On 5 November 2024, the Standing Committee on Business and Industry in the Norwegian Parliament will review a new legislative proposal prepared by the Ministry of Trade, Industry and Fisheries (MTIF). The proposal seeks to empower the Norwegian Competition Authority (NCA) with a tool to conduct market investigation regardless of any suspected violations of the Norwegian Competition Act.
Following such investigation, the NCA will be authorized to impose remedial measures aimed at strengthening competition in markets where conditions are found to significantly restrict, or are likely to restrict competition - contrary to the purpose of the Competition Act.
New market investigation tool
Under current legislation, the NCA can only intervene in competition issues in the event of a violation of the Competition Act. However, if the Norwegian Parliament approves the proposal put forward by the MTIF, the NCA will gain the authority to impose measures on specific undertakings to address competition concerns – even in the absence of a formal breach of the Competition Act. In other words, the NCA's powers would be expanded to allow for targeted measures where it identifies conditions in a market that may hinder effective competition.
The proposed market investigation tool is intended to supplement the NCA's existing enforcement powers under the Competition Act, which are the prohibitions on anticompetitive agreements and abuse of a dominant position, as well as the merger control regulations. While the proposal follows up on the government's 10-point plan to improve competition conditions in the grocery sector, the MTIF emphasizes that market investigation should be a sector-neutral tool and applicable across all markets.
What does a market investigation involve in practice?
The MTIF proposes a relatively formalized procedure for market investigation. First, the NCA must conduct an open hearing where the affected parties are given the opportunity to address any concerns raised by the NCA. Next, the NCA must provide an explanation of why it believes it is necessary to investigate a market further. The purpose of a market investigation is to determine whether there is a need for remedial measures.
According to the proposal, the NCA will be able to initiate a market investigation "in one or more markets or parts of markets if there are conditions indicating that competition is or is at risk of being significantly restricted contrary to the purpose of the Competition Act" (our translation). In other words, it does not necessarily have to be a company's own behavior that causes competition issues. It is sufficient that the issues are stem from "conditions" in the market, such as lack of new entrants. However, the conditions justifying an investigation must be sufficiently specific to form the basis for a preliminary theory of harm, i.e., an explanation of how competition is restricted in the scenario with and without the relevant circumstances.
Furthermore, the NCA will be able to intervene with a decision on remedial measures if there is a preponderance of probability that "there are conditions that significantly restrict or are likely to significantly restrict competition contrary to the purpose of the Act" (our translation). Such remedial measures can be both "behavioral" and "structural", and may encompass most aspects of a business, including the companies' operations, necessary infrastructure and organizational or corporate structure. The key criterion in both cases is that the measure must be necessary to remedy a significant restriction of competition. Structural remedies will only be considered necessary and may be imposed if there are no equally effective behavioral remedies, or if behavioral remedies would be more burdensome. Market players may also propose remedial measures themselves.
A decision on remedial measures will be considered an individual decision pursuant to the Public Administration Act. This means that the NCA will be subject to the obligations, and the parties will have the rights, that follow from the procedural rules of the Public Administration Act, including the right to prior notice, the duty to investigate and provide information, the right of access, the obligation to give reasons, and the right to appeal and take legal action.
When is a market investigation relevant?
According to the MTIF, the market investigation tool may be particularly relevant in markets with few competitors, stable market shares, lack of new entrants, significant vertical integration or substantial economies of scale. The NCA has also communicated that markets subject to special disclosure requirements under Section 24 of the Competition Act are particularly suitable for market investigation.
Inspiration from other European countries
Market investigation tools are not a new phenomenon. The proposal points out that the same development is occurring in several European countries, where there is also a recognition that existing competition regulations are not always sufficient to address serious competition restrictions. One example is the UK's competition authority (the Competition and Markets Authority - CMA), which has had the authority to conduct market investigations since 2002 to determine whether there are conditions in a market that could have an "adverse effect on competition".
Strong opposition during the consultation process
The MTIF's focus on individual markets has led to strong opposition during the consultation process. Some consultation bodies are critical of the fact that the grocery industry appears to be a "premise provider" for the proposal, even though market investigation is intended to be a sector-neutral tool. Several have therefore called for examples of other markets with competitive challenges.
Other objections from the business community are directed at the lack of clarification of parties' rights and legal safeguards, as well as the need for increased predictability in the regulatory framework.
During the consultation process, several also argued that the current Competition Act, and especially the regulatory authority in Section 14, is sufficient to address the challenges described in the consultation paper, and that the market investigation tool would effectively transfer legislative authority from the ministry to the NCA. In response, the MTIF notes in the proposal that the regulatory authority in section 14 regulates situations where market participants' behavior already restricts competition, and that this differs from market investigation, which aims to proactively identify and address potential structural problems in the market before they arise.
Our review of the final legislative proposal shows that the MTIF has addressed several concerns from the consultation process and emphasized the importance of implementing legal safeguards. For example, the NCA's ability to impose interim measures prior to the completion of a market investigation, along with the extensive right to restrict public access during the investigation, has not been preserved.
Next steps
Ensuring well-functioning competition is essential to ensure lower prices and wider selection for consumers. The introduction of a new, potentially intrusive tool that allows the NCA to regulate the market dynamics of private market players before any violations of the Competition Act have been identified raises concerns about whether this is the best approach to uncover potential restrictions on competition.
On one hand, market investigation will provide the NCA with more flexibility and a higher level of detail by allowing it to regulate the market behavior of specific companies. This differs from general regulatory requirements that target an indefinite number or an indefinite circle of people. In this regard, the market investigation tool will provide the NCA with more targeted means to counteract competition problems.
On the other hand, the NCA will have the authority to regulate the otherwise lawful market behavior of private business participants without political and constitutional control. This may make the tool unpredictable and burdensome for several business participants. As highlighted in the Norwegian Bar Association's consultation response, it may be particularly problematic that market investigation gives the NCA the power to require private companies to sell-off key businesses or infrastructure that they have invested significant resources in developing and establishing, without having acted in violation of the Competition Act.
Another aspect that the Ministry apparently does not address is how the implementation of market investigation will affect the enforcement of competition rules. The Ministry acknowledges that the process leading up to a decision will be resource-intensive for the parties involved. In order to mitigate the resource challenges, only specific deadlines from the decision to open a market investigation to making a decision on remedial measures or closing the case have been proposed. However, there are no indications that the decision will lead to an increased allocation of financial resources to the NCA, which is necessary to ensure compliance with the proposed deadlines. In our view, this could potentially have a negative impact on procedural timelines in cases without strict deadlines.
The proposal will now be reviewed by the Standing Committee on Business and Industry in the Norwegian Parliament before it is potentially adopted. It will be interesting to follow how the concerns raised during the consultation process are handled in the further process.
Lovforslaget er tilgjengelig her: https://www.regjeringen.no/no/aktuelt/konkurransetilsynet-far-nytt-verktoy/id3052440/
