Norway

Henrik Svane, Camilla Tellefsdal Robstad and Marianne Elind

Kvale & Co

The Norwegian Competition Act entered into force in 2004, implementing EU and EEA competition rules into national legislation. Some years have passed and experiences have been made. In this article we shall give a brief overview of the Norwegian competition law four years after introducing the Competition Act, and we shall especially point out what separates the Norwegian rules from the corresponding EU rules. Furthermore, we shall highlight important competition issues in Norway in 2008 and point out what we expect to be in focus in 2009.

Overview of the Norwegian competition law and recent developments
The Competition Act entered into force 1 May 2004. The act implements the EU and EEA antitrust and merger rules into national legislation. Hence, EU legislation and law practice is a source of law, and also a source of inspiration, for Norwegian competition law.

Antitrust – the prohibitions

The cartel prohibition is stated in section 10 in the Competition Act. Section 10 prohibits ‘... all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition’.
The prohibition is not applicable if the cooperation:
• contributes to improving the production or distribution of goods or promoting technical or economic progress;
• allows consumers a fair share of the resulting benefit;
• does not impose restrictions that are not indispensable; or
• does not eliminate competition in respect of a substantial particle of the products in question

The prohibition mirrors article 53 of the EEA Agreement and article 81of the EC Treaty. Pursuant to section 10, paragraph 4, the king may issue block exemptions with detailed rules as to what is covered by section 10 paragraph 3. Such regulations have been issued, and the Norwegian block exemptions correspond to the block exemption in the EU.
The prohibition against abuse of dominance is stated in section 11. Section 11 reads: ‘Any abuse by one or more undertakings of a dominant position is prohibited.’ This prohibition mirrors article 54 of the EEA Agreement and article 82 of the EC Treaty.

Antitrust – practice and recent developments

Few interventions

The Norwegian Competition Authority (NCA) has so far only intervened in a few antitrust cases. In 2007 the NCA received 58¹ formal complaints regarding alleged breach of section 10 or 11, however the NCA only intervened in two cases. Statistics show that the number of complaints is decreasing: in 2005 162 complaints were registered, in 2006 there were 91 complaints and 58² complaints in 2007. It will be interesting to see whether this development will continue. This decrease may be the result of improved awareness of the competition rules in Norwegian business life since the introduction of the Competition Act in 2004. However, we do fear that the decrease also may be a consequence of few interventions by the NCA. The market players may feel that it is of no use to complain.

Formal decisions or change of conduct?

The NCA is to a large extent dependant on complaints and information from market players in order to be able to detect breaches of the antitrust rules. However, the fact that there has been a decrease of formal cases does not necessarily mean that the NCA deals with fewer cases. The NCA has in some cases worked informally by entering into dialogue with the parties and encouraged the parties to change their conduct. The NCA has in other words used dialogue as a means instead of formal decisions of intervention.
The NCA handled in 2007 two cases with possible violations of the antitrust rules where the cases were concluded by the parties changing their conduct.
One of the cases involved distribution of price information among the grocery chains via the marketing information company ACNielsen. ACNielsen provided weekly price reports, and this made the grocery market very transparent. The Norwegian grocery market is very concentrated, with only four grocery chains covering 98 per cent of the Norwegian market. The NCA found that the weekly price reports could harm the competition between the chains, and explained this to the parties. After receiving the NCA’s explanation, ACNielsen and the four grocery chains decided to change the reporting significantly. Consequently, there was no a longer need for a formal intervention from the NCA.
The other case involved Microsoft and Microsoft’s application of discounts in framework and cooperation agreements with Norwegian county administrations. Microsoft’s competitor LinPro AS complained to the NCA and alleged that Microsoft abused its dominant position through the agreement it had entered into with Norwegian county administrations and the ‘school agreement’ based on the county agreements. The NCA opened an investigation based on the complaint. As a result Microsoft amended the agreements to meet the competition concerns, and there was no need for formal intervention.
The NCA succeeded to intervene with informal means in these two important cases. The NCA signals that the NCA in the future to a larger extent will assess whether it will be sufficient for the parties to amend their conduct without the NCA having to adopt a formal decision in the case. Such interventions are less time-consuming for the NCA and the parties concerned, and are also consequently less expensive.

Leniency

In 2004 a leniency programme was introduced in Norway. However, the response to this programme has not been as expected. To this day, the NCA has only received one application for leniency. The Ministry of Government Administration and Reform has suggested allocating more resources to cartel investigation and the NCA is working to make the cartel investigation and the leniency regulation more effective. This will be discussed in further detail below.

Mergers

The substantive criteria

The Norwegian Merger Regulation is stated in the Competition Act, sections 16 to 18. The criteria for intervention are to a large extent corresponding to the substantive criteria in the EEA article 57 and the EC Merger Regulation. The Competition Act section 16 paragraph 1 reads:
The Competition Authority shall intervene against a concentration if the Competition Authority finds that it will create or strengthen a significant restriction of competition, contrary to the purpose of the Act.

However, the NCA’s authority is more extensive:
The Competition Authority shall, on the same conditions as set forth in the first paragraph, intervene against an acquisition of holdings in an undertaking even if the acquisition will not lead to control of that undertaking.

The NCA may therefore intervene against acquisitions of a minority share, if this may ‘create or strengthen a significant restriction of competition’. Under EC competition law, one has to assess whether a corresponding situation will infringe article 81 of the EC Treaty.

The thresholds

An important distinction between the Norwegian competition law and EU competition law is the notification thresholds. In Norway mergers need to be notified when aggregate annual turnover exceeds 50 million kroners (€6 million) and annual Norwegian turnover for each undertaking involved exceeds 20 million kroners. These low thresholds are constantly being discussed among lawyers and other legal professionals in Norway. Many find the threshold to be remarkably low compared to other countries in the EU. The low thresholds implicate that a lot of mergers without any possible competition concern need to be notified. For example, will the notification threshold apply to foreign-to-foreign transactions where one of or both parties have subsidiaries with turnover in Norway.
In 2007 the NCA received 561 notifications. The NCA ordered submission of complete notification³ in 20 cases, and intervened in five cases.⁴
For law practitioners dealing with mergers where the undertakings involved may have economic activity in Norway, it is important to be aware of these low thresholds in order to always assess whether or not to notify the transaction in Norway even if notification is not necessary in any other jurisdictions.

New rules on prohibition of implementation – important changes as from 1 July 2008

Until 1 July 2008 the notifications should have been filed no later than when final agreement was made. If the notification was filed too late, or not filed at all, the NCA would impose administrative fines, fines that could be at the maximum of 1 per cent of the turnover related to the undertaking submitting the notification. In 2007 administrative fines were imposed in 17 cases.
Most mergers and acquisitions are notified as simplified notifications. The NCA may within 15 working days after receipt of a simplified notification order submission of a complete notification. If no submission is made within the 15 working days, the case is regarded as closed without further notice. Until 1 July 2008, there was no automatic ‘standstill provision’ – prohibition of implementation – for concentrations notified as simplified notification. Only concentrations being reviewed following the submission of complete notification could not be implemented before the NCA had decided whether to open a further investigation. This is the main explanation for the strict time limits for filing notification. The NCA needed immediate notice of concentrations in order to evaluate whether or not to impose a complete notification and thereby a prohibition of implementation.
However, as from 1 July 2008, all mergers and acquisitions which are required to be notified to the NCA according to the Norwegian Competition Act are prohibited from being implemented until the NCA has completed the case handing. At the same time there is no longer a set time limit for notifications. It will be in the parties’ interest to get competition clearance in order to implement the merger, and there will be no need for strict time limits.
A general prohibition of implementation is common in other jurisdictions such as Sweden, Denmark and the EEA or EU. However, due to the low notification thresholds in Norway, the prohibition will influence a larger number of mergers and acquisitions and in practice almost any merger and acquisition on the Norwegian market will have to wait for competition clearance before being implemented.

Cartel investigation

On the front page of the NCA’s annual report for 2007, dated April 2008, it says in capital letters: ‘IN 2007, THE NORWEGIAN COMPETITION AUTHORITY INCREASED ITS EFFORTS TO DETECT AND INVESTIGATE CARTEL ACTIVITIES.’
Cartel investigation seems to be a highly prioritised task in the NCA in 2007 and 2008, and the Norwegian government has also allocated funding especially for cartel investigation. The NCA has established a dedicated investigation team, and has equipped a modern data laboratory and acquired specially developed software programs for investigation purposes.

Investigation powers and sanctions

The NCA has quite wide-ranging investigation powers under the Norwegian Competition Act. Firstly, the NCA may carry out unannounced searches of both business premises and residential premises. Such searches would, however, require a court order. Moreover, the NCA may retain original documents and image computer hard drives. These powers are comprised by the authorisation to search premises. Finally, the NCA also has the powers to require relevant information by carrying out compulsory interviews with individuals or by other means.
Moreover, the prosecution authority, the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim), may investigate criminal proceedings under the Competition Act. Usually the prosecution authority is brought into the picture by the NCA. Økokrim has general surveillance powers through the general criminal procedure, if it conducts investigations against individuals. This is provided that it obtains a court order.
The sanctions for companies under the Competition Act are administrative fines and criminal fines. When the NCA issues a fine it takes the turnover of the undertaking, the gravity and duration of the infringement into consideration. According to the act, attention shall also be paid to lenience. The maximum fine for a company for cartel participation is 10 per cent of the company’s turnover. Fines may also be imposed if a company fails to comply with orders from the NCA to, for example, provide relevant information for the investigation.
Individuals risk imprisonment, in addition to fines. Fines are issued based a large extent on the same principles as fines issued to companies. An individual may risk imprisonment up to three years, and even up to six years under severe circumstances.

Leniency

Within the EU and in other countries experience indicates that an effective leniency programme is an important tool in order to detect cartel activity. As mentioned above, a leniency programme was introduced in 2004, but so far this has not been a success in Norway. There were no requests for leniency in 2004, 2005 or 2006. In 2007 the NCA received two requests for leniency.
Leniency, according to the Competition Act section 31, relates to administrative fines for infringements of section 10. However, a practical problem is that even if the administrative fine could be adjusted, companies and individuals are still exposed to criminal prosecution. This insecurity has made the leniency programme ineffective.
On 6 March 2008 the NCA issued a statement of non-referral to the prosecutor’s office in leniency cases. Økokrim has on the other hand stated to the NCA that it is unlikely that Økokrim will start an investigation on its own initiative in leniency cases.
The purpose of the statement is to give greater certainty to the company that seeks leniency, and to individuals in that company, that they will not be criminally prosecuted if they fulfil the provisions for leniency set out in the Competition Act. However, it should be mentioned that Økokrim is not legally bound by its statement. Hence, we have to wait and see whether these clarifications will result in more requests for leniency and thereby give the NCA an important tool to detect cartels.
Moreover, the cartel participants are in addition to administrative fines and criminal prosecution exposed to damage claims from customers and negative media coverage. This may still retain as obstacles for an effective leniency programme.
The success of the leniency programme will therefore probably be influenced by the investigative powers of the NCA and the actual risk for the cartel to be detected. If there is a high risk for detection, the company will have more to loose to wait and see than to try to be the first in the leniency line. A high detection risk may cause insecurity among cartel participants and insecurity may in itself lead to applications for leniency.
In a letter of 2 July 2008 to the Ministry of Government Administration and Reform, the NCA has suggested the following amendments in law, in order to achieve a more efficient leniency programme:
• applying the leniency programme also with respect to criminal sanctions against persons;
• introducing regulations that secure anonymity for the whistle-blowers; and
• introducing regulations that limit the possibility to apply for notice to produce for inspection; this may lead to less exposure for the undertaking applying for leniency which is relevant with respect to civil lawsuits.

Blacklisting

Investors have become more and more aware of the environmental and ethical aspects of their investments and ‘socially responsible investing’ (SRI) has grown in importance. An ethical fund is an investment fund where the investment criteria is defined or influenced by different ethical criteria, and ethical indexes track the performance of companies meeting these criteria.
The NCA has considered how ethical investment could support the NCA’s fight against cartels. The NCA has noted that companies strive to comply with the different ethical funds and indexes. Ethical compliance has become important in the companies’ marketing and branding, and is used more or less as a hallmark or quality label for the companies.
The NCA will try to convince the ethical committees that non-involvement in cartel activity must be included as one of the criteria for being listed as ethical investment objects. The director general of the NCA has stated:
Illegal price cooperation, bid rigging and market sharing are not compatible with social responsibility. And anti-competitive crime is most definitely not compatible with normally accepted, basic, ethical principles.

Companies that do not meet the criteria will be blacklisted. The possible blacklisting of companies convicted for cartel activities may have the potential of an effective tool for the fight against cartels. Blacklisting may lead to loss in reputation and loss in shareholder value and can of course be critical for a company. This may highlight the importance of compliance programmes.
The NCA also proposes extensions to the index criteria so that companies included must document compliance practices, and that companies caught for cartel activities get excluded for a certain period of time and must document real compliance practice in order to be included.

The year to come – 2009

We believe that cartel investigation will be in focus also in 2009.
In a letter of 2 July 2008 from the NCA to the Ministry of Government Administration and Reform, the NCA gave an account of actions that the authority are planning to implement or have already implemented. It has, for example, established a special section for investigation staffed with persons with high qualifications in the area of strategic and technical investigation. A project with the object to obtain a more systematic system for collecting and handling information on cartels is also in the initial phase.
The NCA has invested in a modern data laboratory and acquired specially developed software programs and is engaging persons with relevant qualifications, with the object of increasing the expertise in the area of marked analyses and investigation.
In our opinion the actions above, seen in connection with the suggested allocated financial funding by the Ministry of Government Administration and Reform indicate that the NCA in the year to come will keep up the increased focus on cartel cases.
It should also be mentioned that lately we have seen a tendency that the NCA tries to solve cases by entering into dialogue with the parties concerned and encourages them to change their conduct. We believe that the NCA in the year to come will continue to try to solve cases informally rather than with formal decisions.

Notes

1 Reference is made to the annual report of the NCA, page 44.
2 However, not all complaints are registered as formal complaints.
3 Phase 2 investigation.
4 Reference is made to the annual report of the NCA, page 44-45.

An extract from The European Antitrust Review 2009