Merger of DAC ehf. and Lyfjavers ehf.

Last March, the company DAC ehf. bought the pharmacy company Lyfjaver ehf. DAC and Lyfjaver handle the importation of medicines, wholesale and dispensing of medicines for individual patients and patients in institutions. In addition, Lyfjaver operates a pharmacy in competition with a pharmacy owned by Lyfja og heilsa hf., which is part of the same corporate group as DAC.

In addition to the DAC's acquisition of Lyfjaveri constituting a merger within the meaning of competition law, it involves the merger of Lyfja og heilsa and Lyfjaveri. By a decision of 11 July, the Competition Authority has annulled the said merger.

Had nothing been done, the merger in question would have had its most detrimental effects on the market for retail pharmaceuticals and on the market for so-called patient-level dispensing of medicines.

There has been significant consolidation in the pharmacy market in recent years. The merger would have resulted in two pharmacy chains, Lyf og heilsa on the one hand and Lyfja hf. on the other, holding just over four-fifths of all pharmacy retail in the country. In the opinion of the Competition Authority, Lyf og heilsa shares a jointly dominant position with Lyfja in the retail market for medicines. The Competition Authority's assessment is that the combined dominant market position of Lyf og heilsa and Lyfja, as described in the authority's decision, enables the companies to coordinate their behaviour in the market without having to take competitors or consumers into account. The companies are therefore in a position to limit competition and increase prices. Had the merger in question gone ahead, this situation would have become even more serious from a competition perspective. The merger would therefore have resulted in a significant distortion of competition and harmed the interests of those who need medicines.

In recent years, a specialised market has emerged for the sale and packaging of medicines into single-use doses, both for individual patients and for patients in institutions. This is a growing market with an annual turnover amounting to several hundred million kroner. Lyfjaver was the first company in Iceland to establish itself in this market. The company Lyfjalausnir, owned by Lyfja, and the aforementioned DAC, a sister company of Lyfja og heilsa, also operate in this market. With the merger in question, the number of companies in this market would have been reduced from three to two, both of which would have been linked to the two pharmacy chains. The Competition Authority's assessment is that the merger would have resulted in DAC holding a dominant position in the market for medication dispensing and would have hindered competition within it. By virtue of its position, the company would have restricted competition and been able to set pricing, services and commercial terms largely without regard to competitors or customers.
  
With reference to the above, the merger between Lyfja and Heilsu (DAC) and Lyfjavers was annulled today, 11 July, by the Competition Authority.

The Competition Authority considered whether the merger could be authorised with conditions that would remedy its competitive effects and sought proposals from the merging parties to this effect. There were no grounds to approve the merger with conditions.  In the opinion of the Competition Authority, the annulment of the merger was therefore the only viable way to avoid the harm to competition that would result from the merger in the markets where its effects would be felt.

The case was appealed; see the decision of the Competition Appeals Tribunal in the case no. 6/200