Norway: Competition Authority
A recent study has found that market concentration and profit margins have been stable in Norwegian industries for the past 25 years. We believe this reflects active enforcement and effective merger control, and our goal to promote competition in a broad range of markets using all the tools at our disposal. This article presents major activities and achievements related to the core areas of the NCA’s activities during the past year, with background information and our activities relating to three prioritised markets.
- The NCA is a ‘pure’ competition authority, enforcing the Competition Act
- The NCA’s budget for 2020 is 121 million kroner
- The NCA reports to the Ministry of Trade, Industry and Fisheries
- The number of employees as at 1 January 2020 was 116, including administrative and PR staff, temporary employees and employees on leave
- The NCA has 12 economists with a PhD in the economics of industrial organisation
- The NCA’s priorities: retail grocery, digital markets and retail fuel markets
Referenced in this article
- Norwegian Competition Authority
- Merger between Prosafe SE and Floatel International Limited blocked
- Competition Complaints Board’s support for NCA’s 2018 Telenor decision
- Statement of objections to Sector Alarm and Verisure for collusion
- Portal for anonymous notification and communication established
- 41 per cent increase in tip-offs
- Taxi market deregulated in accordance with NCA advocacy advice
- Nordic cooperation agreement for competition ratified in 2019
- Dawn raid in retail grocery sector
Clear impact in markets
Our goal is to promote competition in a broad range of markets using all the tools at our disposal. I believe we achieve this 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 regulation that is more competition-friendly.
Over time, with a low turnover, substantial efforts to retain personnel and build enforcement competencies, and building good working relations with academia, we have succeeded in recruiting and retaining a highly qualified staff. This is reflected in a high success rate against appeals during the past decade. A major event for the Norwegian Competition Authority (NCA) last year was the decision by the Norwegian Competition Tribunal, upholding the NCA’s decision that Telenor had abused its dominant position in the Norwegian mobile telecommunications market.
Deterrence and compliance are key elements to promote competition. The deterrent effects of our enforcement work are well documented: many planned mergers and acquisitions are dropped or modified before notification. Interestingly, a recent report from Menon Economics (commissioned by the NCA) found that market concentration and profit margins have been stable in Norwegian industries for the past 25 years. This is in sharp contrast to development in the United States. I believe these are signs that we have succeeded with our enforcement efforts.
A significant part of our resources is devoted to merger control. Of the 107 merger notifications received in 2019, 96 per cent were cleared within the legal limit of 25 working days. Of the cases that went to Phase II, a notable example is Prosafe’s acquisition of Floatel – the two closest competitors in the Norwegian market for offshore accommodation services. Our decision to block this merger was appealed to the Competition Complaints Board, but the merger was withdrawn before the Board made a decision.
Continuing our work relating to abuse of dominance, one of the major beer producers in Norway, Ringnes, is currently under scrutiny. Notably, Ringnes has offered binding commitments, which could make it easier for pubs and restaurants to source beer from Ringnes’ rivals.
Almost a decade of advocacy efforts relating to taxi services was brought to a successful conclusion last year, when a new regulatory framework for taxi services was enacted, effectively removing the barriers to entry, in accordance with the NCA view. Advocacy is an important part of our work, and we use innovative approaches to identify regulations restricting competition and to raise awareness using cost-effective tools such as op-eds. The NCA was active in advocating changes promoting competition in the market for public occupation pensions, health services and pharmaceuticals, telecommunications and bank services.
For the NCA, antitrust has always been a key priority. We endeavour to work broadly with various types of cases in markets that are important for Norwegian consumers.
In June 2019, we issued a statement of objections to Sector Alarm AS and Verisure AS, warning the companies that the NCA is considering imposing fines totalling approximately 1.2 billion kroner for collusion in the market for alarm services to residential customers. The size of the fines illustrates that the case is serious and concerns a large market that affects many customers in Norway.
Also in 2019, we conducted a dawn raid in the market for waste management services. Five months later, the case was closed when the suspicion of possible offences was rebutted. This shows that we work effectively by focusing early on whether we have received the information that can confirm or disprove our suspicions.
Nevertheless, we continue to work on several other cases that concern possible breaches of the prohibition on anticompetitive cooperation, including in the book market, the grocery market and the fuel market.
Looking ahead, tip-offs, complaints and leniency applications will be important to ensure the greatest possible effects of our work, both direct and indirect. This provides the basis for prioritising cases and activities that are in line with our strategic plan as far as possible. Through targeted information measures, we will continue our focused work to obtain more tip-offs on possible competition crime. Notably, we had a 41 per cent increase in tip-offs in 2019. We believe this is the result of our improved efforts to inform firms about the importance of sending us information about possible violations of the Competition Act. An important continuation of this work was to establish a portal for anonymous notification and anonymous communication with informants. This portal became operative in the spring of 2020. In addition, we utilise the possibilities that digital tools provide, use new sources and methods for data analysis for the detection of cartels.
Another important achievement in the fight against cartels was the new Nordic cooperation agreement for competition, which Norway entered into in 2019. This ambitious agreement provides greater opportunity to collaborate effectively with other Nordic competition authorities, not least with regard to dawn raids and information gathering on behalf of another Nordic competition agency. This implies, among other things, that we will have a greater opportunity to investigate a company that has its head office in another Nordic country and is suspected of violating the Competition Act in Norway.
Abuse of dominance
In 2019, the NCA received full support from the Competition Complaints Board for its 2018 decision to impose a fee of 788 million kroner on Telenor. This was an important decision. It provides clear signals, both that violations of the prohibition of abuse of dominance are serious offences and the of the confidence and assertiveness in our work.
We are now working on several cases that deal with possible violations of the prohibition on abuse of domination. A pending case relates to possible abuse of dominance in the market for beer sales at restaurants. The Authority is considering closing this case with remediation measures.
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: (1) the general notification rules; (2) the extended duty to notify; and (3) the power to order notifications. The first tool is the most important in merger control, according to which 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.
However, this tool is rather crude, and we cannot overlook that mergers and acquisitions in already concentrated markets, concentrations affecting local markets or potential competition may go under the radar. To counter this, the NCA has two additional tools. For sectors and industries that already have a structure and degree of concentration that justifies an enhanced focus, the NCA has the power to impose an extended duty to notify on specific firms. This implies that the firm must notify everything it does in relation to mergers and acquisitions (concentrations).
As its third tool, the NCA also has the power to impose a duty on a specific concentration of which it becomes aware, even if the related turnover is below the notification threshold. 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 Authority should examine the case in more detail. This tool is of particular relevance in relation to analysis of established firms buying start-ups and to prevent killer acquisitions.
Last year, we intervened against three mergers and acquisitions. Two mergers approved on conditions were between Tieto and Evry and the sector’s purchase of shares in the Nokas Group. The Tieto-Evry merger was approved relatively quickly by the sale of the case and filing system to one of the parties. The latter is the first time the NCA has intervened against an acquisition of a minority shareholding. In another case, Prosafe-Floatel, the NCA decided to block the merger. In one Phase II case, the NCA decided not to intervene after careful examination of the effects on competition. .
The duty to notify is an important part of merger control. To safeguard the interests of consumers, the NCA is completely dependent on access to reliable and statutory information from the parties. Only then can we assess whether there are grounds for intervening in possible harmful behaviour and prevent competitive harm. During 2019, we have sent a statement of objections in two cases warning that we were considering imposing fines for breach of the duty to disclose and to provide correct information in the filed notification, respectively. In a notable case, the NCA issued a statement of objections to Norgesgruppen, the major wholesale and retail business in the groceries market, warning that we were considering imposing a fine of 20 million kroner on the company for breach of its disclosure requirements regarding its acquisition of grocery store premises in 2018. The fine considered was relatively high so as to have sufficient preventive effect, and thereby contribute to effective control of structural changes in the grocery sector.
For the NCA, it is important that our work relating to merger control provides businesses with predictability and quick clarification. In 2019, 96 per cent of all mergers and acquisitions notifications were cleared in Phase I (within 25 business days), and most of them early in that phase. In one case, in the laundry market, the parties withdrew the notification after we notified that intervention was likely. This case illustrates the deterrent effect of our merger control.
An important part of our advocacy work is to raise awareness of the importance of competition as instrumental in the efficient use of scarce resources, more innovation, to influence companies’ competitive culture and, not least, to work for changes in regulations that, among other things, facilitate more competition through lower entry barriers, new business models and stronger incentives to compete.
Anticompetitive regulations exist in a number of different areas. We have conducted a survey among business managers in which we asked if they were aware of regulations that restricted competition. Almost 700 business executives provided feedback with examples of regulations that, in their opinion, restricted competition. This feedback provided valuable input for our future advocacy work.
An example of where we have sought regulation for promoting competition is the taxi market. We have argued for a framework with lower entry barriers that reflects the technological developments, thus leading to more flexible supply and consumers getting better and cheaper taxi services. In particular, it is important that the regulations allow for new players and business models. In 2019, Parliament enacted a new regulatory framework that, in essence, has deregulated this industry, in line with our proposals.
Another example is the book market, where we have argued that the agreement between the publishers’ association and the book retailers’ association containing fixed book prices is an important element (an agreement that is exempted from competition law by regulation) and undermines cultural policy objectives by leading to higher prices for new Norwegian literature – which means that fewer books are read when the book is first published. We have argued that cultural policy objectives are better reached by direct means, not by undermining competition, so far without success. Our work to illuminate how competition and cultural policy objectives can go hand in hand with competition will continue, but with a longer perspective.
Another market we have been concerned with is public sector occupational pensions. Here we are working to ensure that new players can challenge the established player, who is currently alone in this market.
The pharmacy market is another area of some concern. Here, well-functioning competition is important for a vulnerable consumer group. The framework conditions must facilitate this. In this regard, we have proposed to remove a rule that opens the possibility of not granting a pharmacy licence to companies with a market share of more than 40 per cent. We argue that successful pharmacies must be allowed to grow, thus stimulating competition.
In general, we observe that our views receive a great deal of media attention. Our statements regarding the competitive situation among funeral services, business norms for hairdressers and competition in the parking market at airports are good examples of this.
There are three markets that receive a greater level of attention, for various reasons. These are retail grocery, the digital markets and the fuel market. Our activities in these areas are described below.
Digitalisation represents both opportunities and challenges with respect to enforcement. On the one hand, digital markets have great potential to contribute to increased competition and efficient use of resources for the benefit of consumers and the business community. Working in the opposite direction are network effects and new dominant players in services and platforms, in addition to regulations reflecting past realities. On the other hand, digitalisation also implies new and better tools that can be effectively used in enforcement – as long as we have the skills and necessary knowledge to use them and understand the market well.
In terms of challenges, market power is a recurring problem in digital markets. One of the reasons why digital players have market power is the high entry barriers. Network effects and assets, such as big data, are some of the factors that affect entry barriers. The players that are often mentioned in this regard are the ‘GAFAs’ (ie, Google, Amazon, Facebook and Apple). But these are not alone; other digital platforms and technology companies also have market power. For an enforcement agency, it is important not to let the smaller problems become hidden behind the big ones, and to be vigilant regarding attempts by the major players to prevent newcomers from becoming challengers (or killer acquisitions).
A recent case in which the NCA has considered intervening based on these concerns was Schibsted’s acquisition of 67 per cent of the shares in Nettbil AS. Here, the NCA decided to impose a duty to notify in March 2020. 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, which, according to Schibsted’s own assessments, is the largest online marketplace in Norway for the sale of used cars, among other things. Finn.no offers a wide range of services for 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 both private individuals who sell used cars and car dealers who buy used cars. Nettbil was founded in 2017 and the current concept was launched in April 2018. Nettbil had a significant increase in revenue from 2018 to 2019.
Digitalisation also presents new opportunities for us, for instance in the form of digital tools that can be used to detect illegal collaboration between companies more effectively. We have worked to unleash the potential provided by digitalisation to streamline working methods, by dealing more effectively with large amounts of data from dawn raid seizures and with the information exchange and data storage that increasingly takes place in cloud-based solutions or is stored on servers abroad. We also consider how artificial intelligence can be used in data analysis of material seized in dawn raids. Experience from our cartel screening projects will be used for analysis of data from public tenders. Digitalisation also provides new opportunities for secure communication with whistle-blowers, a solution introduced during the first part of 2020.
The full potential of digital developments will only be realised if we have the right expertise, organisation and timely working methods.
It is also important to trigger the opportunities for enhanced competition that digitalisation entails. This has several aspects.
In some contexts, the regulatory framework does not facilitate the potential for enhanced competition that the digital economy and new business models entail. There are also strong counter-forces to change. Established players have strong incentives to fight against a development that threatens their position and profitability. We have an important role in pushing for a modern framework that adequately safeguards societal interests, while at the same time facilitating new players in the digital economy that can challenge the established players.
It is a reality, however, that these challenges cannot be handled by one agency in isolation. It requires effective enforcement cooperation across borders. Participation in international networks also makes it possible to gain new knowledge about how and when we can intervene, for example against the use of algorithms and other types of possible anticompetitive instruments in the digital world. One positive factor in this is that the NCA is working with the other Nordic competition authorities to prepare a report on the enforcement challenges relating to digital platforms. This report is expected to be published in the latter part of 2020.
Competitive conditions in the grocery and food markets have a major effect on Norwegian consumers. This market is highly concentrated both at the wholesale level and the retail level. Consequently, we have paid particular attention to this market for many years.
We are currently examining material from two separate cases based on dawn raids conducted in 2018 and 2019. The latter was a consequence of our market study documenting significant differences in terms of purchasing within the groceries chain. We feared that the large differences in purchase prices in some cases could lead to higher prices to consumers, and constitute a possible violation of the Competition Act.
In 2019, the Authority received an additional grant from the Ministry of Trade, Industry and Fisheries, which significantly strengthened the basis for our enforcement and advocacy efforts in this area. The 16 new employees who were hired in 2019 enabled us to allocate six persons to a new project group dedicated solely to the groceries marker while at the same time strengthening our overall enforcement activities. This work done by this new group will focus in particular on market surveillance and identification of measures that can promote competition in this market. Having additional resources allows us to investigate more cases than before, including increased capacity to follow up tip-offs and complaints.
Also important for consumers is the market for gasoline. Over many years, we have conducted a comprehensive analysis of price formation, how competition plays out depending on ownership structures and what determines competitive outcomes.
This work has been followed up through, among other things, op-eds and good cooperation with the Norwegian Consumer Council, with the aim of providing customers with information so that they can exploit price patterns and price differences, for example on which weekdays it is more worthwhile to buy petrol.
The work has also resulted in several cases. In 2019, we started an investigation into whether there has been a breach of the prohibition on illegal cooperation through price signalling. This investigation was a result of the NCA’s continuous monitoring of this market. Going forward, we will continue our efforts to monitor this market closely.
Efforts to detect and prevent competitive crime cannot occur in isolation within national borders. For us, international cooperation and active participation in international bodies working on competition policy have always been important. Two collaboration arenas are particularly important.
One arena is the European Competition Network (ECN). The European Economic Area (EEA) agreement makes Norway part of the European single market. The EEA brings together the EU member states and three European Free Trade Association states (Iceland, Liechtenstein and Norway) in an internal market governed by the same basic rules. Thus, the agreement entails the free movement of goods, services, capital and persons. The agreement also entails common competition rules, public procurement rules and state aid rules, to ensure equal and fair conditions of competition between companies throughout the EEA. However, the internal market also means that many cases of competitive crime include companies that operate across borders and that the adverse effects affect consumers in many countries. This means that active participation in the ECN is all the more important for the NCA.
Another important cooperation arena is the Nordic cooperation. In September 2019, 60 years of Nordic cooperation was celebrated at the annual Nordic meeting for competition authorities organised by the NCA. At the same time, a new Nordic cooperation agreement entered into force. This agreement updates and extends the previous agreement that had been in place for almost 20 years. It makes the fight against competition crime more effective across the Nordic borders and provides a better basis for effective cooperation on enforcement across the borders. In addition, the Nordic competition authorities have entered into a cooperation aimed at facilitating the exchange of employees for shorter periods.