The investigation of the Icelandic Competition Authority (ICA) into the breaches of Húsasmiðjan, a hardware and home improvement store chain, against the Competition Act finalised with a settlement

7/15/2014

A former owner of Húsasmiðjan admits to having been in breach of the Competition Act and pays 325 million ISK (approx. 2,05M €) in an administrative fine.

The undertaking presently operating Húsasmiðjan takes measures intended to enhance competition.

The ICA has investigated the alleged breaches of Húsasmiðjan, a hardware and home improvement store chain, and Byko, also a hardware and home improvement store chain, against Article 10 in the Competition Act, which bans illegal agreements and resolutions between undertakings, and the alleged breaches of Húsasmiðjan against the decision of the Competition and Consumer Authority (a predecessor of the ICA) No. 19/2002.

The activities investigated took place in a period that ended in March 2011. In the period under investigation, the undertaking Holtavegur 10 ehf. operated Húsasmiðjan, (here after „the old Húsasmiðjan“).  Both the store chain and the brand of Húsasmiðjan were later on sold to a new owner, which operates Húsasmiðjan at present. The new owner and operator of Húsasmiðjan is not in any way connected with the breaches of the Competition Act that have been admitted and will be described here.

The undertakings Holtavegur 10 ehf. and Húsasmiðjan turned to the ICA with the aim to finalise the case with a settlement. On that basis the ICA has made a settlement with the undertakings. The settlement is based on an authorisation in the Competition Act.

Serious breaches of the Competition Act admitted

By making the settlement the former owner of Húsasmiðjan, Holtavegur 10 ehf., has admitted to serious breaches against the Competition Act and a former decision of the Icelandic competition authorities. The settlement includes the following:

An admission that the old Húsasmiðjan has breached against Article 10 in the Competition Act with an extensive illegal collusion with Byko, a competitor of Húsasmiðjan. This collusion included i.a.:

• Regular, usually weekly, collusive exchange of information with Byko on price, inventories, etc. in order to raise prices and fight against price reductions of the so called rough hardwares (hardwares, such as timber, rockwool, steel).

• Collusive discussions with Byko with the aim of raising prices on all price offers of hardware in periodic steps.

• Collusion with Byko with the aim of preventing price competition on the market for impregnated timber (Icelandic: gagnvarið timbur, pallaefni).

• A joint effort with Byko to convince Múrbúðin, a new competitor on the market for rough hardware, to participate in collusion on hardware prices and to have made a decision in collaboration with Byko to monitor the actions of Múrbúðin on the market.

It is admitted that the old Húsasmiðjan breached against conditions set in the decision of the Competition and Consumer Authority no. 19/2002. These conditions were set when Byko, Húsasmiðjan and Kaupfélag Skagfirðinga, a co-operative society, purchased shares in an incumbent rockwool producer Steinullarverksmiðjan hf. (now Steinull hf.). The conditions were intended to prevent the joint ownership of Byko and Húsasmiðjan of Steinull from limiting competition. It is admitted that the old Húsasmiðjan breached against the conditions i.a. by having used its influence over Steinull in order to hinder Múrbúðin in getting certain trading conditions, and by this the old Húsasmiðjan placed Múrbúðin at a competitive disadvantage.

The undertaking which formerly operated Húsasmiðjan is to pay 325 million ISK in an administrative fine

The aforementioned settlement between the ICA and Holtavegur 10 ehf. will make the ongoing investigation of the Authority easier. The settlement will pave the way for healthier, and more competitive, market conditions to the benefit of the consumers sooner than if no settlement had been made. It is also important, in this respect, that when the investigation began, Húsasmiðjan took immediate steps in order to prevent further breaches against the Competition Act.

The fact that an undertaking requests a settlement in a case and admits to having breached against the Competition Act justifies a lower administrative fine than would otherwise have been set. This creates an incentive and a possibility of speeding up investigations and actions to the benefit of consumers. The ICA deemed it fitting that Holtavegur 10 ehf. pay 325 million ISK in an administrative fine as a result of the breaches.

Preventing similar breaches

Even though the current owners of Húsasmiðjan are not in any way connected with these breaches, the ICA deems it important to prevent the possibility of similar breaches in the future. By preventing them, more active competition in an important market can be ensured in the future. The ICA has also reached a settlement with Húsasmiðjan simultaneously with the settlement made with Holtavegur 10 ehf.

According to the settlements the conditions that were formerly set because of the ownership of Steinull are made stricter than before. It includes, i.a., that the board member representing  Húsasmiðjan leaves the board of Steinull, and in his place an independent board member is appointed. Húsasmiðjan also obligates itself to install and uphold a competition law compliance plan and ensure that the directors and the employees of the undertaking will be fully informed about the demands that the Competition Act makes on the operation of undertakings on a competitive market.

Background information

On March 8 2011 the Police Department of Economic Crime (now the Special Prosecutor) conducted a dawn raid at the premises of Byko and Húsasmiðjan. This was done in collaboration with the ICA.

The investigation of the Special Prosecutor has been aimed at the alleged breaches of the employees of the undertakings based on a complaint from the ICA. According to the Competition Act such breaches are to be investigated by the police when the ICA has charged the breach. The Special Prosecutor has now prosecuted certain employees of the aforementioned undertakings.

The ICA has investigated the breaches of the undertakings simultaneously with the investigation of the Special Prosecutor. In May of this year, the ICA sent the undertakings party to the case a detailed statement of objections where a preliminary finding was made on the alleged breaches. After this, Húsasmiðjan and Holtavegur 10 requested a settlement in the case, as mentioned before.

The aforementioned settlements are not connected with the case pending within the office of the Special Prosecutor.

The alleged breaches of Byko and Steinull are still under investigation by the ICA.