent the benefits of the efficiencies from being passed on to consumers.
4. Farmers' options will decrease, and their negotiating position will consequently worsen.

More about the settlement and the Competition Authority's decision

• Decision No. 12/2021 – The merger parties' settlement with the Competition Authority is published in the dispositive wording.
• Annex I – Investigation of the case, definition of markets and assessment of the effects of the merger
• Annex II – Results of the previous farmers' survey, dated 10 December 2020 to 6 January 2021 
• Annex III – Results of a consumer survey, dated 11 to 22 December 2020
• Annex IV – Results of the second farmers' survey, dated 19 to 29 March 2021

Background information

Investigation of the case

The investigation of the case was subject to the statutory time limits of the merger rules of competition law. During the proceedings, the Competition Authority obtained extensive data from the merger parties, competitors, customers, interest groups and other stakeholders through emails, telephone calls and meetings. The Competition Authority also commissioned the market research firm Zenter to conduct a survey of consumers and two surveys of farmers.

Mergers

The merger document states that Norðlenska is a meat processing company with facilities in Akureyri, Húsavík and Reykjavík. Norðlenska slaughters horses, cattle and pigs in Akureyri, and sheep in Húsavík. Norðlenska also produces and sells various products from lamb, beef, pork and horse meat under the brand names Goði, KEA, Húsavíkurkjöt and Bautabúrið. Norðlenska is wholly owned by Búsæld ehf., which is held in common ownership by 485 farmers.

Core diet is a food processing company that produces and sells various products from lamb, beef, pork and horse meat. The company's operations are based in Svalbarðsströnd. Kjarnafæði is equally owned by Eiður Gunnlaugsson and Hreinn Gunnlaugsson. Kjarnafæði fully owns the company GMS ehf, which produces ready meals for Kjarnafæði. Kjarnafæði also holds a 34.781% stake in its competitor, Sláturfélag Vopnfirðinga hf.

The sister companies of Kjarnafæði (owned by the same parties) are the company Miðpunktur ehf. and Tani ehf. The former company owns various properties in Akureyri, including the property that houses the headquarters of Norðlenska in Akureyri. Tani ehf. fully owns SAH afurðir ehf.

South African High Commissioner Operates a slaughterhouse and produce sales in Blönduós. The company's operations consist of the slaughter of horses, cattle and sheep, and the sale of produce to food processing companies. SAH afurðir holds a 3.91% stake in its competitor, Fjallalambi hf.