The Norwegian Competition Authority (NCA) continues to emphasise economic analysis in their decision-making. The economists at the NCA, under the directions of Director-General and economist Lars Sørgard, have substantial influence on the authority’s investigations. This article reflects the use of competition economics in the Norwegian market and is based on interviews conducted in June 2019 with the law firms BAHR, Kvale, Thommessen, Wiersholm, Wikborg Rein and Arntzen de Besche.
The continued importance of economic analysis maintains the demand for advanced economic advice both in terms of stand-alone analysis and in terms of helping clients in the dialogue with the NCA during a case. The new development of significantly larger fines combined with notification obligations, even for minority acquisitions, may be the beginning of a new era of stricter competition law enforcement. This trend may increase the demand for economic analysis even further.
Merger analysis: the core of competition economics
Even though legal advice regarding competition law spans many areas, advice in mergers still stands out and continues to be a core service. The same is true for the economic advice and analysis performed by the economic experts. The NCA uses economic analyses extensively in mergers and continues to focus on the closeness of competition and screening tests (the ‘upward pricing pressure’ (UPP), ‘gross upward pricing pressure’ (GUPPI) and the ‘indicative price rise’ (IPR) test), while other issues, for example market definition, receive less attention.
In general, lawyers find that the NCA has become more efficient in its application of the screening tests. Even though merger filings have become more complex over the years, the NCA has become faster and more transparent in merger investigations. This has led the NCA to more quickly make decisions in cases where no indications of concerns can be identified in the proposed transactions. The lawyers agree that when parties perform screening analysis in the pre-notification phase themselves, it is generally appreciated by the authority and typically results in an even faster decision. However, it is worth noting that the view that the NCA is efficient and transparent in their case handling primarily regards the authority’s merger control and is not representative for all cases handled by the NCA.
Two mergers (one in the market for marine fuels and one in the market for digital payments solutions) were subject to in-depth investigations in 2018 after the NCA raised serious concerns about their effects on competition. Both mergers were approved with remedies. In another transaction, the NCA ordered a notification obligation for Sector Alarm AS for its minority acquisition of Nokas AS’s alarm activities regarding small and medium-sized enterprises and private customers. The notification was ordered even though the acquisition (of 49.99 per cent of the shares in Nokas) did not give Sector Alarm control over Nokas. However, the NCA’s assessment was that the minority shareholding would grant Sector both the ability and the incentive to influence Nokas’s strategic market behaviour. Hence, the authority did not accept the acquisition without remedies. The remedies included a 25 per cent reduction in the shareholding position and exclusion from the takeover of Nokas Small Systems. This is the first time the NCA has intervened in a minority shareholder acquisition.
Anticompetitive agreements, abuse of dominance and damages: a costly game
The NCA’s record fine of 788 million kroner (€83.5 million) to Telenor for abusing its dominant position in the Norwegian mobile telephony market, has become central in the competition policy discussion in Norway.
NCA Director-General Lars Sørgard motivated the decision and the exceptionally high fines in a press release, stating that ‘when dominant players prevent rivals from establishing themselves, it is a serious breach of competition law’. Further he added ‘given the size and central position the market for services within telecommunications has for Norwegian consumers, the fine is motivated’.
Many interviewed lawyers found the size of the fine remarkable as well as the ex ante perspective and the strong focus on Telenor’s intentions in the NCA’s investigation. The NCA (and subsequently the appeals tribunal) found that Telenor, through changes in the wholesale prices, had disincentivised further investments in the construction of a third mobile network. Lawyers believe that this will impact future investigations and decisions from the NCA.
Telenor’s record fine in June 2019 was accompanied by an even higher fine of 1.21 billion kronor (€123.4 million) – 784 million kroner and 424 million kronor, respectively, to Verisure AS and Sector Alarm AS – for a nationwide illegal cooperation on sales of residential alarms. According to lawyers, this indicates a trend of high fines following competition law infringements, a trend that may be here to stay.
Although few damage cases have emerged in past years and trading partners are continuously believed to be reluctant to litigate, lawyers believe that private enforcement and class actions will become more prevalent. Litigation funders and other claim collectors have shown increasing interest in the Norwegian market in recent years and are now bringing claims to court. Another view shared among the lawyers is that the Consumer Authority and interest organisations such as Homeowners Association may become more interested in running class-actions on behalf of consumer groups.
Prioritisations: lack of digital dominants or lack of interest?
Competition in digital markets has rapidly come to the centre of competition policy at the international level. However, so far, this has had little impact on competition law enforcement in Norway. While the competition authorities in Sweden and Denmark have been pursuing digitalisation and its effect on competition as a highly prioritised area, the NCA has been assigned to prioritise the retail sector. This is due to political decisions following the strong political focus on the high Norwegian retail prices.
The future: increased demand for economics and increased need for close collaboration
Most lawyers believe that the demand for high quality economic advice will continue to increase in the future. This is based on two observations. First, in recent years, economic analysis has played an increasingly prominent role in the analysis and decision-making of the NCA. Second, the recent record-breaking fines for competition law infringements raise the stakes and increase the need for strong economic analysis.
Lawyers also believe that closer cooperation between lawyers and economists will become more important in the future. This is driven by the complexity of the analysis carried out by the NCA. The lawyers interviewed express increased demand for two types of economic advice. First, increased demand for stand-alone economic analysis, for example in the pre-notification phase of mergers, in relation to unlawful cooperation or in relation to abuse of dominance cases. It is essential that such analysis can withstand the scrutiny of the authority or the court. Second, recent developments call for economic advice on a speed dial basis for guidance through the increased complexity of economic analysis required early on in merger filings, in investigations and in compliance work. Most competition lawyers recognise their need for such guidance, but not all lawyers use it.