Competition Economics Handbook 2019


Copenhagen Economics

Advanced economics analysis continues to play a large role in Norwegian Competition Authority (NCA) decision-making, as its Director-General, Lars Sörgard, previously a full-time professor of economics, enters his third year in office. Following a judgment by the Supreme Court, lawyers find it increasingly more complex to provide legal guidance for companies that are considering joint bidding in public procurements.

The competition law firms interviewed, including Kvale, Bahr, Arntzen de Besche, Thommessen and Wikborg Rein, confirm that the importance of economic analysis in the assessments by the NCA is as strong as last year. Both domestic and international economic consultancies are active in the market, performing a great variety of tasks, ranging from self-standing pieces of economics analysis to direct dialogue with case handlers at the NCA.

In the various areas of legal advice regarding competition law, mergers stand out as the most significant for law firms. This observation also holds for the demand for economic advice and analysis performed by consultants. In almost every filed merger of significance, the Katz–Shapiro ‘upward pricing pressure’ (UPP) screening test is applied. Hence, the analytical approach towards mergers is today much more focused on closeness of competition than on market definition, a development that has now been going on for a period of years.

Some lawyers express concern that such tests are given too much weight in the position taken by the NCA, and that the methodological limitations of such screens are not taken seriously enough. Nevertheless, lawyers also agree that such screens may be useful in quickly identifying potential concerns in proposed transactions. Parties sometimes perform their own UPP tests before deciding whether to proceed with a merger.

There were four mergers that saw an in-depth investigation by the NCA. One of these, the proposed acquisition of Norlines by Eimskip in the market of transportation of frozen fish to Europe, was abandoned by the parties after the NCA raised serious concerns of the effects on competition.

The remaining three mergers that were investigated in-depth were eventually cleared. In one of these, the acquisition by Telia Company AB of Phonero AS, efficiencies were crucial and significant enough to balance out the identified negative effects on competition, the NCA argued in its decision. Although the efficiencies in this particular merger were very case-specific, some lawyers regard the decision as an indication that efficiency-defence in mergers may have a little more impact today than it used to have.

In 2017, four book publishers were fined 30 million kroner for agreeing to collectively boycott a certain distributor. In another case, six companies in the electric installation equipment market were fined 18 million kroner for having cooperated in a joint tender in a public procurement. With the exception of 2013, the total fines awarded by NCA in a single year has never been larger.

The NCA found in a recent survey that one out of three companies believe that anticompetitive agreements, in particular price coordination, are common in their industry. Possibly inspired by this finding, the NCA conducted three dawn raids during the year, up from only one dawn raid the year before. The markets for beer, alarm systems and waste management were involved. The initiatives received considerable attention among lawyers and in the media. As yet, the NCA has not communicated publicly the results of these investigations.

The need for legal advice in the area of competition in Norway is considerable, says Sörgard in the NCA’s 2017 annual report. This is particularly so after the Supreme Court judgment in the Ski-Taxi case, in which a decision from 2011 by the NCA was upheld.

In the judgment, the cooperation between two taxi companies in a public tender was considered to be anticompetitive and a violation of competition law. Following the decision, law firms have noticed a dramatic increase in the demand for advice on the legal boundaries of consortia in public procurements. There is a clear tendency among companies to play safe, ie, to abstain from joint bidding and consortia unless the cooperation is deemed fully compliant with antitrust rules. Clear guidance in this area is, however, more difficult to provide given this recent twist of Norwegian case law, some lawyers conclude.

Compliance with antitrust rules is an important advisory service for most law firms, and is normally part of a package of several compliance areas, of which competition is an integral part.

The famous Intel judgment from the European competition scene has not as yet had any clear consequence on the advice given, say most of the lawyers interviewed.

In the area of abuse of dominance, the Telenor case stands out. On the 21 June, the NCA fined Telenor a 788 million kroner fine for raising barriers for the development of the next generation of mobile network in Norway. The alleged abuse materialised during 2010 – 2014 and the case is expected to continue for some years.

The leniency programme is active, and companies appears to be of the view that it is functioning well. One may then ask why the number of leniency applications is not higher, given their prominence according to the NCA study mentioned above. Some lawyers propose that companies may have an inclination to exaggerate the existence of anticompetitive conduct in the market, and that the real number is considerably lower.

In addition to an active enforcement agenda, the NCA is also very active in advocacy. There have been several public hearings, initiated by the central government, on the regulation and functioning of, for example, the taxi and food retail markets. All lawyers expect the NCA to be as active in the coming years as they were in 2017 and in the beginning of 2018.