Over the last few weeks, the Norwegian government has issued no less than three proposals which all widely expand the Norwegian Competition Authority's enforcement powers.
The proposals equip the NCA with:
- A market investigation tool with extensive sanction options, both behavioural and structural, without establishing an infringement of competition law
- The right to appeal decisions from the National Competition Appeals Tribunal and bring legal actions before the Norwegian courts
- The right to sanction individuals with administrative civil fines up to 43 MNOK for violations of the Norwegian Competition Act and to impose management quarantines
The proposals bring into question what kind of enforcement regime is necessary and desirable to ensure effective competition. The key takeaways from the proposals are set out below.
1. Proposal for new market investigation tool
A much-anticipated market investigation tool for the NCA
The Norwegian Ministry of Trade, Industry and Fisheries (the "Ministry") is planning to launch a new market investigation tool that allows the Norwegian Competition Authority ("NCA") to initiate investigations and impose behavioral or structural remedies on market participants without establishing an infringement of competition law in the relevant market. Companies should be aware that the proposal, if sanctioned, is likely to entrust the NCA with wide discretion to investigate markets and lead to greater uncertainty for businesses.
Key proposals
Key takeaways from the current proposal include giving the NCA authority to:
- Initiate investigations in markets where competition may be restricted without any grounds to believe the existence of a violation of §§ 10 and 11.
- Adopt temporary measures where necessary
- Adopt formal remedial measures in markets where it can provide evidence that competition is significantly restricted or capable to be significantly restricted contrary to the object of the Norwegian Competition Act, including both behavioral and structural remedies
- Sanction companies for non-compliance with imposed remedial measures
The proposal could arguably lower the threshold for interventions and target tacit collusion and unilateral behavior by non-dominant undertakings not caught by the current prohibitions.
Similar market tools have over the past years been introduced in Iceland, the United Kingdom and have recently been proposed in Denmark and Germany. The UK Competition and Markets Authority ("CMA") has conducted market investigations since 2002, though with more complex governance, procedures and a decision-making structure than the current proposal from the Ministry.
The market investigation tool is envisaged to equip the NCA with the authority to effectively address structural and behavioral challenges in all concentrated markets. The proposition nevertheless seems particularly targeted towards digital markets and the grocery sector, two sectors in which the NCA has previously expressed concerns about the competitive conditions.
Wide discretionary powers to the NCA to investigate markets
The Ministry proposes different thresholds for initiation of a market investigation than for decisions to impose remedial measures. The proposals suggest that the NCA may initiate an investigation where there are circumstances that imply that the competition in the relevant market is or may be in danger of being restricted. Such circumstances may include market concentration, high margins, low innovation, high entry barriers or network effects that limit the customers' options to change supplier.
The Ministry has specifically asked for feedback on whether the threshold for initiation of a market investigation is too low, and should be amended to a requirement of significant restriction of competition in line with the threshold for the imposition of measures. The Ministry has further asked for feedback on the requirement for proof, as the current suggestion of "circumstances that imply" (No. "forhold som tilsier") could be deemed lower than the general starting point in civil proceedings (on the balance of probabilities).
During its investigation, the NCA will explore whether competition in the relevant market is restricted. If this is the case, the investigation must also determine the extent to which competition is restricted and the main distortive drivers behind the restriction. In order to ensure predictability for the market operators, it is proposed that the NCA should form theories of harm at beginning of its investigation. This will not prohibit the NCA from exploring other theories where necessary or relevant, but seems intended as a measure to ensure a more predictable procedure for the companies operating in the market under investigation.
Which remedial measures may the NCA impose in restricted markets?
The NCA may only impose remedies if it proves that circumstances in the relevant market significantly restrict or are capable of signficantly restricting competition contrary to the object of the Norwegian Competition Act. The NCA must substantiate why the restriction is not temporary or short-lived and provide a justification for the necessity and proportionality of the proposed remedial measure.
The proposal exemplifies that in markets characterized by high barriers to entry, possible behavioral remedies may include measures that ensure the products or services interoperability or access to necessary input factors such as data interfaces, licenses or distribution networks.
More invasive is the proposed competence to impose structural remedies on undertakings. The NCA's competence in this context will be strictly limited to cases where behavioral measures are not sufficient to remedy the specific competition concerns. In order to ensure harmonization with the merger control regime, assets acquired as part of a concentration subject to review by the NCA, the CAT or court proceedings during the last five years will be exempted. Assets sold as the result of remedial measures under the market investigation tool cannot be repurchased by the selling companies for a five year period, unless the market conditions have changed sufficiently.
The government proposes that affected market participants should have the opportunity to suggest adequate remedial measures to mitigate any anti-competitive issues arising in the relevant market to the NCA during the investigation. The NCA may also impose temporary remedial measures during the market investigation process if such remedies are necessary. The threshold is seemingly low, and may give the NCA wide powers to impose measures in an interim period.
Procedural guarantees and sanctions
Before it can formally initiate a market investigation, it is proposed that the NCA must conduct a public consultation to ensure all interested parties can present information they consider relevant for the assessment. After the closing of the public consultation, the NCA will have four months to review the received information and decide whether or not to open a formal market investigation.
If the NCA decides to open a formal market investigation, the deadline for imposing remedial measures will be 18 months with a six month extension option in specified circumstances, for example delays caused by deferred deadlines for market players' obligations to provide information. The deadline to appeal a decision on remedial measures is two months from receipt of the decision.
Companies unwilling to incorporate and adopt remedial measures imposed by the NCA will risk sanctions, including administrative infringement fines reaching up to 10 % of the company group's turnover.
2. Proposal for NCA to have powers to bring actions in the Norwegian courts
On 24 March 2023, the government announced its proposal to provide the NCA with formal rights of action in the national courts against decisions from the National Competition Appeal Tribunal ("CAT"). This right is currently only enjoyed by the private undertakings subject to the NCA's decision. The proposal entails that the NCA themselves will be able to bring decisions of the CAT before the national court in cases regarding the enforcement of the Norwegian Competition Act Section 10, 11 and 12 third and fifth paragraph, regulations issued pursuant to Section 14, and the EEA Agreement Articles 53 and 54.
The proposal is a result of a wider legislative review on several procedural aspects of the Norwegian Competition Act and enforcement, launched by the Ministry of Trade and Fisheries in 2021. One might wonder why the Ministry has decided to move ahead with this proposal separately, and the timing of the proposal.
For businesses, the proposal entails that it is no longer only the private undertaking concerned who may bring a decision from CAT before the national courts. Companies who lodge successful appeals at the CAT tribunal should be aware that the decision may be appealed, and consequently be prepared for two rounds in the Norwegian court system (the Appeal Court and the Supreme Court) in the years to come.
3. Proposal for replacement of criminal fines and prison sentences with individual civil measures including administrative fines and management quarantine
The Ministry of Trade, Industry and Fisheries has commissioned an independent inquiry and published an expert report into whether the NCA should have powers to sanction individuals with fines for infringement and other measures including quarantine periods for company management.
Today, the Norwegian Competition Act Section 32 permits the imposition of criminal fines and prison sentences by court order on individuals for infringements of Section 10 and certain other sections of the Norwegian Competition Act.1 The report proposes the repeal of the current powers to impose criminal fines and prison sentences (with the exemption of infringements of Section 10 made under severely aggravating circumstances, cf. Section 32 (2)), in favour of an option to impose individual civil administrative fines on individuals instead.
Key amendments
The key proposals from the report are:
- Introduction of the NCA's authority to impose civil administrative fines on individuals for infringements of Section 10 and certain other administrative provisions in the Norwegian Competition Act. Civil administrative fines for violations of Section 11 is not proposed
- The report proposes that civil administrative fines for infringement of Section 10 are capped at 43 mNOK. For other infringements, the cap is suggested at 9 mNOK. The proposals cover both intent and negligence, and will be applicable not only for people in management positions, but also other employees.
- Option for the NCA to offer leniency for civil administrative fines for natural person in certain cases
- Management quarantine, for up to five years
- The repeal of the current criminal sanction-track, where individuals may risk criminal fines and prison for infringement of Section 10 in the Norwegian Competition Act2
Introduction of civil administrative fines to increase sanction level of individuals
The background for the two-track sanction system with a criminal and an administrative track was originally based on the interest of harmonizing Norwegian competition law with EU competition law. However, later practice seems to indicate that it is the civil administrative route lead by the NCA that has proven most efficient. The criminal sanction route has in the past decade played a more passive role as a silent threat.
The current Section 32 in the Norwegian Competition Act has yet to be enforced. The preventative effect of the current legislation may therefore be somewhat dubious.3 Taking into consideration that an introduction of civil administrative fines and management quarantines are less intrusive than the present criminal sanctions from a legal point of view, the report concludes that it is likely that the NCA will be able to accomplish more with the new proposals.
Management quarantine is drafted as a reaction rather than a sanction, and requires that the relevant board member, other representative in the board, general manager or with an equivalent position has violated a relevant section of the Norwegian Competition Act.4 In addition the NCA must find that the violation entails that the person must be considered unfit (No. uskikket) to hold the management position in the company. Management quarantines may be imposed for a period of up to five years.
Greater harmony with the leniency programme
The current effect of the threat of criminal sanctions under Section 32 of the Norwegian Competition Act has also been criticised over the past few years for negatively affecting the leniency programme. Persons aware of any infringements of the Norwegian Competition Act will theoretically have no incentive to report such infringements in exchange for leniency if they are liable to be held personally responsible for the conduct and risk imprisonment.
The report points out that an enforcement system without any personal liability may lead to a biased allocation of accountability, as all responsibility for the violation will be placed on the relevant undertaking. It proposes a more efficient approach where the NCA is the authority to impose civil administrative fines toward individuals, and the competence to assess on a case-by-case basis whether or not to offer leniency to the natural person.
The proposal raises a number of questions of legal and factual nature, particularly pertaining to whether procedural guarantees are adequately addressed and if sanctioning of individuals is the best way forward to achieve more effective competition.
Footnotes
1. Violations of the following provisions are currently criminalised under Section 32 of the Norwegian Competition Act; Section 18 (1) on notification of concentrations, the standstill obligation in Section 19, violations of decisions pursuant to Sections 12 (1) or (5), Section 16 or 16a, failure to comply with an order pursuant to Sections 24 and 25, the provision of incorrect or incomplete information to competition authorities, breaks seal under Section 25 or violates regulations pursuant to Section 14.
2. With the exemption of infringements of Section 10 made under severely aggravating circumstances, cf. Section 32 (2).
3. Violations of the following provisions are currently criminalised under Section 32 of the Norwegian Competition Act; Section 18 (1) on notification of concentrations, the standstill obligation in Section 19, violations of decisions pursuant to Sections 12 (1) or (5), Section 16 or 16a, failure to comply with an order pursuant to Sections 24 and 25, the provision of incorrect or incomplete information to competition authorities, breaks seal under Section 25 or violates regulations pursuant to Section 14.
4. With the exemption of infringements of Section 10 made under severely aggravating circumstances, cf. Section 32 (2).
Originally published 27 April 2023
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