Purchase of Búvís ehf. by Skeljungur ehf.

The Competition Authority has published a decision to annul the acquisition of Búvís ehf. by Skeljungur ehf. Skeljungur is owned by SKEL fjárfestingafélags ehf., operates in various sectors of Icelandic business and, among other things, supplies farmers with inputs, including fertiliser. Búvís specialises in the sale of inputs and equipment to farmers, including the sale of fertiliser.

The Competition Authority's investigation has revealed that Búvís is a significant competitor in the market for the import and sale of fertiliser, and that the merger would, had it not been challenged, have had significantly harmful effects on that market. It is therefore unavoidable that the merger must be annulled.

Fertiliser is an important input in agriculture and a major cost item for farmers. Previous research by the Competition Authority indicates that farmers' bargaining power vis-à-vis suppliers of services and inputs is weak, and that their financial situation is generally difficult.

The evidence in the case shows that Búvís was established in response to significant price increases for fertiliser and a lack of competition. Comments from farmers, obtained in the case, also show that Búvís has improved the competitive situation, kept prices down and improved services and terms of trade for farmers. There is a risk that market conditions would have reverted to their previous state had the merger gone ahead.

Búvís and Skeljungur are close competitors in the sale of fertiliser. Búvís is a strong competitor that provides other companies with competition beyond what its market share indicates. An acquisition of Skeljungur would therefore have eliminated the important and effective competitive pressure exerted by Búvís.

Had Skeljung's takeover of Búvís gone ahead, the number of substantial competitors would have been reduced from four to three. This would have resulted in a significant concentration of the market into a duopoly, beyond what is acceptable under recognised competition law standards.

Furthermore, the reduction in competitors in the market in question would have the effect of making conditions much more favourable for coordination, such as on pricing, to the detriment of farmers and consumers.

The merger parties have not submitted sufficient information, data or explanations to the effect that the merger would result in efficiencies or economic improvements that would offset its adverse effects.

During the proceedings, the merging parties have neither requested settlement talks nor submitted proposals for possible conditions. Furthermore, the merging parties have not used the provision in competition law to request an extension of the deadlines in the case, in order to allow for further investigation.