Economy under pressure
The Norwegian economy is under pressure. The direct reason is the large drop in oil prices. One of the main lessons from the past is that competition policy plays an important role in restructuring the economy in a deep recession. In the US they repealed the price-fixing rules in the 30s. Studies have found that the relaxing of competition slowed down restructuring, and it took a longer time than it else would have done to return to economic growth and a reduction in unemployment. Efficient enforcement, advocacy and high visibility is therefore even more important when the economy is under pressure, as at present in Norway.
Given the economic downturn in Norway at present, the high level of activity in 2015 concerning competition policy has a large impact on the economy. In the merger area, the NCA intervened in five mergers, most of these in highly concentrated markets with sales directly to consumers, such as telecommunications, groceries and gasoline. In addition, several companies were fined for violations of the standstill obligations. One of these decisions was tested in the court, where the court of first instance confirmed the NCA’s decision. Even though the decision has been appealed, the media attention a case like this receives provides a significant deterrent, thus leading to a more effective control with structural changes.
At the same time, we managed to keep up the pressure in our investigations activities. The NCA had an all-time high number of dawn raids in 2014. The Authority continued with its investigations in these cases throughout 2015. Notably, the Authority carried out 45 interviews or interrogations in five cases last year. This resulted in two decision relating to the prohibition regulations and a substantial portfolio of ongoing cases last year.
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. The way we conduct interviews has in particular been improved. In addition, we have in a systematic way built competence and capacity to use quantitative methods in merger control. Having a stable, competent work force 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 in the courts
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 were tested in the courts last year have been confirmed.
To be more specific, three cases were handled in court in 2015. The decision from 2013, where the NCA imposed fines on two companies in the asphalt market, was appealed by the company that was not granted leniency – NCC Roads. In 2014, the Court upheld the Authority’s conclusion that the Competition Act was violated. The Court, however, disagreed on the size of the fine and on the Authority’s conclusion that the parent company could be held responsible. The Court reduced the fine from 140 million to 40 million Norwegian kroner (from approximately €16 million to €4.5 million). Both the Competition Authority and NCC Roads appealed this decision. In 2015, the Court of Appeals increased the fine to 150 million Norwegian kroner (approximately €17 million) and concluded that NCC Roads AS was liable for the infringement carried out by one of its employees. It also held the parent company NCC AB jointly and severally liable for the infringement. NCC Roads appealed, but the Appeals Committee of the Supreme Court of Norway rejected the appeal. The 150 million kroner fine issued by the Court of Appeals is now final and the ruling by the Appeals Committee of the Supreme Court marks the end of the asphalt cartel case that began with an application for leniency and subsequent dawn raids in February 2010.
Another case handled in court relates to taxi companies cooperating in tenders for patient transport. The Authority fined these companies in a decision of 2011. The Authority’s decision was not upheld by the Court of Appeals in February 2013. The Competition Authority appealed this ruling, and the case was handled in the Court of Appeal in 2015. The Court’s decision agreed with the Authority’s finding that the cooperation was a violation of competition law. However, the Court reduced the fines from 2.85 million (in total for all three companies) to 1.3 million Norwegian kroner in total (from approximately €320,000 to €150,000). Part of the decision has been appealed to the Supreme Court, and the Supreme Court has asked for an opinion from the EFTA Court on the question of whether open bid rigging is a violation by object.
Jotunfjell Partners AS was issued a fine of 700,000 Norwegian kroner (approximately €80,000) for breaching the standstill obligation. The company appealed, but the Court’s decision from 2015 upheld the decision. The case is appealed to the Court of Appeals.
Even though the second instance decision in the bid-rigging case in patient transport was appealed to the Supreme Court, the final decision in the asphalt case was an important decision. It sends an important signal that serious violations of the competition rules will not be tolerated and will result in heavy fines.
Active advocacy efforts
In addition to direct enforcement, the NCA has also been active in the area of market studies and advocacy. In 2015, the Competition Authority submitted answers to 10 hearings, to various ministries and authorities. Public enquiries typically consider changes in laws and regulations.
Moreover, the NCA published three market studies last year – the taxi market, the market for residential property development as well as the market for mortgages – all with clear messages regarding measures that should be undertaken to enhance competition. The studies received substantial interest and media attention. Throughout the year, we have also worked close with our Nordic colleagues to produce a joint market study on the waste market. The report was published in February 2016.
To enhance the deterrent effects of our activities, the NCA has worked strategically throughout 2015 to maximise visibility, resulting in almost 5,000 instances where our decisions were referred to in the media. This is a result of active use of our website www.kt.no, nursing a good contact with central media, as well 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
A revision of the Competition Act entered into force on 1 January 2014. The aim of the change was to simplify the legislation and to further harmonise it with the laws of the EU, with the aim of having more effective enforcement. One of the main changes was the increase in the turnover thresholds for the notification of concentrations. New provisions regarding, inter alia, restrictions on access to leniency applications were also introduced.
Further revisions are under way, some of which have already been passed by Parliament. Some of the changes are further alignment with EU competition law with the introduction of SIEC test and a consumer welfare standard in merger review; the introduction of a settlement procedure for cartel cases modelled on the EU/EEA rules; and finally, the introduction of a competition complaints board. The introduction of an independent complaints board for competition cases implies that the Ministry for Industry, Trade and Fisheries no longer is the appellate body for the NCA’s decisions under the merger regulations. An important motivating factor behind the introduction of a competition complaints board is to increase the independence of the NCA, and to abolish the role of the government as the appellate body for merger decisions. The change implies that the government no longer can reverse the NCA’s merger decisions because of public interest considerations. The board will also be the first instance appellate body for the NCA’s decisions under the prohibition regulations.
Moreover, it is also expected that the dual treatment of mergers in the media sector by the Norwegian Media Authority and the NCA, where the Media Authority considered the effect of the merger on media plurality, will be discontinued. The government has proposed that the NCA will be the only body to consider mergers. The enacted changes in the law, inter alia, the introduction of a consumer welfare standard, support that the effects on media plurality of a merger will be duly considered by the NCA.
Funding for competition research
The NCA has been given the responsibility to allocate funds for research in competition law and economics. Starting in 2015, up to €720,000 will be allocated each year. 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. In the first round of applications, the Authority received 21 applications from a variety of different disciplines. Nine projects received grants. In the second round in December 2015, five new projects received funding. These projects will improve the knowledge basis for competition enforcement, and contribute to strengthen the ties between the academic community and the Competition Authority.
2015 has been a year with a high activity level, many important decisions and advocacy initiatives, and where the outcome in the courts reflects our strategic mission to enhance the quality of our work to a high international and professional level. 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. In addition, cases can also be finished earlier if the parties propose remedies to alleviate competition concerns. The most recent revisions enacted, with ia. the introduction of settlement procedures, will expectedly enhance efficiency in case handling even further.
Regardless, the NCA will continue to work hard to speed up casework by focusing on project management and using new tools for more effective casework. This includes training project managers, digitising and improving project processes, and adopting new IT tools to aid casework and make the Authority less vulnerable to turnover.
The ability to conscientiously prioritise the use of tight resources within overall strategic goals is one of the keys for an effective agency. To make the most of our limited resources and be successful in deterring anticompetitive behaviour relating to cartels as well as abuse, and fighting anticompetitive measures, the Authority has initiated a process to 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. Other important areas for advocacy is fighting against the continued exemption from the competition act for the book industry, as well regulations restricting competition relating to taxi services. Relating to the banking industry, the NCA will follow up on last year’s report, with a particular emphasis on the consequences of the unique Norwegian capital requirements for competition in this sector.
High visibility will continue to be one of its major strategic goals, not only in the context of the NCA’s advocacy work, but also in increased awareness of the importance of competition more generally.