An editorial in Viðskiptablaðið (Óðinn) this week discusses the Competition Authority's involvement with the appointment and work of an expert, who is operating under an agreement between N1/Festi and the Competition Authority regarding the companies' merger in 2018. The article refers to coverage of the matter in Markaður, a supplement of Fréttablaðið, on 25 March and 1 April.
The editorial is titled „The Hearts in Namibia and Borgartún“. The cost of the expert's work is mentioned, and it is also implied that the lawyer, Ludvík Bergvinsson, was given the project because of his friendship with the Deputy Director-General of the Competition Authority. The lawyer was thus chosen for the task over two other qualified, named individuals who had been nominated by the CEO of N1/Festi.
This is being compared to a case that Kveikur reported on last autumn concerning alleged bribes paid to officials in Namibia. The article concludes with reflections on greed and corruption, and also features an extract from the Passions of Hallgrímur Pétursson, in which he memorably wrote about the avarice of moneylenders.
There is reason to urge all interested parties in Icelandic business and public administration to read the editorial. It is an unusually clear example of the vitriolic rhetoric that public interest organisations sometimes have to endure from those who claim to be fighting for the interests of Icelandic businesses.
The Competition Authority is, of course, not above criticism. It is therefore only natural to ask whether there may be any truth to the serious allegations and/or insinuations contained in this coverage. In the interests of an informed discussion, it is both my pleasure and my duty to inform you of the Competition Authority's involvement in the appointment and work of an expert in this case. To that end, it is only right to set out the following:
1. Why a skilled person?
When N1 became aware in late winter 2018 that its acquisition of Festi would not be approved due to serious competition concerns, the company attempted to propose conditions for the merger that would address these concerns. The company therefore proposed, among other things, the sale of certain operations and significant changes to the arrangement of fuel wholesale. The company also committed to appointing a special monitor to ensure compliance with the conditions. Following negotiations on these conditions, N1 and the Competition Authority reached a settlement which formed the basis for the merger's approval.
The role of a skilled person is recognised in international competition law (referred to as a Trustee in English). He is usually appointed by the company concerned and his activities form part of the company's internal organisation. This can be compared to a company commissioning an external party to carry out an internal audit. Therefore, an expert is not part of the work of the Competition Authority, but of the company in question.
2. Did the Competition Authority select the expert?
No, N1/Festi chose the skilled professional. The CEO of N1/Festi nominated three individuals whom he considered suitable for the position and was prepared to enter into contracts with them to fill the role. This was clearly stated in News which was published at the end of August 2018 on Nasdaq Iceland – Stock Exchange.
It is, however, the role of the Competition Authority to formally appoint the expert, pursuant to Article 30 of the settlement (see p. 361 of Decision No. 8/2019). The task of the Competition Authority is, in particular, to examine whether the expert is independent of the company and of the tasks they are to perform, and whether they possess the knowledge and experience applicable to the said tasks. On that basis, the Competition Authority can reject a nomination, and N1/Festi must then nominate a new one. To avoid delays in the process, the CEO decided to nominate three suitable candidates at once.
3. Why did the Competition Authority not appoint the other of the two nominees?
The CEO of N1/Festi nominated three potential experts, as previously stated. The article in Viðskiptablaðið states that these individuals were Eyjólfur Árni Rafnsson, former CEO of Mannvit and chairman of the Business Association, Ólafur Þór Jóhannesson, an auditor, and the aforementioned Lúðvík Bergvinsson, a lawyer. All are distinguished men with extensive experience in various fields.
The Competition Authority took all three nominations for closer scrutiny and summoned Ólafur Þór and Lúðvík for an interview. Eyjólfur Árni was not summoned for an interview, as N1 did not comply with the authority's request to provide information about his career. It was apparent that Eyjólfur Árni was and is the chairman of the board of Eik fasteignafélag hf. The role of an expert at N1/Festi includes, among other things, overseeing the conditions for the sale of the grocery and fuel business, and it was clear that Eik could have an interest in these transactions. At that time, Eyjólfur Árni was chairman of the Federation of Icelandic Businesses and was therefore representing interests on a platform that could have conflicted with his duties as an expert.
At this time, Ólafur Þór Jóhannesson had recently finished his role as Managing Director of Basko's Finance Department and Deputy CEO of the company. He also held a share in the company. At that time, Basko operated the Iceland and 10-11 stores. It was clear that Basko could have a significant interest in how the sale conditions in the settlement between N1 and the Competition Authority were implemented. Therefore, Ólafur was not considered a suitable expert. However, he possessed experience that the Competition Authority envisaged could be utilised in specific expert projects, and it conveyed that a specialist could approach Ólafur on these grounds. Furthermore, he took up the position of Managing Director of the Finance Division at Skeljungur in 2019, a company which is a competitor of Festi.
An assessment of Ludvík's suitability revealed no connections to the grocery or fuel market that would suggest he would struggle to perform the role, as was the case with the other two. It was also clear that Ludvik had knowledge and experience in the fuel market, having, among other things, been involved in the implementation of tenders for fuel purchases by fishing companies. The Competition Authority therefore had no reason or grounds to make any objections to the appointment by the CEO of N1/Festi, and confirmed the appointment.
From the above, it is clear that the selection of Ludvig was at the discretion and responsibility of the CEO of N1/Festi, and therefore the management or staff of the Competition Authority were not in a position to secure financial gain for their potential acquaintances or friends in connection with the appointment of an expert, as the authors of the Viðskiptablaðið editorial or the Fréttablaðið coverage would have it.
4. Who bears the cost and handles cost monitoring for an expert?
As previously stated, the work of a skilled professional/supervisor is considered to be part of the internal organisation of the relevant company. Consequently, the company is responsible for negotiating payment for the work. The scope of a specialist's/supervisor's tasks depends on the nature of the agreement. Article 30 of the agreement with N1/Festi (p. 361 of decision no. 8/2019) The tasks of a skilled man are described, and it is clear that they are quite extensive.
The Competition Authority has directed companies that have committed to this type of supervision to formalise work contracts and, where applicable, plans. It is not unusual for an expert to explain significant deviations from the work plan to the company, as well as it being normal for the company to request timesheets and carry out other monitoring at these costs as part of the relevant company's routine internal controls or internal audit. Further instructions Enquiries about this have been directed to the relevant companies, including N1/Festi.
As with other outsourced services, there is therefore nothing to prevent a company from exercising active cost control, without compromising the professional's independence or preventing them from undertaking necessary investigations. As previously stated, this can be likened to outsourced work in a company's internal audit.
The Competition Authority therefore does not mediate in the charging of an expert's fees. However, should a dispute arise over the interpretation of the settlement, the expert or the company in question may refer the matter to the Authority. Similarly, the Competition Authority may intervene if it considers that the provisions of the settlement are being breached or run counter to their purpose. If the companies concerned are dissatisfied with the Authority's findings in this regard, they can refer them to the Competition Appeals Tribunal, see e.g. a recent ruling in case no. 5/2019, The case against the Competition Authority.
From the foregoing, it follows that experts/supervisors cannot unimpededly engage in self-dealing in their work, as is insinuated in the coverage of these matters by the Viðskiptablaðið and Fréttablaðið.
5. Has N1/Festi made any comments regarding the charging of a skilled professional?
It is therefore clear that a company which has committed to being subject to the supervision of a competent person/supervisor can take various measures if the charging is incompatible with the scope of the work. Thus, for example, the company can make comments to the relevant expert/supervisor or make reservations regarding payments.
Following this coverage, the Competition Authority requested information on whether Festi had made any comments regarding Lúðvík Bergvinsson's charging as an expert. It has been confirmed that Festi has not made any comments regarding an expert in relation to payments made to him.
Furthermore, N1/Festi has not requested that the Competition Authority intervene regarding the charges.
What are they up to, then?
There is therefore no basis for the serious insinuations and accusations made against the Competition Authority and its staff in the coverage of these matters by the Viðskiptablaðið and Fréttablaðið. It is noteworthy in this regard that neither Fréttablaðið nor Viðskiptablaðið sought clarification or comment from the Competition Authority in connection with their coverage. It is also noteworthy that Fréttablaðið rejected a request for a correction of the inaccuracies in its coverage.
The question therefore remains as to what people's motives are for making such statements. It is reasonable to conclude that the coverage is intended to weaken the authority and undermine its credibility. Furthermore, the coverage in Viðskiptablaðið can be read as expressing intolerance of companies being set limits and held to account.
Fortunately, these views do not reflect the general attitude of managers of Icelandic companies. On the contrary, the experience of the Competition Authority is that most company managers understand the importance of supervision, respect the rules in place, and are willing to engage in clear and constructive communication with regulatory bodies.
Therefore, it can be asserted that this argument is neither in the interests of nor palatable to the majority of Icelandic companies, which not only want to comply with laws and regulations but, like consumers, insist on active competition in the markets. Markets that are often difficult and inaccessible in a small economy like ours.
This is particularly urgent at present, as smaller companies, which often enter markets with a breath of fresh innovation, are at risk of disappearing from the market due to the economic hardships caused by COVID-19.
The lobbying that is evident in the coverage of these matters by the Viðskiptablaðið and the Fréttablaðið has therefore gone astray.
Páll Gunnar Pálsson
Director-General of the Competition Authority
[This post was published as an article in Kjarninn in April 2020]
"*" indicates required fields
