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On 1 January 2014, the revised Norwegian Competition Act (the Act) entered into force. The main features of the amendments are a considerable increase in filing thresholds and a more flexible merger procedure. The revision also introduces a settlement procedure in antitrust cases, an improved regulation on leniency and stronger safeguards for companies during investigations. The result is a national legislation in closer harmonisation with the EU rules.
The Act applies to anti-competitive behaviour having an effect or liable to have an effect in Norway. Section 10 of the Act prohibits all ‘agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition’.
Section 10 of the Act has been modelled on article 53 EEA, which corresponds to article 101 TFEU. Equally, section 11 of the Act, relating to abuse of dominance, has been modelled on article 54 EEA, which corresponds to article 102 TFEU. Articles 53 and 54 of the EEA Agreement form part of national Norwegian law and may be enforced in Norwegian courts. However, in order for the prohibitions in articles 53 and 54 to apply, trade between the contracting parties to the EEA Agreement must be affected.
The Norwegian Competition Authority (NCA) has been given the power to enforce the Act. However, as in several other countries, cartels in Norway may also be investigated and sanctioned by the prosecuting authorities under criminal rules. As for the EEA Agreement, the EFTA Surveillance Authority (ESA) supervises and enforces the competition rules of the EEA agreement. However, the NCA is given the authority to enforce article 53 and 54 of the EEA agreement when applying the antitrust rules under the Act.
Following the adoption of the Act in 2004, the NCA has made few significant decisions under section 10 of the Act. The decisions have generally concerned smaller companies and the fines have been of a limited size. However, in March 2013, the NCA issued a decision imposing a fine of 140 million kroner on Sweden-based construction company NCC for its alleged participation in an asphalt cartel. Norwegian construction company Veidekke, which had applied for leniency, was granted full immunity and thus escaped a fine of 220 million kroner.
According to the decision of the NCA, the cooperation between Veidekke and NCC concerned bids for asphalt paving contracts in the counties of North and South Trøndelag in central Norway, and took place between 2005 and 2008. During that period, the two companies allegedly shared contracts advertised by Statens Vegvesen (Norway’s public road administration) and by the city of Trondheim.
In assessing the amount of the fine, the NCA considered several factors, including the value of the contracts affected by the alleged cartel and the gravity and duration of the infringement. The fine is the highest ever imposed by the NCA. However, participation in a cartel may lead to fines of up to 10 per cent of the global turnover of the companies involved, and the fine is significantly below this level.
In February 2014, the NCC case was tried before the city court in Oslo. The court upheld the decision with regards to the Norwegian subsidiary, but did not find sufficient grounds for holding the Swedish holding company liable for the infringement. The court generally disagreed with the NCA on several issues in the application of the method of setting of fines, such as the size of the relevant basic amount. The court also considered basic principles of proportionality and harmonisation with Norwegian criminal law to be relevant factors not taken into account by the NCA. Moreover, the court pointed out that the NCA had not investigated the role of the management of the company, which could have been a relevant aggravating circumstance. The court concluded that a fine of 40 million kroner was appropriate – 100 million kroner less than the fine set by the NCA. Although the NCA has appealed, the court ruling sends a signal that the NCA has been too eager in raising the level of fines.
In April 2013, the NCA granted its first interim decision suspending a cooperation agreement on joint distribution and purchase between two grocery chains. As a result of the agreement, one party would rely on the other for approximately 60 per cent of its purchases and discontinue its wholesale unit in large parts of Norway.
The Norwegian grocery market consists of four large chains with vertically integrated wholesale and retail activities. The NCA was concerned that the cooperation agreement would weaken competition between the grocery chains and increase the risk of exercise of market power, either through coordination between the chains or as a result of unilateral action by a single entity. The NCA was also concerned about long-term harm to supplier markets – it argued that competition could be permanently and irreparably harmed if the cooperation proceeded while the NCA investigated the case.
The parties appealed to the Ministry of Government Administration, Reform and Church Affairs (the Ministry), which partially upheld the decision in July 2013. During the appeals procedure, the parties offered to cooperate only on purchase, not distribution. The Ministry found this to be a sufficient remedy and allowed the parties to cooperate on purchase until the NCA would adopt its final decision. In February 2014, the NCA issued a statement of objections, upholding the full prohibition of the agreement, including a ban of the joint purchase element of the cooperation. As a matter of background information, the two other grocery chains in December 2013 made it official that they intend to enter into a similar cooperation if the NCA would allow the others to cooperate. There has been speculation in the media that this intention to cooperate is a mere tactical measure to encourage the NCA to prohibit the cooperation of their competitors. The NCA, however, claims that this potential cooperation has not affected the outcome of the case.
The revised Act provides some improvements to the rights of the suspected companies during investigations. The NCA can only seize copies of documents during inspections, as opposed to under the old regime when the NCA could confiscate originals. This brings the Norwegian procedure for inspections closer to the EU rules. The revised Act further grants the company the right to receive copies of all seized documents. As a consequence, the companies will now have full information about the evidence of the case, as the NCA’s practice used to be restrictive towards giving access to file in the first phase of an investigation. The NCA, however, still has a wide-ranging authority to mirror computers and databases. As mirroring will normally result in a very large number of documents being part of the case material, the companies will still face challenges in preparing their defence until the NCA has issued a statement of objections. In order to safeguard legal professional privilege, the companies are now given the right to be present when the NCA opens the seized electronic documents.
As a breach of the prohibition against agreements restrictive to competition in section 10 of the Act can be criminally sanctioned irrespective of an application for leniency for civil fines imposed by the NCA, the Norwegian leniency programme has had a slow start. It was therefore no surprise that the leniency rules introduced in Norway in 2004 were not successful until assurances were given in 2008 that a company applying for leniency was in practice very unlikely to be criminally prosecuted. The NCA reportedly received 14 applications between 2008 and 2012.
However, Norway’s current leniency rules provide no absolute protection against criminal prosecution for the company’s management. Employees and board members of a company involved in a cartel may risk criminal prosecution, and those individuals may also be involved in the company’s decision as to whether a leniency application should be filed or not. A risk of imprisonment might function as a disincentive to approach the authorities.
The initial report from the committee appointed to review the Act proposed to extend the leniency rules to cover all types of criminal sanctions. However, the revised Act does not provide a general protection against criminal prosecution for the management in a company. The rationale is that such a protection would conflict with fundamental principles of Norwegian criminal law. Nevertheless, a provision where public prosecution of violation of the competition rules is conditioned upon the NCA’s petition has been adopted. In reality, this merely constitutes a formalisation of the procedure already applied.
In addition, criminal sanctions for companies have been abolished in the revised Act in their entirety, as such sanctions are considered redundant next to administrative fines. Criminal sanctions on companies have not been imposed since the adoption of the Act in 2004, and the level of administrative fines imposed have also been significantly higher than for criminal penalties.
The revised Act also guarantees non-disclosure of applications for leniency. This provision was included to prevent the risk of private litigation being a disincentive to potential leniency applicants. In addition, according to the Civil Procedure Act, the application cannot be used as evidence in a civil lawsuit.
In addition to amendments in the leniency regime, the Act now formalises a procedure relating to the NCA’s ability to enter into settlement decisions. The opportunity to adopt settlement decisions allows the NCA to use less time on procedures relating to drafting a decision, possible complaints from the involved companies and so on. The NCA previously closed a couple of cases on the basis that the parties had altered their agreements or practice. Such informal decisions not to institute legal proceedings raise a number of legal questions, particularly relating to the legal effect of the settlement.
The Act now includes a provision in section 12, paragraph 3, corresponding to article 9 of Regulation 1/2003, giving the NCA authority to negotiate a formal settlement with the parties. This implies that the NCA can close the case provided the parties commit to comply with certain conditions preventing or mitigating the anti-competitive concerns. As seen in the corresponding practice of the Commission in article 9 cases, settlement decisions are most suitable for fixing current and future competition problems and will hardly be applied for past infringements or in hard-core cases. The new procedure has still not been applied, but is ‘marketed’ by the NCA in pending cases. Thus, it can be expected to play an important part in the future decision making policy of the NCA.
Abuse of a dominant position
The Act also applies to abusive behaviour by dominant undertakings. Section 11 of the Act states that ‘any abuse by one or more undertakings of a dominant position is prohibited’. As mentioned at the outset, section 11 of the Act corresponds in essence to articles 54 EEA and 102 TFEU. Even though the NCA has not published a statement of objections or issued any decisions under section 11 since 2007, such cases are currently being investigated, showing that the NCA gives priority to enforcing the prohibition.
In October 2013, the NCA carried out an unannounced inspection of several players in the market for electro installations in the Eastern part of Norway. The case relates to possible infringement of section 10 of the Act. No statement of objections has been issued yet.
In April 2014, the NCA carried out an unannounced inspection in the publishing sector relating to the market for distribution of books and magazines to the mass market (grocery stores, kiosks and petrol stations). This is the first publicly known inspection after the revised Act. As part of the new regime, the NCA has to provide more information to the parties about the nature of the suspected infringement. The NCA has informed that the suspicion regards a possible refusal to deal in the market for the distribution of books and magazines to the mass market. From the media, it has later been known that the involved publishers are suspected to have been colluding to deny selling books to a distribution company which is a competitor to the publishers’ own distribution service.
The NCA issued three guidance papers in the past year:
- The guidance on project cooperation covers ‘cooperation between undertakings in isolated projects’, as opposed to permanent cooperation extensively covered in the Commission guidelines. The guidance replaces a former guidance on the same issue, and deals with both vertical and horizontal cooperation. The NCA distinguishes between cases in which both undertakings could compete for the contract in question on individual basis, and cooperation cases in which only one of the undertakings could carry out the project on their own. This distinction does not necessarily coincide with whether the companies are regarded as competitors on a general basis. In the first instance, the cooperation would normally be regarded as a restriction by object, whereas the latter case calls for an effects analysis. If none of the companies could carry out the project on their own, the cooperation would normally not restrict competition, save in the case of spill-over effects resulting from exchange of sensitive information. Another important parameter is whether the cooperation results in one or more offers, as different issues may prove relevant to consider. The public consultation of the draft guidance resulted in a fair amount of criticism that the NCA had widened the object-box beyond the scope as laid down in case law, resulting in a chilling effect on pro-competitive cooperation. However, the final version strikes a better balance between object and effects cases.
- The guidance on resale price maintenance (RPM) is basically a summary of the Commission guidelines followed by a statement about which cases the NCA will prioritise. Although RPM is considered a restriction by object, the NCA will focus on cases in which RPM may have horizontal effects, and typically in concentrated markets with frequent use of RPM. Moreover, the NCA states that a restriction only of intra-brand competition is less likely to harm consumers, and such cases will normally not be given priority.
- The guidance on information exchange is more or less a summary of the Commission guidelines. The guidance should, however, be seen in light of the NCA’s work related to the fuel market, which it has analysed extensively for some years, without being able to come up with an antitrust case. The guidance is directly addressed to the fuel market, although it only contains notes on general competition law on information exchange, and is an example of the NCA’s advocacy work.
A merger or acquisition, as well as other transactions deemed to constitute a concentration, require notification to the NCA. However, the Norwegian merger control regime is currently only partially harmonised with the merger control rules in the EU. Section 17 of the Act, stating what types of transactions are considered concentrations, fully corresponds to the EU Merger Regulation. However, sections 16 and 18 of the Act, stating the criteria for intervening against the concentration and the procedural rules for notifying the concentration respectively, have not been harmonised with the EU.
Before the revision, Norway stood out as one of the European countries with the lowest turnover thresholds for notifications of mergers and acquisitions. This imposed a regulatory burden not only on Norwegian companies, but also on foreign companies with only limited sales to Norway. All concentrations had be notified to the NCA if each of at least two parties to the transaction had a group turnover in Norway exceeding 20 million kroner, provided that the combined group turnover such parties derived in Norway exceeded 50 million kroner. Sales to customers in Norway by foreign companies are normally treated as turnover in Norway.
However, the revised Act has significantly increased the filing thresholds. In the case of an acquisition of a company, the new thresholds mean that notification in Norway will be required if each of at least two parties to the transaction has a group turnover in Norway exceeding 100 million kroner, provided the combined group turnover such parties derive in Norway exceeds 1 billion kroner. In addition, certain amendments have been made concerning the entities to be included in the calculation of the group turnover of the parties. These amendments are harmonised with the principles for turnover calculation that apply under the EU Merger Regulation.
The revised thresholds are comparable to the thresholds in Sweden and Denmark. Based on an analysis of notifications received in recent years, it is expected that the increased thresholds will reduce the number of notifications in Norway by 70 per cent. According to the NCA’s experience so far, the revision has not significantly decreased their mergers workload. Whether this is a ‘breaking-in’ cost for the new rules or permanent remains to be seen.
Before the revision, a concentration that required notification to the NCA had to be submitted by means of a ‘standardised notification’. A standardised notification was normally fairly short, providing essential information about the parties and the concentration. If the NCA decided to examine the case in further detail, the NCA would, within 15 working days of receipt of the standardised notification, order the undertakings to submit a ‘complete notification’. In such cases, the undertakings to which the order applied had to provide additional and more detailed information about the transaction.
The revised Act contains procedural rules that are more similar to the regime in the EU, abolishing the system of two separate notifications. This means that only one notification will be submitted, leaving the NCA with a 25-working-day deadline before they must decide whether to proceed to Phase II. As only one notification will be handed in, the content requirements are more comprehensive than for the standardised notification, requiring more detailed information about the market and the undertakings concerned. Moreover, the NCA encourages pre-notification dialogue in order to keep the formal phase of the procedure as efficient as possible. For certain uncomplicated transactions, it is also possible to submit a ‘simplified notification’, similar to the Short Form CO in the EU, although the information requirements are generally not as comprehensive as in the EU. It should be noted that the clock will not start until the notifying parties have submitted a reasoned public version of the notification, a requirement that the NCA enforces strictly.
The NCA has a practice of sanctioning failure to notify mergers or breach of the standstill provision. In December 2013, three companies received fines of between 200,000 and 350,000 kroner, which represent the typical level of fines for unintentional breaches in non-problematic mergers. A quite different fine level can be seen in the extraordinary case decided in February 2014, in which the fine was set to remarkably 25 million kroner. The case involves the takeover of lease contracts for 13 grocery shops between the same grocery chains that have agreed to cooperate on purchase and distribution, as mentioned above under recent cases. The NCA took the view that the acquiring company had deliberately implemented the transaction, although the NCA had ordered for a notification.
The NCA also retains the power to intervene against transactions where the parties’ turnover is below the thresholds, provided that the NCA within three months after the final agreement or acquisition of control orders for a notification of the transaction. Such an order will primarily take place in transactions where the NCA fears competition will be limited after the completion of the transaction. The threshold for imposing such a duty to notify is significantly lower than for the NCA to intervene against a transaction. The NCA monitors the market for candidate transactions, and has established a special tip-off telephone line for this purpose. This is in line with the long-standing policy of the NCA to pursue mergers in narrow and local geographic markets. It should be noted that the NCA also advocated against the abolishment of the standardised notification in the hearing of the revision, as it feared competition in narrow markets could suffer with the increased thresholds.
The NCA has already ordered for a notification in one case which involved horizontally overlapping activities. According to the decision, the NCA disagreed with the parties’ definition of the relevant market and concluded that the transaction ‘may affect competition’. This shows that the NCA is determined to enforce the merger control rules in transactions below the filing thresholds and not hesitate to order for notification if competition can be affected by the merger. Moreover, the NCA has imposed a simple obligation to inform the NCA of any transaction done by 10 selected large Norwegian companies.
Thus, in transactions where the filing thresholds are not fulfilled, it is important for the parties to make a separate assessment on whether to file voluntarily to the NCA.
A new feature of the revised Act is that the NCA has to issue reasoned decisions when clearing a case in Phase II. The first decision from January 2014 concerned a three-to-two merger in the security services market. Although the decision is short, the NCA for the first time provides insights in their reasoning in favour of approving a merger. It is expected that the coming cases will represent some guidance as to when companies can expect a merger to be approved.
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