Rating Enforcement 2017

Norway's Competition Authority

21 July 2017

Norway's competition regime underwent some legislative shifts in 2016 - which observers say have yet to make a significant difference - as well as a change at the top of its enforcer, following the appointment of former economics head Lars Sørgard as its new director-general. Sørgard has brought a different style to Norway's Competition Authority, observers say. He is said to be less pragmatic, and more rigid, than his predecessor Christine Meyer, who left in autumn 2015.

Star Rating:     
Performance:  
Head of Agency: Lars Sørgard

This can particularly be seen in the enforcer's mergers record in 2016. It blocked three tie-ups that would have merged companies in the ferry, forestry and pizza restaurant markets. That's a high number for an authority that received 97 deal notifications that year - and which did not ultimately clear with conditions any of the deals that it challenged. In early April 2017, the increasingly block-happy agency prohibited Icelandic company Eimskip's acquisition of Nor Lines, after finding the deal would harm competition in the market for the transport of frozen fish with reefer ships between Northern Norway and Northern Europe.

A source says this stems from a "remarkable change in policy" by Sørgard soon after he joined. Where Meyer was typically pragmatic and flexible, and willing to discuss remedies, Sørgard tends to take a stricter view than his own case teams. One observer expressed concerns that this approach will filter down to enforcement staff in future cases.

Quite apart from potential differences between Sørgard and Meyer's style, one lawyer says, the way the authority's merger review process is structured can make it tough to get deals through, as case teams tend not to get engaged on potential commitments early enough in the process. "They don't give you exact feedback when they discuss possible approaches to commitments," the lawyer says. While there's been some progress in getting engagement to happen sooner, the lawyer, who was not involved in any of the blocked deals, suggested that some of those may have been the victim of such poor practice. The authority says remedies were not proposed in one deal, and suggested remedies were insufficient in the other two cases.

That said, observers do not fault Sørgard's competence, even if some disagree with his mindset. The same lawyer who criticised his approach in mergers acknowledges that he is a "very strong" economist overall. Notably, after the companies involved in two of the three blocked deals appealed against the competition authority's prohibition decisions, Norway's trade, industry and fisheries ministry - which is the appellate body for mergers - backed the enforcer in both cases.

Meanwhile, the competition authority now operates under a new, modernised framework more closely aligned to that of the European Union, though Norway is not a member. In addition to copying the "significantly impede effective competition" test for problematic mergers, the Norwegian enforcer now has the ability to agree settlements in cartel cases. Norway also began the process of setting up a specialised appeal board to hear appeals against decisions, following Christine Meyer's call in mid-2015 for the creation of such a body.

The changes are yet to be felt in practice - especially on the behavioural side. Norway's Competition Authority has traditionally been a fairly inactive enforcer in cartels and abuse of dominance, but incentivising companies to cooperate through the creation of the settlement procedure may help. The authority handed down only one cartel decision this year, targeting two construction companies for rigging a tender for a wastewater byproduct contract. The total fine came to 6.5 million kroner (€700,000), almost exactly two years after the enforcer raided the two companies.

But the extent to which the changes will make a difference is in reality probably fairly limited. At the end of the day, the enforcer needs to up its behavioural game and it's well aware of that: the agency says it is now prioritising ongoing cartel and abuse of dominance cases and closing non-prioritised deal cases at earlier stages. The agency also plans to boost its cartel detection capabilities, and says it's taking part in the European Competition Network's working group on how competition authorities deal with informants. However, one observer notes that leniency has yet to seriously take off in Norway because of the incomplete protection it offers. "It isn't bulletproof in terms of personal prosecution," he says; while the competition authority issues comfort letters, they don't prevent prosecutors from pursuing cases.

The enforcer's largest abuse of dominance case did at least see some progression: in November, the Competition Authority charged telecoms company Telenor and imposed a preliminary 906 million kroner (€97 million) fine - just under four years after it raided the company in parallel with the EFTA Surveillance Authority, which is conducting a separate investigation. If confirmed, the Norwegian penalty would be the enforcer's highest to date.

Head of agency

Lars Sørgard

Previous employment

Chief economist at Norway's Competition Authority; professor of economics at the Norwegian School of Economics

Mandate expires

2022

Salary of head of agency

€132,000

Appointment of head of agency

Norway's government

Agency head reports to

Norway's trade, industry and fisheries ministry

Budget

€10.7 million

Amount spent on salary

Approximately €7.5 million

Percentage of budget spent on salary

Approximately 70%

Staff working on competition enforcement

98

Non-administrative competition staff

74

Percentage who are lawyers

45%

Percentage who are economists

51%

Percentage who are others

4%

Other areas of focus

Administrative responsibility for the secretariat of Norway's Public Procurement Complaints Board until April 2017

Average age of staff

38

Male/Female

51%/49%

Average tenure

5.5 years

No. of staff who left in 2016

2

No. of staff who retired

0

No. of staff who remained in civil service

0

No. of staff who joined in 2016

1

No. of staff who joined from the civil service

0

No. of staff who have spent at least 5 years in private practice

13

Percentage of staff who left

3%

Percentage who retired

0%

Percentage who remained in civil service

0%

Percentage who joined in 2016

1%

Percentage who joined from civil service

0%

Stand-alone bureau of economics

Yes

No. with PhDs in economics

7

Name of chief economist

Kurt Brekke

Priorities

No. of staff working on mergers

Not applicable - staff organised by market sector

No. of staff working on anti-cartel

Not applicable

No. of staff working on dominance-related issues

Not applicable

No. of staff working on other areas

Not applicable

Percentage of staff working on mergers

30%*

Percentage of staff working on anti-cartel

25%*

Percentage of staff working on dominance-related issues

15%*

Percentage of staff working on other areas

20%*

Sectoral priorities in 2016

Retail grocery, telecommunications, markets with regulation limiting competition

Sectoral priorities for 2017

Retail grocery, telecommunications, markets with regulation limiting competition

Internal performance assessment

Evaluation is performed before case closure, with essential findings presented to senior management.

External performance assessment

Norway's trade, industry and fisheries ministry evaluates the authority's performance, and has an increased focus on the effects of decisions and advocacy in relevant markets, especially in relation to results for consumers.

* Estimates.

Mergers

No. of mergers filed

97

No. of mergers that led to in-depth review

5

No. of filed mergers challenged

3

No. of challenged mergers blocked

3

No. of challenged mergers resolved with remedies

0

No. of challenged mergers abandoned by parties

0

Percentage of filed mergers that led to in-depth review

5%

Percentage of filed mergers challenged

3%

Percentage of challenged mergers blocked

100%

Percentage of challenged mergers resolved with remedies

0%

Percentage of challenged mergers abandoned by parties

0%

Average length of an in-depth merger review

5 to 5.5 months from notification to decision

Anti-cartel

No. of leniency applications

First-in: 3

Total: 3

No. of dawn raids

1

No. of cartel decisions

1

No. of cartel decisions concluded with fines

1

Total cartel fines in 2016

€714,000

Average fine per cartel

€714,000

Average length of cartel investigation

Two years from dawn raid to decision

Fines collected by

Norway's National Collection Agency on behalf of the competition authority

Fines go to

Norway's government

Abuse of dominance

Highest no. of abuse of dominance cases under way in 2016

Confidential

No. of abuse of dominance investigations launched in 2016

Confidential

No. rolled over

Confidential

No. of files closed in 2016

1

Average length of investigation

Too few to estimate

Sum total of abuse of dominance fines

0

No. of abuse cases settled with behavioural conditions

0

Longest-running investigation

Investigation started with a dawn raid in December 2012

Explanation for its duration

The Competition Authority analysed substantial amounts of physical and digital evidence.

Criminal enforcement

Criminal enforcement track

Yes

Offences punishable by imprisonment

Cartel activity

Individual sentences imposed

None

Longest prison sentence

None

2016 total prison time

None

Total fines

Total fines

€714,000

Imposed for

Cartels 100%

Abuse of dominance 0%

Other 0%

Organisational change

Structural change

No

Leadership change

On 25 January 2016, Lars Sørgard was appointed as the new Director General; in August 2016, Kurt Brekke became chief economist.

New powers or responsibilities

The authority became the sole agency to review media mergers, which previously also needed approval from Norway's Media Authority.

Budget change

€641,000 increase

Advocacy

Percentage of budget dedicated to advocacy

None specific

Stand-alone advocacy office

No; in principle all case handlers can take part in advocacy.

Appearances before congress/parliament

None

Other contact with lawmakers and government officials

Answers submitted to 10 public hearings related to proposed legal changes to various ministries and authorities.

Legal changes proposed/enacted

In February 2017, Norway's government appointed a committee to analyse the effect of the sharing economy, following the authority's repeated advocacy for deregulation. As part of a joint Nordic report on waste management, the authority proposed several measures to boost competition. It also evaluated a proposition on market balancing in the meat and egg markets, arguing against cooperation between a meat cooperative and a trade association of independent producers; the cooperation was abandoned. The authority encouraged local governments to open airport parking to market entry; the municipal and provincial government near Stavanger airport have adapted their land use planning to let a new competitor enter the market. Norway's National Consumer Council plans to launch a retail grocery price comparison portal; following Competition Authority objections, the portal will prevent the three main retail chains from using it to coordinate on prices. The authority recommended changing banking regulations, as harmonisation with European regulation will increase competition, and authority objected to prolonging the book sector's exemption from RPM rules; it was nonetheless extended to 2018. The authority proposed more central government analysis of the effects of an extra fee for air traffic passengers; it was introduced as planned.

Other results

Director-general Lars Sørgard has been active in the media, publishing regular op-eds in Norway's business press.

Priority setting

Setting goals and priorities

The trade, industry and fisheries ministry states the government's competition priorities in a letter to the competition authority at the beginning of each year. The ministry asked the enforcer to pay particular attention to the retail grocery sector in 2016 and 2017. Otherwise, the competition authority has full discretion to prioritise.

Allocation of resources

Prioritisation is based on impact and effects, risk, strategic importance and resources. The authority has become more proactive, setting its own agenda by prioritising ongoing cartel and abuse cases, and by closing non-prioritised merger cases at earlier stages. Allocation also takes place dynamically based on cases received. Senior management discusses the status of ongoing cases and projects.

Long-term strategy and training

Evaluation methods

Internal peer review and evaluation; informal feedback from lawyers and company managers. Annual two-day conference by the Norwegian Association of Lawyers covers competition law developments.

Ensuring stability

The enforcer's workforce is increasingly stable; turnover has dropped from 15% from 2012 to 8% in 2014-2015, and now 4% in 2016. The enforcer aims to give all employees opportunities for development; almost 5% of total time resources for non-administrative staff was used on competence building. Internal seminars spread know-how.

Results

Key achievements

Non-administrative staff numbers fell by almost 10% in 2016 compared to 2015, mostly due to a temporary budgetary situation postponing new recruitment to replace departing employees or employees on leave. The enforcer has maintained a high activity level, with three prohibited mergers, and has made progress in ongoing cartel and abuse of dominance cases. The substance of the authority's decisions has also been upheld.

Appeals success

Companies appealed against two merger decisions in 2016; the enforcer won both.

How do you rate yourself?

The authority had quite an active 2016, with enforcement covering the whole spectrum of anti- competitive behaviour in various markets.

One major event was the abuse of dominance statement of objections sent to Telenor. Telenor was informed that we were considering imposing a fine of 906 million kroner, reflecting our view that the company engaged in conduct that impeded the entry of a third competing mobile network. This is a record high fine for the authority. The statement of objections marks a major milestone in work that started with unannounced inspections at the premises of Telenor Norge and Telenor ASA in December 2012, and has required substantial resources.

In addition, the authority prohibited three mergers in such diverse sectors as the ferry, forestry and pizza markets. Relating to cartels, two companies were fined for rigging bids in a tender on sewage services for the municipality of Bergen. This is the most recent in many bid rigging decisions the authority has had in the last five years, and it shows the authority's strong efforts in fighting bid rigging.

We have also been active on advocacy, especially focusing on regulations harming competition. The authority has repeatedly argued for a deregulation of the taxi market. A government-appointed committee has proposed legal changes in order to reduce barriers to entry in this market. In advocacy matters, the authority has in addition aimed at airport parking, waste management, capital requirement for banks limiting competition between domestic and subsidiaries of foreign banks, and the exemption from the competition act for the agricultural and book sectors. The authority prioritises cases where its influence is most likely to result in a positive outcome for competition. This has shown to be an effective use of resources. The authority has been active in media explaining the importance of a solid enforcement of competition law, and the direct effects for consumers.

Effectiveness and results (doing the right things) are continuously in focus, rather than just processes and efficiency (doing things right). In addition, treating parties with respect and professionalism has been a key strategic goal for many years. With an increasingly stable workforce with a record low turnover in 2016, case handlers are capable of issuing high-quality decisions that are upheld on appeal. With measures to enhance the authority's independence enacted - for example, the removal of the government's power to reverse the authority's merger decision on public interest considerations; and the establishment of an independent competition complaints board - I believe the deterrent effects of our enforcement will be enhanced further.

Finally, in the future we will take a more proactive approach to discover cartels. In this regard, it can be mentioned that the authority has started a project on uncovering cartels ex officio, benefiting from active participation in the European Competition Network cartel working group's project on how competition authorities deal with informants. International networks are proving to be more and more important in daily case handling, especially with a legal framework that is now practically fully harmonised with EU law.

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