Norway: economist perspective

Konkurransetilsynet - The Norwegian Competition Authority is the enforcement authority for Norway. Read their profile

Economic evidence plays a prominent part in Norwegian Competition Authority (NCA) decisions and prioritisations. The influence of economists on the NCA’s activity is significant and long-established and the persistent focus on economic analysis from the NCA has cemented a large demand for advanced economic analysis advice in Norwegian competition investigations.

In February 2022, Tina Søreide was appointed director-general of the NCA. Søreide took over an active authority from her predecessor Lars Sørgard, in terms of both competition law enforcement and merger control. The NCA has significantly raised fines for competition law infringements to a level that now matches the level of fines imposed by the European Commission. Søreide also inherited a pipeline of high-profile cases from her predecessor, including investigations of competition law infringements and in-depth merger investigations.

This article discusses the use of competition economics in the Norwegian market. It is based on interviews with the law firms Arntzen de Besche, BAHR, Kvale, Thommessen and Wiersholm conducted in June 2022.

More comprehensive investigations and higher fines have led to increased demand for economic analysis

A general view among the lawyers interviewed is that the NCA’s activity and focus on economics have permanently increased the demand for legal and economic advice. For many years now, especially during the past six years, the NCA’s investigations have become more comprehensive, both in terms of scope and depth. This, in combination with the substantial fines imposed on competition law infringements, has made economic analysis an integral part of almost all competition investigations.

The lawyers expect the NCA, under its new director-general, to continue its high degree of intervention and its imposition of substantial fines for anticompetitive behaviour. Several law firms also state that the increased demand for economic analysis motivates them to strengthen their internal expertise by adding in-house economists to their teams. These developments have increased competition in the field of economic advisory.

Mergers remain the core area for economic advice

All law firms interviewed confirmed that mergers remain their core service area, constituting approximately half of the competition-related legal advice they provide. Merger cases are also where competition economics has the most prominent role.

The importance of economic analysis in merger cases continues to increase, mainly due to the increased complexity and comprehensiveness of the NCA’s investigations, where economic analysis often constitutes the core of the investigations. Extensive merger filings without economists involved have become rare and the lawyers see a growing need for economic analysis and advice already in the early preparations for merger cases, such as in the pre-notification phase. This is one of the factors driving the new trend of law firms strengthening their legal teams with in-house economic experts.

Although the NCA’s case handling has become more complex, the lawyers interviewed largely agree that the NCA is efficient in its clearance process despite the increased number of notifications. In 2021, the NCA handled 156 merger notifications, 94 per cent of which were concluded within 25 days.^[1]

Two merger cases from the past year are of particular interest.

The first case is a long-standing one where the Norwegian media house Schibsted in late 2019 announced its plans to acquire Nettbil, a platform provider for advertisement and sales of used cars. The NCA’s main cause of concern is that Schibsted owns the online classified site for used cars, Finn, which competes with Nettbil in the digital market for advertisement and sales of used cars in Norway. The NCA blocked the acquisition in November 2020 and the Competition Appeals Tribunal (CAT) upheld the NCA’s decision in May 2021. Schibsted appealed the CAT’s decision to the Gulating Court of Appeal, making it the first merger case ever to be decided by a Norwegian court.

In March 2022, the Gulating Court of Appeal annulled the prohibition by the NCA and the CAT. The court disagreed with the NCA and the CAT on critical issues such as the market definition and the relevant counterfactual scenario. It concluded that the merger would not restrict competition to the degree claimed by the NCA and the CAT. In addition, the court concluded that both the NCA and the CAT had erred in their assessments of the evidence, particularly concerning their review and interpretation of internal documents. The NCA has appealed the decision to the Supreme Court, which has decided to grant the NCA leave to appeal. This will be the Supreme Court’s first review of a merger case.

The second case is DNB’s acquisition of Sbanken. The NCA raised concerns about this acquisition based on the effects the transaction could have on the market for the distribution of mutual funds to private customers. Following an investigation where the NCA found that the market for mutual funds would be moderately concentrated post-merger (combined market shares of 30-35 per cent), the NCA still moved to block the merger. This was motivated by arguments that the parties were close competitors and that Sbanken was an essential source of innovation in the market. Sbanken’s presence was thus argued to generate competitive pricing dynamics in the market.

DNB appealed the decision to the CAT, which found that DNB and Sbanken are indeed close competitors. Nevertheless, other market players were also found to be close competitors for DNB and Sbanken, and many of these were considered well positioned to replace most or all the competitive pressure exerted by Sbanken. The CAT further concluded that it had not been adequately established that Sbanken stands out from its competitors in terms of innovation and technological development. Therefore, the CAT overturned the NCA’s decision. This was the first time a decision to block an acquisition under the merger control rules has been overturned by the CAT since its establishment in 2017.

Large fines in major antitrust cases

Several of the NCA’s ongoing competition investigations have gone on for years. The core topics include tender cooperation, collective boycott, market sharing and price signalling.

The case that has received the most attention during the past year is an investigation of the Norwegian grocery market. The NCA is investigating an alleged agreement among the three major grocery chains in Norway, Norgesgruppen, Rema 1000 and Coop, not to prevent each other from observing and collecting shelf prices in each other’s stores. Although the case does not concern any direct exchange of information, the NCA argues that the alleged agreement has an anticompetitive object and impedes competition. The NCA issued a statement of objections in December 2020, stating that it is considering imposing fines on the three grocery chains amounting to €20.4 billion in total. These fines are at the level of some of the largest cartel fines issued by the European Commission. The grocery chains replied to the NCA’s statement of objections by the end of February 2022, and the case is still ongoing.

In addition to the NCA’s investigation into the grocery market,^[2] the authority has issued decisions in other prominent cases. Three cases are particularly noteworthy for their contribution to the development of Norwegian competition policy.

• The Supreme Court upheld the NCA’s decision to fine four publishers (Gyldendal, Cappelen Damm, Aschehoug and Schibsted) engaged in a collective boycott of the distributor Interpress, which operates in the national mass-market segment. The parties subject to the fines jointly own the only competitor of the boycotted distributor.
• The Court of Appeal upheld the fine of approximately €78 million in the long-standing abuse of dominance case against Telenor.
• The CAT upheld the NCA’s decision to fine the residential alarm supplier Verisure approximately €76 million for a market-sharing agreement with Sector Alarm.

In the collective boycott case, the Supreme Court found the boycott to be anticompetitive by its very nature based on the two-step procedure proposed in Advocate General Bobek’s opinion in case C-228/18 Budapest Bank. First, the Supreme Court evaluated the content and nature of the agreement and concluded that the category of the agreement in question by its very nature was harmful to competition. Second, the court assessed the economic and legal context of the goods and services affected, the structure of the markets in question, and the parties’ intentions to investigate whether the economic and legal context would change its finding from the first step. The court found that neither the legal nor the economic context warranted any alteration of its initial conclusion. Hence, the court upheld the NCA’s finding that the collective boycott restricted competition.

In both the Telenor^[3] and the Verisure^[4] cases, the penalties have been upheld in the court and appeals system. The NCA’s significant increase in competition law infringement fines can thus be considered to have been accepted by the juridical system, and a new level of fines has been established as practice in Norway.

The NCA’s prioritisations and activity remain relevant and motivated

The law firms interviewed largely agree that the NCA’s case handling is efficient in merger cases. Although merger filings, in general, have become more complex over the years, lawyers agree that the NCA remains efficient under a seemingly heavy workload, given the large number of merger cases currently investigated by the authority. The lawyers find the NCA to be pragmatic, and when the merging parties present analyses during the pre-notification phase, they are generally well received by the NCA. This typically results in faster decisions. However, the lawyers do wish for more transparency in the NCA’s case handling.

The lawyers interviewed generally perceive the NCA as competent, reasonable and pragmatic. Concerning a few topics, however, the lawyers are more sceptical of the NCA’s activities.

First, the lawyers are sceptical of the NCA’s active media communication before judgments, which tends to bring unfavourable publicity to the company under investigation, regardless of whether it is convicted or not. Second, the lawyers question whether the power between the economic and legal teams within the authority is appropriately balanced or whether the economists are given too much freedom within the authority’s operations at the expense of legal principles. Sometimes, the lawyers get the impression that the level of complexity may not reflect the actual characteristics of the case’s legal and/or economic context.

Nevertheless, the NCA’s high activity has pushed competition issues upward on companies’ lists of priorities. Many lawyers interviewed acknowledge that compliance work related to antitrust rules has become a growing field. Overall, the lawyers interviewed agree that the NCA’s priorities and enforcement of competition law remain effective and have a deterrent effect on businesses active in Norway.

Notes

^[1] Norwegian Competition Authority, Annual Report 2021, page 19.

^[2] This also includes investigations into the competitive conditions in the grocery segment of fruits and vegetables, suppliers’ price discrimination between the grocery chains, and concerns related to contractual clauses in rental contracts restricting retailers’ ability to locate.

^[3] https://konkurransetilsynet.no/telenor-judgment-final-fine-of-nok-788-million-upheld/?lang=en.

^[4] https://konkurransetilsynet.no/fines-exceeding-1-billion-nok-in-total-imposed-on-verisure-and-sector-alarm/?lang=en.