Norway: High Activity in Covid Times

In summary

The covid-19 pandemic has had a major impact on the NCA’s work in 2020; however, despite the pandemic, the NCA’s activity has been high, and its work has gained a lot of attention. Its statements of objections and decisions have affected various markets, and it has created task forces to provide guidance and conduct analyses. The NCA has also implemented a digital strategy that will put it in a good position to face the challenges and exploit the opportunities relating to digitisation.

Discussion points

• The NCA’s work regarding cartels, abuse of dominance, merger control and advocacy
• The NCA’s work in respect of its three sectoral priorities: retail grocery, digital markets and retail fuel markets
• Effects of the covid-19 pandemic on the NCA’s work

Referenced in this article

• Norwegian Competition Tribunal
• Statement of objections with a warning of fines totalling 21 billion Norwegian kroner on major grocery chains
• Sector Alarm and Verisure decision
• Antitrust case with commitments in the gasoline market
• Portal for tip-offs on regulations restricting competition
• Witnessed taxi market deregulated in accordance with NCA advocacy advice
• NCA digital strategy

Clear impact in markets

The goal of the Norwegian Competition Authority (NCA) is to promote competition in a broad range of markets using all the tools at its disposal. This goal may be achieved through a good balance between anti-cartel activities, clear signals to dominant firms on what they can and cannot do, effective merger control and, not least, active advocacy work to enhance knowledge and compliance and to promote a more competition friendly regulation.

In 2020, the NCA issued three decisions and two statements of objections (SOs) in investigative cases and stopped one acquisition. It also concluded or sent SOs in which it considered imposing fines in three cases for breach of disclosure requirements relating to acquisitions. The size of the fines in those cases underlines the importance of providing correct information to the NCA.

The NCA’s SOs and decisions have affected a wide variety of markets, from groceries to digital platforms, from fuel to beer and from books to transport services. It concluded the investigation in the house alarm market with significant fines for market sharing.

The NCA’s SOs for illegal cooperation relating to the book market and the grocery market also drew much attention. In the latter case, the NCA warned that a record fine of 21 billion Norwegian kroner was considered.

The covid-19 pandemic has had a major impact on the NCA’s work in 2020. As was the case with many other organisations, from March 2020, NCA employees have mainly worked from home.

Despite the pandemic, the NCA’s activity was high throughout 2020, and its work gained a lot of attention throughout the year. This is especially true for the markets for groceries, books and fuel.

The NCA has been more active than ever when it comes to using social media and publishing op-eds. It has also launched its own podcasts covering several topical issues. Media analytics and a survey of competition law lawyers show that the NCA has become more visible in 2020, which enhances the effects of its work; more firms comply with the Competition Act, for the benefit of consumers.

In the coming period, the NCA’s advocacy efforts will, in particular, focus on small and medium-sized enterprises, where the NCA’s surveys have documented a clear need to enhance knowledge relating to competition law.

Cartels

Antitrust has always been a key priority for the NCA. The NCA endeavours to work broadly with various types of cases in markets that are important for Norwegian consumers. Through high visibility and maximising media attention relating to its investigative work and its decisions, the NCA increases compliance.

For the effect to persist, it is important that the NCA has continuity in its cartel work, with a continuous addition of new cases. In the past few years, there has been an increase in tip-offs. This may be the result of the NCA’s improved effort to inform firms about the importance of sending it information about possible violations of the Competition Act.

An important part of that work was to establish a portal for anonymous notification and anonymous communication with informants. The portal became operative in spring 2020. The NCA also takes advantage of the possibilities that digital tools provide and uses new sources and methods for data analysis for the detection of cartels.

In 2020, the NCA started investigation into two new cases regarding possible illegal cooperation, notified infringement fines in the book market and in the grocery market, decided to impose an infringement fine in the alarm market and closed a case in the fuel market with commitment for remedial measures.

A major case was concluded by the NCA when in, November 2020, it decided to impose a fine of 766 million Norwegian kroner on Verisure AS. The decision follows the fine of 467 million Norwegian kroner to Sector Alarm in the same case in 2019: collusion in the market for the provision of alarm services to residential customers (approximately €77 million and €47 million, respectively). The significant fines result from the NCA’s conclusion that Verisure and Sector Alarm, by far the two largest players in the market, had engaged in market sharing practices in the period from 2011 to 2017. In the NCA’s view, Verisure and Sector Alarm agreed not to sell alarm services to each other’s customers through door-to-door selling.

Another notable case relates to the gasoline market. The NCA resolved an antitrust case with commitments for the first time, the background being investigations of two companies in the gasoline market based on concerns that publishing indicative list prices facilitated parallel national price increases. The case was concluded when the companies committed to put a stop to their practice of publishing prices. Already in the beginning of 2021, price patterns have been changing to the benefit of conscious consumers.

A case receiving significant attention in 2020 relates to the grocery market – a market under close scrutiny by the NCA for many years. The NCA issued an SO warning that it is considering imposing fines of 21 billion Norwegian kroner on NorgesGruppen, Coop and REMA 1000.

The NCA’s preliminary assessment was that the three grocery chains had cooperated in a way that may have led to higher grocery prices. The cooperation concerns the chains’ price hunting practices; they had agreed to allow their ‘price hunters’ to access each other’s grocery stores to scan shelf prices. The price hunters collected a substantial amount of price information.

In the NCA’s preliminary assessment, in the SO, it expressed the view that the grocery chains used the price information collected to coordinate prices. This may have resulted in higher grocery prices to the detriment of consumers. Adding to the severity is that those practices have been ongoing since 2011. At this stage, the findings of the NCA are preliminary, and the grocery chains were invited to submit their comments on the Authority’s objections by April 2020.

Looking ahead, tip-offs, complaints and leniency applications will be important to ensure the greatest possible direct and indirect effects of the NCA’s work. This provides the basis for prioritising cases and activities that are as far as possible in line with its strategic plan. Through targeted information measures, the NCA will continue its focused work to obtain more tip-offs on possible competition crime.

Abuse of dominance

The NCA is currently working on several cases that deal with possible violations of the prohibition on abuse of dominance. Although is has less cases regarding possible abuse of dominance than illegal cooperation, the cases that the NCA investigates are of significant importance to consumers. Moreover, they create clear deterrent effects among firms with dominant positions.

Throughout 2020, the NCA examined information seized in a major dawn raid in November 2019 related to the grocery sector in Norway. The inspection was carried out, among other factors, in light of findings made during an examination of the purchasing conditions in the grocery sector.

Another case solved with commitments relates to a major Norwegian brewery and its sales to pubs and eateries. The case was based on the NCA’s investigations of major brewer Ringnes. The concern was that it abused its dominance by forcing pubs and restaurants to buy beer exclusively from the company. The case was concluded when Ringnes amended its agreements with pubs and restaurants and, thereby, made it easier for rivals to enter the market.

From January to February 2021, the Telenor case was heard in the Gulating Court of Appeal. In 2018, the NCA concluded the case with a fee of 788 million Norwegian kroner for having prevented the development of a third mobile network. In June 2019, the decision was fully upheld by the Competition Tribunal, after which Telenor filed a lawsuit. This is the first time that a decision from the Competition Tribunal was reviewed by the Gulating Court of Appeal.

Merger control

An important task for the NCA is to assess and prohibit concentrations that will significantly impede effective competition. To fulfil this task, the NCA has been equipped with three tools: general notification rules; extended duty to notify; and the power to order notifications.

General notification rules are the most important tools in merger control. According to those rules, companies and other business enterprises have a duty to notify the NCA about any mergers, acquisitions and agreements by which they acquire control of other companies, if the turnover of the undertakings concerned exceeds certain thresholds. For sectors and industries that already have a structure and degree of concentration that justifies enhanced focus, the NCA has the power to impose an extended duty to notify on specific firms.

The NCA has the power to impose a duty on a specific concentration that it becomes aware of – even if the related turnover is below the notification threshold levels. Imposing a duty to notify can be done if the NCA has reason to assume that competition will be affected by the transaction or if other particular considerations indicate that the NCA should examine the case in more detail. This tool is of particular relevance in relation to the analysis of established firms buying start-ups and to prevent killer acquisitions.

In 2020, the NCA received 93 merger notifications in accordance with the general notification rules. This is lower than the average over the past five years (103 notifications), despite the fact that many predicted an increase in the number of mergers and acquisitions as a result of the covid-19 pandemic.

Regardless, merger control is even more important during economic crises because of the increased risk of market concentration that can limit competition. If several companies are in danger of going bankrupt, they can be acquired by larger companies, thus weakening future competition. Consequently, this has been an area of particular attention right from the start of the pandemic. The pandemic is not over, and several economists predict a surge of bankruptcies. The NCA is well prepared to deal with this.

In 2020, the NCA announced possible interventions in three cases. A case of particular interest relates to digital markets, namely Schibsted’s acquisition of 67 per cent of the shares in Nettbil AS.

Schibsted is an international group that owns a number of digital marketplaces, media houses and technology companies, both inside and outside Scandinavia. It is the owner of Finn No AS (Finn), which, according to Schibsted’s own assessments, is the largest online marketplace in Norway for the sale of used cars, among other things. Finn offers a wide range of services for the advertising, sale and purchase of property, car, travel, movable property and services.

Nettbil is a relatively new entrant that offers an online sales and advertising service aimed at private individuals who sell used cars and car dealers who buy used cars. It was founded in 2017, and the current concept was launched in April 2018. Nettbil had a significant increase in revenue from 2018 to 2019; thus, the major digital platform for online trading in Norway acquired a newcomer – an online platform for selling and buying used cars.

The NCA decided to impose a duty to notify in March 2020. Eventually, even though the acquisition was below merger notification thresholds and was consummated, the NCA decided to block it. This case is currently under review by the Norwegian Competition Tribunal.

Another merger, in the market for wine and spirit, is still under consideration. This merger has a Nordic perspective and illustrates the importance of the Nordic cooperation agreement. A merger in the sports equipment market was allowed after concluding that it would not negatively affect competition.

For the NCA, it is important that its work related to merger control provides business with predictability and quick clarification. Approximately 60 per cent of the notifications submitted to the NCA are simplified notifications (ie, mergers that are unlikely to affect competition). The vast majority (a total of 91 in 2020) of all mergers and acquisitions notifications were cleared in Phase I (within 25 business days), and most of them early in Phase I.

In one case, in the laundry market, the parties withdrew the notification after the NCA notified them that intervention was likely. This case illustrates the deterrent effect of the NCA’s merger control. Quick clarification is important for the firms involved and ensures that companies can carry out mergers that may be beneficial for consumers.

Groceries markets

The Norwegian grocery market is highly concentrated, and the barriers to entry are considered high; thus, the groceries market has, in particular, been a focal area of concern for the Authority.

A groceries task force is now up and running, focusing, among other things, on analysing differences in wholesale prices at the retail level, advocating measures for enhanced competition and providing input to the government’s white paper to the Parliament on the groceries sector. The task force contributed to the white paper on groceries, which was handled by the Parliament in 2021.

Among other issues that the task force has focused on is the importance of access and control of premises for competitors. One factor in this regard relates to the Norwegian Planning and Building Act. The Act grants local governments the authority to determine the uses for which specific areas can or cannot be used. Consequently, the opening of a new grocery store is often dependent on approval from local planning authorities.

Where local planning authorities have passed local regulations regarding the location of grocery stores, this approval can be more difficult to obtain as the regulations are sometimes restrictive of competition. The NCA has advocated that effects on competition should be considered both when passing local regulations and when considering whether to approve an application.

In the white paper on groceries, the government expresses that it shares the NCA’s understanding and is of the opinion that the Planning and Building Act, in its current wording, allows the local planning authorities to take effects on competition into consideration. With reference to the white paper, the NCA has sought to influence local authorities by bringing it and the government’s view to their attention.

In two recent cases, the NCA attempted to influence local regulations that restricted competition in local grocery markets. The attempt was considered successful as none of the local planning authorities disputed the legal assessment of the Planning and Building Act, as has previously been the case.

The NCA expects its remarks to be taken into consideration in the upcoming revisions of the local regulations in question. Its proposal to consider amendments to the Planning and Building Act highlights the importance of competition to the local planning authorities, as well as eliminates any doubt on whether effects on competition can be taken into consideration.

Digital markets

Digitalisation represents both opportunities and challenges in respect of enforcement. Digital markets have great potential to contribute to increased competition and efficient use of resources for the benefit of consumers and the business community. Digitisation contributes to comprehensive technological development and innovation.

Working to counter this are network effects and new dominant players in services and platforms, as well as regulations reflecting past realities. Traditional market structures are being challenged, which may contribute to increased competition. At the same time, digitisation can result in market dominance and increase the risk of illegal price collusion.

Digitalisation may also imply new and better tools that can be effectively used in enforcement – as long as the skills and necessary knowledge to use theme exist, as well as understanding of the market.

Reflecting on those challenges and opportunities, the NCA has implemented a digital strategy that encompasses measures to strengthen the NCA’s digital competencies and capacity and its use of digital tools and data to enhance efficiency and strengthen focus on digital markets in enforcement and thorough market studies, as well as active advocacy to adjust regulations to the digital reality and possibilities.

In this regard, the NCA has launched and participated in new projects to promote competition in digital markets. In autumn 2020, a joint report from the Nordic competition authorities on digital platforms was published. The Nordic competition authorities presented their view on the challenges and approaches to how large digital platforms can be regulated.

In early 2021, the NCA published a report on algorithms, presenting findings in respect of the use of those algorithms and the importance of compliance. In addition to implementing new digital tools and upgrading existing ones, the NCA has employed data scientists to expand its capacity to analyse behaviour in digital markets.

Advocacy

An important part of the NCA’s advocacy work is to raise awareness of the importance of competition as instrumental for the efficient use of scarce resources, more innovation and influencing companies’ competitive culture, as well as to work for changes in regulations that, among other things, facilitates more competition through lower entry barriers, new business models and stronger incentives to compete.

Anti-competitive regulations exist in a number of different areas. On the NCA’s website, the NCA has established a function allowing the general public to send tip-offs to the Authority regarding restrictions that are perceived to restrict competition. An internal task force has been established that consider these tip-offs for further consideration and follow-up by the market departments.

Over the years, the NCA has repeatedly advocated for deregulation of the heavily regulated taxi market. In November 2020, deregulation was formalised, after a few months delay owing to the covid-19 pandemic. The NCA continues its advocacy work in this area, stressing the importance of modernising taximeter regulations, following technological developments that make the taximeters redundant. Consequently, it has advocated for allowing alternatives to the more traditional taximeters.

The pharmaceutical market is another area of concern. Well-functioning competition in the pharmaceutical market is important for a vulnerable consumer group. The framework’ conditions must facilitate this.

In 2019, the NCA proposed that the Ministry of Health and Care Services change regulations in the pharmacy sector. It argued for removing the current market share limit. Competition in the market has improved and will further improve by being able to hand out licences to pharmaceutical companies not limited by a maximum of market share of 40 per cent. Successful pharmacies must be allowed to grow to stimulate competition. The proposed change was enacted in 2020.

Another area of huge concern to consumers is the electricity market. The market conditions in the retail market for electricity to households indicates strong competition and a well-functioning and efficient market. There are over 100 suppliers of electricity, and market concentration is low. Electricity is a homogeneous product, and the most important competition parameter is price. Under those circumstances, there should be fierce competition, and prices should be expected to be close to marginal costs.

However, the retail electricity market is not as efficient as could be expected. A major concern is that consumers lack access to adequate information, which may enable them to compare products and prices from different suppliers. The NCA published a feature article in February 2020 in which it expressed its assessment of different types of measures to address challenges in the retail electricity market. To assess measures to alleviate the situation, the NCA participates in regular discussions regarding the retail electricity market with a variety of institutions, including the Norwegian Energy Regulatory Authority, the Consumer Authority, the Norwegian Consumer Counsel and the industry organisation Energy Norway.

In general, the NCA’s views receive significant media attention. The NCA’s statements regarding the competitive situation among funeral services, business norms for hairdressers and competition in the parking market at airports are examples of this.

Covid-19

The NCA’s employees have mainly been working from home during the covid-19 pandemic. Remarkably, this has not negatively affected the NCA’s enforcement and advocacy work.

In line with other EU and EEA countries, the NCA created a task force to provide informal guidance to companies and industry associations regarding things they can work together on during the pandemic. The NCA has also established a task force that followed the decision on whether some companies were taking advantage of the situation to set unusually high prices. The NCA specifically examined the prices of face masks and found that consumer price increases could be explained by higher import prices.

The NCA launched an investigation against a trade association for possible violation of the competition law relating to potentially illegal price collusion. The background of this investigation relates to information received regarding the possible exchange of competition-sensitive information relating to the pandemic.

The NCA has expanded the monitoring of aviation, where the major airline companies are obliged to report market information to it.

The NCA has also prepared guidelines for infection control rules for dawn raids, and, in autumn 2020, it carried out a dawn raid in the shipping market in accordance with those guidelines.