Icelandic retail chain broke competition laws

Bónus1The Reykjavik District Court has ordered Hagar to pay ISK 315 million in fines for abuse of market position.

The District Court has upheld a Competition Authority ruling from December 2008 that Hagar should pay a fine of ISK 315 million (USD 2.45 million) for abusing its leading market position. The fine is the biggest such punishment ever handed out in Iceland.

Hagar runs large Icelandic retail chains including Bonus supermarkets.

Hagar’s national share of the grocery market is over 50 percent; and over 60 percent in the Reykjavik region. The company broke competition laws by selling certain products at below cost price – especially by selling dairy products far below their true cost in its Bonus stores in response to a competitor’s newly lowered prices on a wide variety of products in 2005, reports.

The owners of Bonus put the whole chain into a loss-making position purely to starve out its rivals before putting prices up again, which the Competition Authority felt was against the law.

Kaupass (Kronan supermarkets) and Samkaup (Samkaup, Netto and Kasko supermarkets) hoped to increase their market positions during the 2005 ‘price war’, but Hagar’s tactics ensured that Bonus remained on top.

Arion Banki recently re-floated Hagar on the stock market after taking it over due to the bankruptcy of its former mother company.

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