The Reykjavík District Court has today ruled that the Dairy Cooperative (MS) must pay a fine of 440,000,000 kr. for abusing its dominant market position by selling a basic raw material for the production of dairy products to its competitors, i.e.i.e. raw milk, at a higher price than MS itself and related parties (Kaupfélag Skagfirðinga (KS) and its subsidiary) had to pay.
In determining the amount of the fine, the court took into account that MS's infringement was serious and had lasted for a long time. The infringement concerned the processing of an important consumer product and MS's actions were intended to seriously harm competition and consumers. Consideration was also given to the fact that this was a repeated offence. The judgment also finds that MS had weakened the competitive position of smaller competitors (e.g. Mjólkurbúsins Kú) and had a direct impact on their growth.
The decision of the majority of the Competition Appeal Tribunal in ruling from 18 November The 2016 decision that the Agricultural Produce Act authorised the aforementioned conduct is therefore set aside. The judgment is in accordance with a dissenting opinion in the appeal board's ruling, which held that the decision of the Competition Authority should be upheld. No. 19/2016.
The judgment also confirms the aforementioned decision of the appeals board that MS breached its duty to provide information under competition law by withholding important evidence from the Competition Authority. The judgment states on this point: „By their conduct, the principal claimant hindered the investigation of the case, and it was therefore necessary to commence the investigation anew.“. The amount of the fine, kr. 40,000,000, is considered appropriate.
The legal action was brought, on the one hand, by the Competition Authority, see. News dated 26 November 2016, and, on the other hand, on behalf of MS.
The basis for the regulator's investigation was a complaint from the Kú Dairy.
In July 2016, the Competition Authority concluded that Mjólkursamsalan (MS) had seriously breached the prohibition in Article 11 of the Competition Act against the abuse of a dominant market position. Specifically, MS had abused its dominant market position by selling a basic raw material for the production of dairy products to its competitors, i.e.e.g. raw milk, at an unreasonably high price, at the same time as MS itself and related parties (Kaupfélag Skagfirðinga (KS) and its subsidiary) received the same raw material at a much lower price, and furthermore below cost price. The conclusion of the investigation was that this had given MS and the related parties a significant competitive advantage over their rivals. In this way, the ability of such parties to compete with MS and its affiliated companies had been seriously impaired, which ultimately served to harm the interests of consumers and farmers.
In addition to fining MS for this infringement, among others, the Competition Authority issued an order to MS. The purpose of this was to prevent similar infringements from recurring and to create the conditions for small competitors of MS to operate in the market on a permanent basis.
MS appealed the decision of the Competition Authority to the Competition Appeals Tribunal, which issued its own ruling 18 November 2016. The majority of the Committee reached the conclusion, among other things, that the exemption provisions of the Agriculture Act had displaced the prohibition in competition law against the abuse of a dominant market position. Consequently, the fine imposed on MS for breaches of Article 11 of the Competition Act was quashed, and the same applies to the aforementioned orders of the Competition Authority. On the other hand, the Committee confirmed that MS had committed a serious breach of the competition law information obligation and that the company was liable to pay a fine of 40,000,000 kr. for this.
After reviewing the grounds of the majority of the Appeal Board, the Competition Authority concluded that it should refer the aforementioned ruling to the courts and sued MS before the Reykjavík District Court to have the aforementioned decision of the majority of the Appeal Board on co-opil the Agricultural Produce Act and the Competition Act. The action was brought to determine whether the prohibition in the Competition Act against the abuse of a dominant position applied in full to MS. Furthermore, a final resolution would be obtained as to whether the company should face full liability for the conduct in question, which the Competition Authority had assessed as serious infringements against its smaller competitors.
With legislation that came into force in 2011, the Competition Authority was granted the power to appeal the decisions of the appeals board to the courts, whereas prior to the law's enactment, only individual companies could bring such cases. The purpose of this legislative change was to better enable the Competition Authority to„to protect the legitimate public interest inherent in effective competition“. The legislature considered it important that the Competition Authority could bring an action„major and important issues“...concerning consumer interests before the courts. In this way, a balance would be maintained between the protection of the public interest and the private interests of companies in competition matters before the courts.
As noted above, MS also referred the appeal panel's decision to the courts and sought to annul the part of the decision concerning a breach of the duty of disclosure.
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