On 25th April, an extract from radio station K100's interview with Ari Edwald was published on mbl.is, along with access to the interview itself. These were the same views that Ari put forward at a meeting of the Business Council of Iceland on 24 April, where guidelines on competition rules for businesses were presented.
The interview discusses the findings and practices of the Competition Authority. In the interest of an informed debate on competition matters, the Competition Authority considers it appropriate to correct certain points that were raised in this coverage and to draw attention to its rulings on them.
1) Are RÚV and 365 competitors?
The interview claims that the Competition Authority considered that RÚV did not operate in the same market as Stöð 2 (365) and was not in competition with that company. This is not correct. The following rulings are relevant in this regard:
In a recent decision No. 42/2017, Merger of Fjarskipta hf. and 365 miðla hf., the telecommunications and media markets were defined in detail (pp. 17–80). These included television services, the market for telecommunications and television service bundles, content acquisition, television and radio broadcasting, and media advertising. The investigation was based on the views of the merging parties, input obtained from competitors and stakeholders, data obtained from market participants, domestic and international precedents, etc. The Competition Authority's conclusions were, among others, as follows:
- That the market for television advertising includes both advertising on free-to-air and subscription television, i.e. that the aforementioned types of television channels operate in the same market in this respect. (See further pp. 76-79). This is consistent with the authority's previous findings that RÚV and Stöð2 are competitors in this respect.
- That RÚV and Stöð2 are among the competitors in the television content acquisition market (see pp. 110-112).
- That subscription television is a distinct market, not the same market as free-to-air television. Is that conclusion consistent with European precedent, see most recently Decision of the European Commission from February last, which concerned, among other things, the television markets in Norway and Sweden. The Competition Authority's decision also emphasises that RÚV and other free-to-air channels provide considerable competitive restraint for 365. (See in particular pp. 50–61).
The Competition Authority has also drawn attention to the competitive discrimination inherent in RÚV's participation in the advertising market, alongside its income from public funds. In 2008, the Competition Authority addressed a specific opinion to the Minister of Education, No. 4/2008, which proposes that RÚV's participation in the advertising market should be reviewed. The supervisory authority has since repeatedly addressed this, see e.g. Report on the bill (Doc. 1186 – Item 748) to the Committee of the Icelandic Parliament, dated 10 May 2012. The supervisory body's view is supported in this respect in a recent Report of the Committee on an Improved Operating Environment for Private Media, from January 2018.
Accordingly, it is incorrect to state that the Competition Authority considers that RÚV and 365 do not operate in the same market and are not in competition.
2) Is Netflix part of the television market?
The interview claims that the Competition Authority believes Netflix is not in the same market as traditional subscription television. This is not correct.
This matter was discussed in the aforementioned decision. No. 42/2017, Merger of Fjarskipta hf. and 365 miðla hf. A specific consideration is given as to whether non-linear subscription television is in the same market as linear television, and therefore whether streaming services such as Netflix are considered to operate in the same market as traditional subscription television.
In its decision, the Competition Authority noted the arguments for and against Netflix being considered in the same market as traditional subscription television, but nevertheless did not consider it necessary for the outcome of the case to make a final determination on the matter. Instead, the Competition Authority included the turnover of streaming providers in its calculation of market share in the case, thus allowing the merging parties the benefit of the doubt. (See in particular pages 61–66 and 103–107 of the decision).
The decision pointed to various factors in support of the argument that streaming services do not operate in the same market as traditional subscription television, such as internal data from the merging parties and Decision of the Danish Competition Authority from September 2017, where it was concluded that streaming services were not part of the traditional television market.
On the other hand, the Competition Authority pointed out that there are certain signs that the distinction between linear and non-linear subscription television has diminished, and that the convergence of these markets will increase in the future.
3) Should the Freeport's turnover in cosmetics have been taken into account in the investigation of the merger between Haga and Lyfja?
The interview claims that when the merger between Haga hf. and Lyfja hf. was annulled, the Competition Authority excluded Fríhöfnin „as the largest cosmetics retailer“. For this reason, it is necessary to state the following
By decision No. 28/2017, Merger of Haga hf. and Lyfju hf., The Competition Authority concluded that the acquisition had strengthened Hagar's dominant market position, particularly in the cleaning and personal care products market. The merger would have resulted in the elimination of the competition that currently exists between Hagar and Lyfju in that market. The changes would have been likely to harm competition, to the detriment of the public and business life. The merger was therefore annulled.
In the case, the Competition Authority, among other things, investigated whether the duty-free shop at Keflavik Airport and online retail were considered part of the relevant markets. For this purpose, the Authority collected data on sales in this sector, turnover, transaction frequency and the distribution of sales, in addition to reviewing decisions by foreign competition authorities. The Competition Authority also commissioned a special consumer survey to shed light on consumer purchasing behaviour and attitudes.
The findings of this study strongly indicated that duty-free shopping was not part of the relevant market, although it did provide a certain degree of competitive restraint for domestic retail. This conclusion is primarily based on the fact that sales in the duty-free shop are conditional upon consumers being on their way into or out of the country. (See in particular pages 37–51 of the decision).
Notwithstanding the above finding, the Competition Authority obtained information on the Freeport's revenue from the sale of toiletries and cosmetics and examined whether the substantive outcome of the case would have been different if the Freeport's sales had been included. That review revealed that even if the Freeport's sales were included, it would not change the position of the merged company in many geographic markets for toiletries and cosmetics. (See pages 114–116 of the decision for further details).
This decision was, among other things, the subject of public debate regarding the Competition Authority's approach to assessing changes in the competitive environment for Icelandic businesses. The Authority has participated in that debate, see e.g. Article no. 2/2017, Competition in a changed world.
4) Other matters
The interview also criticises the Competition Authority for taking a position on the likely effects of mergers, as it is, however, required to do under competition law. It is also incorrectly claimed that the Competition Authority, or its Director, has required that incidents where competitors meet by chance be reported.
It is suggested that company managers fear contact with the Competition Authority, including retaliatory action on its part. This description is not consistent with the Competition Authority's own experience of dealing with companies in the country. The Competition Authority has had good relations with companies and endeavours to maintain them.
