Norway: economist perspective
The Norwegian Competition Authority’s (NCA) focus on economic analysis and the level of the fines imposed by the authority have led to high demand for advanced economic analysis and economic advice in competition investigations in Norway.
Lars Sørgard has, from the very beginning of his appointment as director general of the NCA, given economic analysis a prominent role and a large influence over the authority’s decisions and prioritisations. Although economic analysis has a central role in the NCA’s investigations, all recent in-depth investigations brought forward by the authority have been formulated as ‘by object’ infringements, excluding any thorough effects analysis.
In this article, we discuss the use of competition economics in Norway. The article is based on interviews with the law firms Arntzen de Besche, BAHR, Kvale, Selmer, Thommessen, Wiersholm, and Wikborg Rein conducted in June 2021.
A general view among Norwegian lawyers is that the development of the NCA’s law enforcement has changed the competition landscape in Norway and increased the demand for legal and economic advice. The NCA’s investigations have become more comprehensive, both in terms of scope and depth. This, in combination with the very large fines imposed on competition law infringements, has led to an increased demand for legal advice, which in turn has increased the demand for advanced economic advice. Cases that previously only involved legal advisers now also include advanced economic advice throughout the NCA’s investigations.
The trend of competition issues becoming a top priority in companies’ compliance work, seen in previous years, now appears to have manifested itself and is here to stay. Compliance with antitrust rules has therefore become an important advisory service for the majority of the interviewed law firms.
Although the covid-19 pandemic has imposed comprehensive restrictions, which have had a large impact on the Norwegian economy, the development of the Norwegian competition landscape has followed the same pattern as previous years. After a short slowdown period with relatively low activity in the Norwegian market in March and April 2020, the activity picked up again quite rapidly in May and June 2020 and has remained at a high level since then.
Mergers remain the core area for economic advice
As in previous years, advice related to mergers and merger control remains the core service provided by the interviewed law firms, constituting about half of the competition-related advice they provide.
Competition economics also has its most pronounced role in merger cases. The lawyers generally agree that the development of the NCA’s case handling has increased the complexity of merger investigations. This has led to the larger involvement of economists in the filing process. Larger merger filings without economists involved remain unlikely. In addition, the lawyers see the need for economic analysis and advice in the early preparations of merger cases and the pre-notification phase.
During the past year, the NCA decided to intervene against four proposed transactions:
- Schibsted’s acquisition of Nettbil was prohibited by the NCA. The Competition Appeals Board upheld the decision, but Schibsted have now taken the case to court.
- Sport 1’s acquisition of Gresvig was cleared by the NCA after a thorough investigation.
- The merger between Altia and Arcus was cleared with commitments by the NCA after a thorough investigation.
- In Bonnier’s proposed acquisition of Strawberry Publishing, the parties decided to change the distribution of ownership after the NCA had warned the parties that it was considering blocking the merger. However, after this change, Bonnier sold its stake in the publisher Cappelen Damm, which was the main concern of the NCA’s objections, and is planning once again to acquire a majority stake in Strawberry Publishing.
Among these mergers, all interviewed lawyers point out Schibsted’s acquisition of Nettbil as the most interesting case because it contains a few important factors that may be worth taking into consideration when providing merger-related advice in Norway in the future.
First, the NCA considered the merger to be problematic because Schibsted owns the digital marketplace Finn, a competitor to the acquired firm Nettbil, which is a digital marketplace for sales of used cars. Although the merger (in terms of size) was relatively small, the NCA deemed the merger to be harmful to competition. What is new about this case is that the NCA focused on the closeness of competition between the parties without clearly defining a relevant market for the sale of used cars. The NCA’s initial decision to block the merger was appealed by the parties, but the decision was upheld by the Competition Appeals Board. Many of the interviewed lawyers raise the question of whether the competition assessment of mergers that take place in a digital environment should differ from that taking place in non-digital mergers.
The NCA has a particular focus on the grocery sector
The main ongoing investigations by the NCA follow its mandate to investigate the competitive conditions within the Norwegian grocery market.
Throughout 2020 and the beginning of 2021, the NCA investigated a case of alleged price discrimination, which started in 2019. Through surveys, the NCA found that the largest grocery chain was consistently offered lower prices from its suppliers than the two smaller competitors. The NCA suspected that this could harm competition and consumers since large price differences may inflate prices and hinder market entry. After more than one year of investigation, the NCA closed the case in June 2021 without recourse as it could not substantiate that the price discrimination distorted competition and harmed consumers. At the same time, the NCA announced that it plans to continue surveying wholesale prices in the grocery sector in the coming years.
The NCA also issued a Statement of Objections in December 2020, warning that it is considering imposing fines totalling 21 billion kroner on the country’s three largest grocery chains. The authority’s preliminary assessment is that the three grocery chains have cooperated in a way that may have led to higher grocery prices. The cooperation concerns the chains’ so-called price hunting practices, through which they collect product prices from competing grocery chains’ stores.
In the spring of 2021, the NCA sent out a new survey to the wholesalers and retailers regarding the functioning of the fruit and vegetable market. The interviewed lawyers agree that, given the NCA’s results as an enforcer and as a driving force for competition in the grocery market, this is likely to be just the first in a row of investigations in these markets.
The NCA’s prioritisations are considered both relevant and motivated
In general, the interviewed lawyers agree that the NCA handles cases well, especially concerning mergers. Although merger filings have become more complex over the years, the NCA remains efficient.
The lawyers also agree that when the merging parties present their own analyses during the pre-notification phase, they are generally appreciated by the NCA, typically resulting in faster decisions. Nevertheless, the lawyers generally agree that the NCA could be more transparent in its case handling.
While the NCA is generally perceived as competent, reasonable and pragmatic in simpler cases, there are a few topics where lawyers are more sceptical of the NCA’s activities. First, lawyers question whether the level of fines is appropriate or if the same effect could be achieved under a regime with lower fines. Second, lawyers are also sceptical of the NCA’s active media communication before verdicts, which brings negative publicity to the company involved, regardless of whether it is convicted or not. Finally, the lawyers question whether the power between the economic and legal forces within the authority is appropriately balanced or whether the economists are given too much freedom within the operations of the authority.
Nevertheless, the Norwegian lawyers generally agree that the NCA’s priorities and enforcement of competition law are continually effective and have a deterrent effect for competition law infringements.
The future: economic analysis will remain an integral part of the competition landscape in Norway
For many years, the NCA’s prominent focus on competition economics has made economic advice pivotal in developing competition cases. This has increased the demand for high-quality economic advice in most competition cases.
The NCA has brought the level of complexity of its analyses to a point where legal advice must often be supplemented with advanced economic analysis to give the best possible advice to clients and to withstand the scrutiny of the NCA and the courts. This development has led to closer cooperation between economists and lawyers, and has assisted in cases that traditionally have been dealt with solely from a legal angle.
The lawyers generally believe that this trend will remain as long as the NCA maintains its high level of enforcement and continues to impose substantial competition fines, which have had a clear deterrent effect on the Norwegian market.
A final remark, made by most of the lawyers, is that the first class action (with third-party funding) for damages following a competition law violation has been filed in Norway. The lawyers generally believe that private enforcement will also henceforth have a limited role in the Norwegian market. Still, all of them follow the development of the case closely since no corresponding case has been tested by Norwegian courts before.