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Press release – Merger of Lyf og heilsa (DAC) and Lyfjaver annulled

Competition Appeals Committee confirms Competition Authority decision to annul merger in the pharmaceutical sector

10/17/2006

By a decision on last 11 July the Competition Authority annulled the merger of DAC and Lyfjaver, pharmaceutical retail and dose service companies, as the merger was deemed to distort competition and  to be detrimental to the public interest. DAC is an affiliated company of the pharmaceutical retailer Lyf og heilsa. The merger would have had the effect that two pharmaceutical retail chains, Lyf og heilsa, on the one hand, and Lyfja, on the other hand, would have commanded in  excess of 80% of the entire pharmaceutical retail sector in Iceland. The Competition Authority was of the opinion that Lyf og heilsa were sharing a collective dominant position with Lyfja in the pharmaceutical retail sector. It was the conclusion of the Competition Authority that the collective market dominance of Lyf og heilsa and Lyfja enabled the companies to collude in the market without needing to take account of competitors or consumers. In the opinion of the Authority the companies were therefore in a position to restrict competition and raise prices. If the merger in question had taken place, this position would have become even more serious from the point of view of competition.

DAC and Lyf og heilsa appealed the decision of the Competition Authority to the Competition Appeals Committee, which returned its decision today. The Competition Appeals Committee stated that it had been demonstrated that the merger would distort competition and that the Competition Authority had therefore been correct in annulling it. The Committee therefore confirmed the decision of the Competition Authority.

The pharmaceutical retail sector has seen substantial concentration in recent years. The Competition Authority believes it is very significant that this merger was prevented and increased oligopoly in this important market thereby deterred. Lyfjaver has been a strong competitor of the large pharmaceutical chains and focused on offering pharmaceutical products at low prices. The exit of Lyfjaver from the market would have resulted in a significant distortion of competition which would have been detrimental to the interests people who need to take medication. The Competition Authority also believes that the decision of the Competition Appeals Committee sets a significant precedent which will make it easier for the Competition Authority to prevent tendencies towards oligopoly in various markets in Iceland.

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