We have summarised trends and developments in 2022 and discuss what we can expect from the Norwegian Competition Authority (NCA) in 2023.
"Merger control" is the process by which a competition authority reviews a planned transaction (typically a merger or acquisition) to determine whether it would significantly impede effective competition in the market. If the answer is affirmative, the competition authorities may prohibit the concentration in its entirety or allow it on certain conditions (remedies). The competition authority may only intervene in transactions which will significantly impede effective competition on the market. Nevertheless, the authority's priorities and focus areas may influence the enforcement of the competition rules within merger control.
Thus far, the NCA has been significantly more active than authorities in other jurisdictions, with frequent use of prohibition decisions and remedies. We have inspected the NCA's enforcement practice to look for indications of what to expect in 2023.
A total of 160 concentrations were notified to the NCA in 2022, wherein 112 were submitted under the simplified procedure. The number of notifications was about the same in 2021, and represents a significant increase compared to previous years. All 160 concentrations were cleared, but with remedies imposed in three of the cases. The NCA did not prohibit any concentrations in 2022.
An active Competition Authority
The NCA has dropped cases despite of initial concerns
In 2022, six cases went to phase II, which entails that the NCA needed more time than the initial 25 business days in phase I to assess the effects of the transaction. Of the phase II cases, two were closed without intervention and three with remedies (one case is still pending).
An example of this is the Axess Logistics/Auto Transport Service, which concerned the acquisition of a bankruptcy estate. The NCA was concerned that the concentration could restrict competition in the market for preparation and transport of vehicles, and stated there were alternative ways the bankrupt company could continue its business in the market in the absence of the concentration. After a lengthy case handling process, the NCA concluded it would not intervene, primarily due to the uncertainty regarding whether there were actually alternative buyers and the fact that market entry was possible.
The assessment of the alternative scenario has been important in previous cases concerning the acquisition of bankrupt companies, see e.g. Sport 1/Gresvig from 2020. We expect the number of transactions involving failing companies to increase in the upcoming year. Ensuring verifiability of the transaction process will be imperative in these cases; the time and extensivity of the review process by the NCA may be reduced by documenting a lack of interest from alternative buyers.
Previous cases show that it is possible to obtain approval on the condition of remedies
In 2022, the NCA approved three cases following submission of remedies by the parties, which goes to show that they are willing to accept remedies. Although the NCA has previously stated that they prefer structural remedies, we see that behavioural remedies are often accepted in vertical transactions.
- Acquisition of competitors. The remedy in Royal Unibew/Hansa Borg (V2022-4) was the termination of a distribution agreement (semi-structural remedy). Bewi/Jackon (V2022-10) was approved on the condition of divesture of factories (structural remedy).
- Vertical acquisition. Nortura/Steinsland (V2022-10) was approved with a package of behavioural remedies, including that Nortura obliged to offer equal obligations to buyers of hens and refrained from discriminating against producers of eggs to consumers on the basis of the breed of the chicken.
The NCA utilises its power to impose a duty to notify transactions and ensures its possibility to intervene by expanding the duty of disclosure
The NCA has the power to order undertakings to notify transactions that are not subject to the requirement to notify, provided that there are reasonable grounds to believe the transaction could have an effect on competition or special considerations indicate that it should be investigated. The duty to notify may be imposed on transactions below the thresholds or on minority acquisitions. However, it must be imposed within three months from closing or the acquisition of control. The NCA regularly makes use of the opportunity to call in transactions, with two transactions being imposed such a duty in 2022.
There is also a focus on acquisitions of smaller competitors at the European level, especially so-called "killer acquisitions" – i.e. acquisitions with the aim of eliminating a competitor. The call-in mechanism also exist at the EU level, and competition authorities in several countries have indicated that they want a legal basis to call in transactions for better enforcement of merger control, particularly in relation to digital markets.
Furthermore, the NCA may impose a duty of disclosure on non-notifiable transactions. The list of companies subject to this duty was further expanded this year to include further undertakings in selected markets. This mechanism gives the NCA the opportunity to keep a close eye on markets that may be particularly vulnerable to enforcement of merger control.
Does judicial review of the NCA's decisions have a disciplining effect on the Authority?
The NCA's merger control decisions have not previously been subject to judicial review, however, both the Competition Appeal Tribunal and Gulating Court of Appeal overturned the NCA's decisions in the spring of 2022:
- The Competition Appeal Tribunal reviewed the NCA's prohibition decision in DNB/Sbanken. The NCA held that the acquisition would remove the competitive pressure exerted by Sbanken in the market. In contrast, the Competition Appeal Tribunal found – after a full re-examination of the case – that the acquisition was not likely to significantly reduce effective competition. The NCA is not entitled to appeal the Tribunal's decisions to the Courts, and the decision is therefore final.
- Gulating Court of Appeal overruled the Competition Appeal Tribunal's decision in Schibsted/Nettbil. The NCA imposed a duty on the Schibsted to notify the transaction, and prohibited it on the basis of the finding that it would increase prices and reduce innovation in the market for online distribution of used cars. After the prohibition decision was upheld by the Competition Appeal Tribunal, Schibsted appealed to Gulating Court of Appeal, which overturned the decision after a full review of the case. The Court of Appeal disagreed with the NCA's market definition, as well as the analysis of the alleged restrictions of competition caused by the transaction. The judgement of the Court of Appeal was appealed to the Supreme Court. The main hearing was conducted in January 2023, and there has not been a verdict in the case as of January 31 2023.
In our opinion, the mentioned cases have influenced the NCA's recent practice, particularly with regard to the assessment of closeness of competition. While the NCA placed great emphasis on DNB and Sbanken being close competitors, they placed less emphasis on the fact that there were also other close and strong competitors of the parties. When the Competition Appeal Tribunal came to the opposite conclusion, it was partly after an assessment of the closeness of competition to other undertakings. The NCA seems to have adapted its practice in line with the Competition Appeal Tribunal's view with regard to the assessment of closeness of competition in recent practice, e.g. in Bewi/Jackon.
Closeness of Competition: Where do we stand?
In its recent practice, the NCA has been particularly concerned with closeness of competition in the assessment of whether a concentration would significantly impede effective competition in the market, compared to traditional factors such as market shares and the level of concentration in heterogeneous markets. The issue of closeness of competition, which was central in both DNB/Sbanken and Schibsted/Nettbil, is part of a larger European trend. We can probably expect guidance from the European Court of Justice on the issue in 2023:
- In May 2022, the General Court upheld the Commission's prohibition decision in Wieland's acquisition of its competitor Aurubis Rolled Products (ARP), as well as their joint venture Schwermetall (case T-251/19). The parties were the two largest providers on the market. The General Court held that it was sufficient for the parties to be close competitors to find a significant impediment to effective competition (SIEC-test); it was not necessary for them to be each other's closest competitors.
- In the same direction, Advocate General Kokott rejected that the parties must be "particularly close competitors" in her opinion in CK Telecoms (C-376/20 P), which the General Court had set out as a requirement in its decision in the same case. She further noted that finding closeness of competition in itself is not sufficient to fulfil the SIEC-test – it is mainly one of the relevant factors to consider.
Issues related to closeness of competition were central in both DNB/Sbanken and Schibsted/Nettbil, as well as in the Supreme Court's review of the latter case. The Attorney General, representing the NCA/Government, made a point of the nuance between "close competitors" and "particularly close competitors".
Expected enforcement priorities for 2023 as indicated by the NCA's strategic plan and its latest practice
The NCA's strategic plan for the years until 2027 states that the NCA will continue to focus on digital markets and the grocery sector and increase its focus on sustainability within merger control.
As part of the focus on digital markets, it is expected that the NCA, like other European competition authorities, will pay particularly close attention to killer acquisitions. The Authority has also recently expressed concerns about such transactions within the electric car charging market.