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Competition Authority annuls merger of Lyf og heilsa (pharmaceuticals retailer) and Lyfjaver (sales of pharmaceuticals etc.)

7/11/2006

Last March, the company DAC ehf acquired the pharmaceuticals distributor Lyfjaver ehf. DAC and Lyfjaver engage in the importation of pharmaceuticals and dispensing of dosages for individual patients and institutionalised patients. In addition, Lyfjaver operates pharmacies which are engaged in competition, among other things, with pharmacies owned by Lyf og heilsa hf., which belongs to the same consolidation as DAC.
 
In addition to the fact that the acquisition by DAC of Lyfjaver constitutes a merger in the understanding of the Competition Act, it also involves a merger of Lyf og heilsa and Lyfjaver. By its decision of 11 July, the Competition has annulled the merger.
In the absence of any measures, the anticompetitive impact of the merger would mostly have been felt in the retail market for pharmaceuticals and the market for patient dosaging.
The pharmaceuticals market has undergone significant concentration in recent years. The merger would have had the effect that two pharmaceutical retail chains, Lyf og heilsa on the one hand and Lyfja hf. on the other hand, would have commanded over four fifths of the pharmaceuticals retail market in the country. In the opinion of the Competition Authority, Lyf og heilsa shares market dominance with Lyfja in the pharmaceuticals retail market. It is the opinion of the Competition Authority that the joint market dominance of Lyf og heilsa and Lyfja, as described in the decision of the Authority, will enable the companies to co-ordinate their market behaviour without any need for consideration of competitors or consumers. This places the companies in a position where they can restrict competition and raise prices. If the merger in question had taken place this situation would have been even more serious from the point of view of competition. The merger would have resulted in a significant distortion of competition to the detriment of the interests of persons who need pharmaceuticals.
In recent years a separate market has been created where pharmaceuticals are packaged and sold in dosages, both for individual patients and patients in institutions. With the merger, the number of companies in this market would have been reduced from three to two. It is the opinion of the Competition Authority that the merger would have led to a dominant position for DAC in the dosaging market and restricted competition. From its position, the company could have distorted competition and decided its pricing, services and business terms to a significant extent without consideration of competitors or customers. 
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