With judgment of the Supreme Court of Iceland, issued today, confirms the Court of Appeal's ruling on the serious breaches of competition law by the Dairy Cooperative (MS). The fines totalling 480 million krónur, imposed by the Competition Authority on MS for serious abuse of a dominant position in the market and for breaching its obligation to provide information, remain in place.
Abuse of a dominant position
The judgment confirms that the price discrimination which Mjólka ehf. and later Mjólkurbúið Kú ehf. were subjected to by MS was significant, as these companies had to pay a price for raw milk that was up to 171% higher than that paid by Kaupfélag Skagfirðinga svf. (KS) and its subsidiary. The Supreme Court held that this discrimination had given KS and its subsidiary an unfair competitive advantage. Given the dominant position of the appellant and the „weak competition“ in the defined market, MS had thereby seriously harmed the competitive position of those competitors of the company who were dependent on it for access to milk.
The Supreme Court's judgment states that MS has extensive knowledge of the dairy industry and dairy trade and, in practice, holds a dominant position in the dairy market. In this light, MS's conduct was „particularly serious“. The Supreme Court held that the aforementioned price discrimination could not be justified by reference to the provisions of the Agriculture Act. MS had therefore „seriously“ infringed the competition law prohibition on the abuse of a dominant position.
The Supreme Court's judgment states that MS's infringement of Article 11 of the Competition Act was serious, as well as being long-standing and clearly very likely to distort competition. Furthermore, it concerned an important consumer product and thus affected the public. In light of this, the decision of the Court of Appeal was upheld, confirming that MS must pay a fine of 440 million krónur for the infringement.
Data hidden
The Supreme Court's judgment also confirms that MS „intentionally“ concealed from the Competition Authority a document which the company must have known would be of fundamental importance to the investigation of the case, but by virtue of its position, the company bore „particularly onerous duties to disclose the basis for the commercial terms“. MS thereby obstructed the Competition Authority's investigation and caused a previous decision by the authority to be annulled. In light of this, a 40 million króna fine for the offence was upheld.
_____________
Páll Gunnar Pálsson, Director-General of the Competition Authority:
„The Supreme Court's ruling is of great significance for the working environment in the production of dairy products in this country and strengthens the position of farmers and consumers. The ruling thus confirms the importance of competition in the dairy market and that MS is entirely prohibited from taking action aimed at preventing small competitors from gaining a foothold or driving them out of the market.
Experience showed that competitive pressure from, for example, Mjólku, benefited both farmers and consumers, and the Supreme Court's judgment makes it clear that it is a serious offence to disrupt such competition.
MS's conduct can be traced to the company's interpretation of the scope granted to dairy plants by amendments to the Agricultural Produce Act in 2004, when they were permitted to merge and cooperate beyond the general provisions of competition law and beyond what applies to comparable companies in our neighbouring countries.“
Background information:
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.
MS appealed the decision of the Competition Authority to the Competition Appeals Board, which issued its ruling on 18 November 2016. The majority of the panel concluded, among other things, that the exemption provisions of the Agricultural Produce Act had displaced the competition law prohibition on the abuse of a dominant position. Consequently, the fine imposed on MS for breaching Article 11 of the Competition Act was quashed. On the other hand, the Board 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.
The Reykjavík District Court had upheld the Competition Authority's demand that MS be fined 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 that which MS itself and related parties (Kaupfélag Skagfirðinga (KS) and its subsidiary) had to pay. The District Court therefore overturned the majority's finding on the Competition Appeals Board that the Agricultural Produce Act had permitted the company's conduct.
MS appealed the District Court's judgment to the Court of Appeal, which upheld the judgment. The Supreme Court of Iceland has today upheld the judgment of the Court of Appeal, as stated above.
"*" indicates required fields
