Definition of a Merger
Impact on the Local Market
The Notification Procedure
Nullifying Mergers

Iceland's Competition Act was amended in December 2000 to require that the Competition Authority (the administrative body of the Competition Council) be notified of all mergers where the total turnover of the undertakings is at least Ikr1 billion. If the Competition Authority is not notified, then it has the power to nullify the merger.

The government's goal in amending the Competition Act was to bring it in line with Articles 53 and 54 of the EEA Agreement (which are similar to Articles 81 and 82 of the Rome Treaty).

Definition of a Merger

For the first time, the amendments define a 'merger' (in Article 4). A merger takes place when:

  • two or more independent undertakings merge;

  • an undertaking takes over another undertaking;

  • owners controlling an undertaking acquire direct or indirect control in another undertaking; or

  • two or more undertakings enter into a joint venture for a specific purpose, but the parties otherwise retain their competitive position toward one another.

Impact on the Local Market

Article 3 addresses whether the amended Competition Act applies to a merger, and therefore, whether the duty to notify arises. The article states: "This law shall apply to agreements, terms and actions that have or are intended to have an effect in Iceland." Thus, the Competition Council only has jurisdiction over merger agreements and acquisitions that have an effect (or are intended to have an effect) in Iceland. The amended act does not address the degree of effect that is required. But it is certain that there must be at least some impact in Iceland. Establishing whether a merger will affect the local market will be easier when the merging parties have offices and/or operation in Iceland and there is some overlapping of the merging parties' operations.

The Notification Procedure

The new notification procedure is described in Article 18, as follows:

"If the Competition Council deems that a merger obstructs effective competition by giving one or more undertakings a dominant position or such a position is strengthened, the council may annul the merger. The Competition Council may also set conditions for such a merger that must be complied with within a given time. When assessing the legality of a merger, the Competition Council shall take into account to what extent international competition affects the competitive position of the merged undertaking. Also, when assessing the legality of a merger, it must be taken into account whether the market is open or access to it is obstructed.

The provisions of Paragraph 1 apply only to mergers where the total turnover of the undertakings in question is Ikr1billion or more. Included must be the turnover of parent undertakings and subsidiaries, undertakings within the same group of undertakings and undertakings that parties to the merger control directly or indirectly. Then, at least two of the undertakings that are parties to the merger must have an annual turnover of at least Ikr 50 million each for Paragraph 1 to apply.

The Competition Council must be notified of a merger that Paragraph 1 applies to, no more than one week after the conclusion of the agreement, or the announcement of the public bid, or the acquisition of controlling interest in an undertaking, whichever happens first. The notification shall contain information about the merger and the undertakings involved. The Competition Council may lay down rules that indicate more precisely the information that must appear in a notification, for example, about markets which the merger affects and other effects on competition.

The Competition Council shall notify the relevant undertakings within days if it has reason to further investigate the competitive effects of the merger. The deadline is counted from the time the council receives a notification that meets the conditions of Paragraph 3 and rules that are promulgated accordingly. A decision to annul must be made no later than three months after notification.

To ensure a proper decision under Paragraph 1, the Competition Council may intervene temporarily in a merger. An intervention can be a temporary ban on having the merger take effect until a final conclusion of the council's investigation is available.

If the Competition Council decides to annul a merger, the council can, along with a decision based on Paragraph 1 or by a separate decision, require the undertakings or assets brought together to be separated, or the cessation of joint control, or any other action that may be appropriate in order to restore conditions of effective competition."

The wording of this article is unfortunately not as clear as it could be. It does not state clearly which mergers should be notified and whether the turnover thresholds are limited to turnover generated in Iceland or include worldwide turnover. Further, the competition authority has not yet laid down any rules on the notification procedure as stated in the article. As the Competition Council or local courts have yet to interpret this article, it is difficult to say what implications the notification procedure will have. From the explanatory notes to the bill that lead to the amendments, it would seem that worldwide turnover is to be considered.

Nullifying Mergers

If the Competition Authority is not notified of a merger, it may nullify it if it finds that the merger obstructs competition in Iceland. Before the Competition Authority makes this decision it must, of course, notify the parties and give them a chance to argue their case (with relevant evidence). A decision by the council may be appealed to the Competition Appeals Committee, and then the local courts.

Article 52, dealing with administrative fines, provides that penalties or fines cannot be imposed on undertakings that fail to notify a merger. Only a violation of a provisional ban or prohibition gives the Competition Council the authority to impose sanctions.

For example, Articles 10 prohibits certain anti-competitive agreements between undertakings while Article 11 prohibits abuse of a dominant position. Violators of these two articles may be fined.

Finally, although a merger must be notified within one week of completion, the amended Competition Act does not state how long the Competition Council has to start an investigation (although it if it is going to nullify, it must do so within three months). The legislators could have been clearer with regard to this provision too.

For further information on this topic please contact Guðrún Björk Bjarnadóttir at LOGOS by telephone (+354 5 400 300) or by fax (+354 5 400 301) or by e-mail ([email protected]).

The materials contained on this web site are for general information purposes only and are subject to the disclaimer.