– It is surprising that they have so few doubts – E24

Norway’s largest supermarket chains were notified on Tuesday of more than NOK 20 billion in fees as a result of what the Norwegian Competition Authority considers illegal price collusion.

The Norwegian Competition Authority’s preliminary assessment is that the collaboration constitutes a violation of purpose and that a non-compliance fee should be imposed, they wrote in Tuesday’s press release.

All three chains are notified that they will be charged the following fees:

• Norgesgruppen ASA receives a fine of NOK 8.8 billion
• Coop Norge SA receives a fine of NOK 4.8 billion
• A fee of NOK 7.4 billion is imposed on Rema 1000 AS

NHH professor and competition expert Øystein Foros says he is somewhat surprised by the warning, and especially by the use of the word “purpose violation.”

– From what I see in the Authority’s press release, apparently it is decisive for the size of the fine that the Norwegian Competition Authority considers the matter to be a breach of purpose. It is an extremely important formulation, says Foros.

The hardest tool

A breach of purpose, covered by section 10 on anti-competitive cooperation, applies to the most serious violations that obviously have no other effect than being harmful to competition, explains the NHH professor.

– It is the most difficult tool that the Norwegian Competition Authority can use, and they must be very safe to use.

– It’s a bit surprising to me. When we speak of violation of purpose, it is usually pure cartel activity, direct price cooperation or market sharing, “you are in Bergen and I am in Oslo”, for example. It’s surprising to me that they go for the violation of purpose when it comes to the bounty hunter business.

The agreement on the industry standard was signed in 2010 in collaboration with the predecessor of the Norwegian Consumer Agency, the Consumer Ombudsman. At that time, the Norwegian Competition Authority had no objection.

– The dispute basically revolved around who could advertise as the cheapest. Then they set an industry standard for what it took to be able to say they were the cheapest. There, a rule was also agreed on how prices could be monitored in competitor stores, says Foros.

He emphasizes that a lot has happened since then, especially technologically.

– Now they will most likely find it cheaper to scan the entire store than individual items, because the price tags are largely digital and almost centrally controlled.

– Must have a better explanation

Forums also wondered why the Norwegian Competition Authority had not taken action earlier, if they saw that the price search scheme could be problematic.

– When banks spoke openly about what they would do with interest rates in 2018, the Norwegian Competition Authority issued an article and warned that such signaling could be a crime. Why didn’t they do it in this case in 2010 or 2012? If this is a violation of purpose, then the Norwegian Competition Authority should have seen it by then, as the Authority was aware of the industry standard, he says.

– This fee enters the EU’s largest list in size, and then it mainly deals with pure cartel activities and obvious practices that are harmful to competition. From what we know now, it is difficult with the agreement that was there to see that this is so. So they should have a better explanation than what is stated in the press release.

By comparison, in 2016, the EU assumed that Europe’s largest truck manufacturers had been involved in cartel activity for 14 years and imposed a total fine of more than NOK 27 billion on them.

Foros is supported by UiO professor Erling Hjelmeng, who also reacts to the size of the fee. Hjelmeng has previously helped Norgesgruppen with advice.

– I think it’s surprisingly tall. Both because I have trouble treating this as a violation of purpose, and also because the Competition Authority has been continually informed, says Hjelmeng, who notes that the European Union Court of Justice in two cases earlier this year has explicitly said that the purpose category should be interpreted restrictively.

Compared to collaboration at gas stations

Hjelmeng uses the Authority’s research on the fuel market as an example.

Last year, the Authority closed the investigative case against Circle K and YX, after the companies agreed to end the practice of posting indicative list prices for fuel on their websites.

The background to the investigation was the suspicion that Circle K and YX collaborated in fixing fuel prices. The publication of indicative list prices was suspected of facilitating parallel increases in domestic supplier prices.

– When the Norwegian Competition Authority concludes the case in the fuel market confirming remediation commitments, it is also surprising that they hit a record fine here, says Hjelmeng.

– I believe that the harm to consumers is greater as a result of the price signaling in the fuel market than what can be attributed to the price hunting agreement. But I don’t think there is any doubt that the competition in the grocery market could have worked better, it is true that it is hardly due to the price search agreement, says Hjelmeng.