The purchase by IS Haf Investment Ltd. of at least a 40.1% stake in KAPP Ltd.

On 26 September 2023, the Competition Authority was notified of the acquisition by IS Haf fjárfestingar slhf. (hereinafter „IS Haf fjárfestingar“) of at least 40% shares in KAPP ehf. (hereinafter „KAPP“). The notification was accompanied by a short merger statement in accordance with paragraphs 5 and 6 of Article 17a of the Competition Act and the rules of the Competition Authority No. 1390/202, and the Authority was informed that the merger notification was considered sufficient. 

The Competition Authority considers it clear that this is a so-called merger of conglomerates, as the merging parties do not operate in the same market. Therefore, no competitive effects arise from increased concentration or vertical effects. However, it has been noted that potential competition concerns may arise from the relationship between the commercial bank, Íslandsbanki, and competing businesses.

Since the crash, the Competition Authority has taken action against competitive distortions that can arise from the ownership of businesses by banks and pension funds, as the ownership of these entities can, under certain circumstances, create a risk of barriers to competition. This merger, however, is different from a case where a commercial bank holds a direct ownership stake in a company in a competitive market. Here, the situation is that a subsidiary of Íslandsbanki, Íslandssjóðir, operates an investment fund which invests in a company.

Nevertheless, the Competition Authority considers that Íslandsbanki's ownership of Íslandssjóðir constitutes a strong link which, under certain circumstances, could give rise to competition law breaches. In this regard, it can be noted that there may be an incentive for the relevant group to keep business within the group and to direct companies to do business with companies within the group. For these reasons, among others, the Competition Council has considered it necessary to impose conditions requiring these companies, i.e. Íslandsbanki and Íslandssjóðir, to operate independently of one another. By email dated 6 November 2023, Íslandssjóðir expressed its willingness to enter into a settlement in the matter pursuant to Article 17. clause f of the Competition Act, with the aim of addressing any anti-competitive links or other barriers to competition that could arise from IS Haf fjárfestinga's ownership of KAPP and the direct and indirect ownership of other businesses by the owners of IS Haf fjárfestinga.

Íslandsbanki and Íslandssjóðir have previously undertaken commitments intended to ensure independence between the companies, see Decisions of the Competition Authority no. 21/2014, no. 44/2017 and no. 3/2019. The aforementioned agreements are event-based in that they concern the relevant investment fund, Íslandssjóðir, and the business enterprises that are shareholders at any given time.

By this decision and the settlement set out in the dispositive wording, Íslandsbanki and the Competition Authority have agreed on conditions intended to prevent the negative competitive effects that may arise from the dominance of Íslandsbanki and its funds over companies on the samcompetition market, through a comprehensive, non-case-specific settlement that addresses the aforementioned issues and the same conflicts of interest as the parties' previous settlements, regardless of which companies or investments are involved on any given occasion.

In this matter, Íslandssjóðir and IS Haf fjárfestingar have therefore undertaken conditions which are intended to ensure, among other things, the independence of KAPP and its subsidiaries, with regard to Íslandsbanki, the Competition Authority considers that this thereby prevents potential distortions of competition which might otherwise arise from the involvement of the Íslandsbanki group in the merger. The Competition Authority also considers that the settlement prevents potential competition distortion that could arise from the general involvement of Íslandsbanki and Íslandssjóðir in companies on the market, and even in competitors. However, in subsequent cases, certain relationships or market concentration may be subject to separate review, for example, if funds managed by Íslandssjóðir invest in competitors. The parties signed the settlement on 12 December 2023 and its terms are as set out in the dispositive wording, pursuant to Article 17(f) of the Competition Act. They do not require any further explanation.