An active year
For the Norwegian Competition Authority (NCA), 2016 was a particularly active year, with enforcement covering the whole spectrum of anticompetitive behaviour in various markets.
Notably, a statement of objections was sent to Telenor in November for possible abuse of a dominant position. Telenor was informed that we consider imposing a fine of 906 million kroner. Our view is that Telenor abused its dominant position by engaging in two types of conduct that impeded the entry of a third competing mobile network. The first possible abuse concerns Telenor's conditions for giving Network Norway access to its network when the third network was under construction. These conditions reduced the profitability of building the third network. The second abuse concerns the fact that Telenor entered exclusive supply agreements with four mobile operators, reducing the ability of the third network to acquire customers. If there eventually is a final decision with such a fine, this will be a record high for the Authority compared to fines in earlier cases.
Moreover, three mergers were banned in 2016 in diverse sectors: the ferry market, the forestry industry and the pizza market. Two of these decisions were appealed, but upheld. In the ferry market, a tender shortly after our decision clearly illustrates the effects of antitrust. The bids showed a difference of over 1 billion kroner between the two competitors that otherwise would have merged. Most probably ferry passengers would have had to pay for at least some of these extra costs, by means of more expensive tickets if the merger had been approved.
Relating to cartels, in October 2016 two companies were fined for bid-rigging in a tender on sewage services for the municipality of Bergen. This is the most recent of many bid-rigging decisions the authority has had over the past five years, and it shows the Authority's strong efforts in fighting bid-rigging. Moreover, in June 2016 the NCA sent a Statement of Objections to four book publishers with fines totaling 23 million kroner. In our view our preliminary findings indicate a collective boycott of Interpress, as well as exchange of sensitive information, and this is a violation of section 10 in the Competition Act. The collective boycott implied that the publishers, acting together, did not distribute books to the mass market through Interpress.
We have also been active on advocacy, especially focusing on regulations harming competition. Notable examples include advocating for deregulation of the taxi market. The Authority has in addition aimed its advocacy efforts 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 sector and the book market. The Authority prioritises the 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 also been active in media explaining the importance of a solid enforcement of competition law, and the direct and indirect effects for consumers.
Managing to keep up the pressure in investigations while at the same time dealing with many complex merger cases must be seen in connection with our work to enhance efficiency and quality in investigations, streamlining case handling procedures and clarifying internal responsibilities. In addition, we have in a systematic way built competence and capacity to use quantitative methods in merger control throughout the market divisions using our expert economists. Having a stable, competent workforce has definitely been one of the main reasons behind the high activity level and positive results. Dealing effectively and professionally with the whole spectrum of our cases is an important part of our strategic goal to treat the parties with respect.
Success on appeals
One of the strategic goals of the Authority is to have case handling at a high international professional level. That we have succeeded in this respect is for example reflected in the fact that all our decisions that have been tested in the courts and appealed to the Ministry the last few years have been confirmed. More specifically, in 2016, two decisions in merger cases were appealed to the Ministry (in the pizza market and the forestry market). In both cases, the Authority's decisions were upheld. Decisions where the NCA imposes fines may only be appealed to the courts. No decisions were handled in court in 2016, but one will be handled by the Supreme Court in 2017.
Active advocacy efforts
In addition to direct enforcement, the NCA has also been active in the area of market studies and advocacy.
In a joint Nordic report on the waste management markets in a circular economy perspective, the Nordic authorities proposed several measures to improve competition, ie, enhanced use of tendering in order to cut costs and stimulate innovation as well as promoting competition as much as possible in the various parts of the circular economy chain.
The Authority also, under a commission from the Ministry of Trade, Industry and Fisheries, produced a report with a general description of the conditions of competition in the petroleum industry and an assessment of how competition policy instruments can be used to counteract the harmful effects of buyer power. The background for the commission is the significant drop in oil prices in recent years. This has imposed changes and cost cutting that have particularly affected the supply sector to the petroleum industry. However, the Authority concludes that it is difficult to see how the use of purchasing power could limit competition and harm consumers in this sector.
Another important advocacy area for the Authority is to consider whether there are reasons for concerns related to consequences for competition in proposed changes in laws and regulations in public hearings. The Authority found reason to submit answers to 10 hearings to various ministries and authorities in 2016. More specifically, the following advocacy initiatives can be mentioned:
The Authority made an evaluation of a proposition on market balancing in the meat and egg market. The Authority argued against the proposed cooperation on market balancing between the large meat cooperative Nortura and the trade association of independent meat processors in these markets. The final design of the regulation is pending the outcome of the political process.
The Authority has encouraged local authorities to open up for private actors in the market of airport parking. Near Stavanger Airport, the municipality and provincial government have subsequently adapted land use planning in order to let a new competitor enter the market.
A new price portal for price comparison in the retail grocery market will be launched by the National Consumer Council. Due to objections from the Competition Authority, the portal is being developed in a way that prevents the three main chains in the market from using the portal to coordinate on prices.
The Authority has recommended to change regulations in the banking sector. National capital requirements for Norwegian banks are stricter than requirements for foreign banks operating in Norway, leading to unfair competition. In the Authority's view, a harmonisation with European regulation will increase competition in the banking sector.
To support policy goals related to the publishing and reading of books, the book industry is exempt from the prohibition regulations in section 10 (agreements by undertakings that restrict competition) of the Act by regulation. Thus, the use of RPM (fixed book prices) are allowed. The Authority has advocated against this on several occasions over the years. In 2016, the Authority again objected to the prolonged exemption of competition law for books. The exemption was prolonged until 2018.
In a hearing statement, the Authority also proposed that the central government analysed more closely the competition effects of an extra fee for air traffic passengers before introduction. In the Authority's view, the fee might lead to unequal conditions for airlines. The hearing statement received unpresented attention in the media. However, the fee was introduced as planned.
Finally, it can be mentioned that the Authority repeatedly has advocated for the deregulation of the heavily regulated taxi market. In February 2017, a committee appointed by the government to analyse the impact of the sharing economy followed up with proposals in the same direction, inter alia, based on input from the Authority.
To enhance the deterrent effects of our activities, the NCA has worked strategically throughout 2016 to maximise visibility, resulting in almost 4,000 instances where our decisions were referred to in the media. This results from active use of our website, www.kt.no; maintaining good contact with the central media; and a media strategy adapted to each decision and advocacy activity. In addition, repeated media training for key employees has resulted in professional media appearances with clear messages reflecting the NCA's important tasks.
Revisions in the competition law
New amendments to the Competition Act were enacted in 2016. One of the important developments is that an independent competition complaints board will be established as a measure to enhance the NCA's independence. At the same time, the possibility to reverse the NCA's decisions based on public interest considerations will be abolished.
The background is as follows: in Norway, the NCA's independence in individual cases is secured by law. Even though the Authority may be ordered to deal with a case, it cannot be instructed as to decisions in individual cases. Nevertheless, the Ministry for Industry, Trade and Fisheries is the appellate body for the NCA's merger decisions. In addition, the NCA's decisions to intervene in mergers could be reversed by the government based on public interest considerations.
The new amendments imply that the possibility to reverse the NCA's decisions based on public interest considerations will be abolished. As an additional measure to enhance the NCA's independence, an independent competition complaints board will be established. The board will be the appellate body for all decisions by the NCA, in mergers as well as cartel and abuse of dominance cases.
In addition, the SLC test for intervention in mergers will be replaced. According to the new amendments, the NCA shall prohibit concentrations that will significantly impede effective competition, in particular as a result of the strengthening of a dominant positon (the Significant Impediment to Effective Competition (SIEC) test). The new standard harmonises the Norwegian merger control review standard with the EU/EEA merger control rules, and will be interpreted in line with EU precedents. One consequence of the new and EU-harmonised standard is a shift in the role of the evaluation of efficiencies. Following the amendment, the NCA can no longer take into account all relevant social economic gains, but focus on the pro-competitive effects which are likely to benefit consumers.
The changes in merger control were decided by the Parliament in May 2016, and came into force in July 2016. The independent competition complaint board came into force in April 2017.
It can also be mentioned that in 2016, the Authority became the only authority that controls mergers in the media industry. Before 2016, mergers in the media industry also had to be approved by the Norwegian Media Authority.
Funding for competition research
The NCA has been given the responsibility to allocate funds for research in competition law and economics. The purpose of the grants is to strengthen competition policy research and facilitate knowledge sharing between competition authorities and academia. Educational and research institutions, enterprises and independent individuals can apply for funding. Starting in 2015, the Authority has thus far allocated funds after three application rounds. Currently, there are 10 running projects or activities with funding. After the application round in 2016, five new projects or activities received funding. These projects will improve the knowledge basis for competition law enforcement, and contribute to strengthen the ties between the academic community and the competition authority.
The NCA moved to new offices in 2016. The relocation has been used as a strategic opportunity to support efficient cooperation between case handlers in enforcement (ie, by designing good spatial solutions for work on cases by project teams).
The NCA is pleased to note that case-handling efficiency in mergers and antitrust investigations has improved. Notified mergers are cleared more swiftly if there is no reason for concerns. The most recent law revisions enacted, with ia. the introduction of settlement procedures for cartels, will expectedly enhance efficiency in case handling even further.
Efficient and effective enforcement, advocacy and high visibility will continue to be key priorities for the Authority.
More efficient case handling will enhance the direct and indirect effects of enforcement and competition policy. However, in addition to working towards making enforcement as efficient as possible (ie, to do things right), it is equally important to be effective (ie, to do the right things). This implies a conscientious prioritising of cases to which scarce resources will be allocated. Thus, to make the most of our limited resources the Authority routinely discuss priorities at the different levels of the organisation.
One of the sectors that will be prioritised, and where the authority will be particularly active in the future, is the grocery market. The NCA and the ministry have jointly announced several measures. For example, barriers to entry will be investigated as well as the nature of competition between the existing grocery chains. This will support the overall goal to increase competition to the benefit of consumers in this highly concentrated sector.
In 2017, the Authority celebrates its 100th anniversary. Over these 100 years, we have witnessed a shift from a focus on regulation to a reality where the importance of competition has clear support. Nevertheless, even though the benefits of competition are clear, the mechanisms need continuous care to work optimally. The deterrent effects of a competition law are enhanced by active enforcement, significant fines and criminal sanctions against individuals involved in violations of the law. To enhance the deterrent effects by increasing probability for detection, we have initiated a project for ex officio detection and investigation, ie, the ‘exit project'. A more proactive approach to detect competition crime will expectedly also increase the incentives to apply for leniency.
Moreover, the support for our work cannot be taken for granted. Thus, we will also continuously work to show key stakeholders the effects of the work we do, inter alia, to maximise deterrent effects and to document the effects, and to legitimise the continued use of public resources. Consequently, high visibility and to document effects and benefits of enforcement to consumers, business and society will be a key strategic goal in the future.
In addition to realising the benefits of enforcement, policymakers must also be convinced that competition can be improved by designing laws and regulations in a way that promote competition. The heavily regulated taxi industry and the exemption from the competition law for the fixed book price agreement between publishers and booksellers are notable examples of regulations where our advocacy efforts that will be continued.
Looking back, it is also interesting to note that some examples of exemptions from the competition law has managed to exist almost as long as the Authority. For example, special regulations for the primary industries introduced during the Great Depression continue to exist, effecting competition, growth and innovation negatively not only in that sector, but related sectors as well.