Kohtuasi

L_3901597/1 40365-501 www.kvale.no

Oslo, 14 December 2024

GMA/40365-501

TO THE REGISTRAR OF THE EFTA COURT

APPLICATION

submitted in accordance with Article 108(2)(b) of the EEA Agreement, Article 36 of the

Surveillance and Court Agreement, and Article 19 of the Statute of the EFTA Court, by

SKEL fjárfestingafélag hf.

with its permanent address at Bjargargata 1, 102 Reykjavík, Iceland, represented by

Gjermund Mathisen, Kvale Advokatfirma DA, as Counsel, against the

EFTA Surveillance Authority

for the annulment of EFTA Surveillance Authority ("ESA") Decision No 159/24/COL of

3 October 2024 requiring SKEL fjárfestingafélag hf. together with all undertakings

directly or indirectly, solely or jointly controlled by it, including Lyfjaval ehf., to submit to

an inspection pursuant to Article 20(4) of Chapter II of Protocol 4 to the Surveillance and

Court Agreement ("SCA") ("the contested decision").

Registered at the EFTA Court under NºE-32/24-01 on 16 day of December 2024.

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I. INTRODUCTION AND OVERVIEW

(1) Lyfjaval ehf. ("Lyfjaval") operates seven retail pharmacies in Iceland – six in the

greater capital area and one in Keflavík. Lyfjaval is a relatively small player in the

Icelandic retail pharmacy sector, and has some 7% of total annual turnover in

retail pharmacy sales in Iceland. The company is indirectly controlled by SKEL

fjárfestingafélag hf. ("SKEL" or the "Applicant").

(2) Lyf og heilsa hf. ("Lyf og heilsa") also operates retail pharmacies in Iceland – 18

in the greater capital area and six elsewhere.1 With more than 29% of total annual

turnover in retail pharmacy sales in Iceland, Lyf og heilsa is a significantly larger

player in the sector, at over four times the size of Lyfjaval. Lyf og heilsa is

controlled by Faxar ehf., which is wholly owned by Faxi ehf., which in turn is

wholly owned by Toska ehf.

(3) At the heart of the case is an asset swap agreement of 26 April 2022 between

Faxar ehf. and Lyfjaval ("the asset swap agreement") (Annexes A.1 and A.2),

pursuant to which the parties traded retail spaces in two small, local shopping

centres in Reykjavík municipality, where each party operated a pharmacy.

Lyfjaval gave up its retail space in Mjóddin2 – after opening a new pharmacy

around the corner, in Suðurfell 4, a move which had been in the works since long

before the asset swap agreement was entered into. Faxar ehf. gave up its retail

space in Glæsibær3, in which Lyf og heilsa operated a pharmacy that had long

since been for sale, for lack of profitability.

(4) The asset swap agreement was duly notified to the Icelandic Competition

Authority ("ICA") as two mergers. The ICA opened a phase II investigation and

issued a Statement of Objections, but ultimately the mergers were approved as

the ICA did not adopt any decision to prohibit them, or impose remedies, within

the legal time limit.

1 See Apótek - Lyfjastofnun, Lyf og heilsa and About Apótekarinn

2 Forsíða | Mjóddin.

3 Forsíða | Glæsibær.

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(5) On 14 October 2024, ESA commenced an unannounced inspection at the business

premises of SKEL and Lyfjaval, based on the contested decision (Annexes A.3

and A.4). In accordance with its Articles 3 and 4, the contested decision was

notified to SKEL immediately before the inspection.

(6) The same day, ESA published a brief press release regarding the inspection.4

(7) According to Article 1 of the contested decision, ESA suspects Lyfjaval of

participating in anti-competitive conduct contrary to Article 53 EEA, "in relation

to the retail pharmacy market in Iceland". Specifically:

The suspected agreements and/or concerted practices include the elimination of

direct competition with Toska (in particular through Toska ehf.'s subsidiary Lyf og

heilsa hf.) that took place using traditional walk-in pharmacies, where Lyf og heilsa

hf. benefits from Lyfjaval ehf.'s closure of certain of its traditional walk-in

pharmacies which previously directly competed with Lyf og heilsa hf.'s traditional

walk-in pharmacies, and where Lyfjaval ehf. concentrates on drive-through

pharmacies, while Lyf og heilsa hf. does not enter the drive-through pharmacy

segment.

(8) SKEL seeks the annulment of the contested decision. The application is based on

four pleas. First, that the contested decision provides insufficient reasoning.

Second, that there is no effect on trade. Third, that ESA did not have sufficiently

serious indicia to justify an unannounced inspection. Fourth, that conduct relied

on by ESA to justify the inspection has already been approved by the competent

Icelandic authorities as notified and approved mergers.

(9) In a separate section of the Application, SKEL proposes the adoption of a measure

of organisation of procedure.

(10) It is known that ESA also carried out an inspection at the premises of Lyf og heilsa.

Further, SKEL understands that the inspection decision on which ESA must have

4 In Icelandic: Samkeppni: Eftirlitsstofnun EFTA gerir fyrirvaralausa athugun | ESA.

In English: Competition: The EFTA Surveillance Authority carries out unannounced antitrust inspection | ESA.

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based that inspection will be challenged in a separate Application. Seeing as the

present Application effectively concerns the same case, substantively, and

presumably the same investigation on ESA's part, SKEL would encourage the

Court to see the two Applications in context.

II. FIRST PLEA: INSUFFICIENT REASONING

(11) According to settled case law, the statement of reasons required under Article 16

SCA must be appropriate to the measure at issue and must disclose in a clear and

unequivocal fashion the reasoning followed by ESA, in such a way as to enable the

persons concerned to ascertain the reasons for the measure and thus enable them

to defend their rights and enable the Court to exercise its power of review (see,

inter alia, the judgment in Casino, Guichard-Perrachon and AMC v Commission,

T-249/17, EU:T:2020:458,5 paragraph 107 and case law cited; and Case E-1/22

G. Modiano Limited & Standard Wool (UK) Limited v ESA, judgment of 24 January

2023, paragraph 84 and case law cited).

(12) In an inspection decision, such as the contested decision, ESA must state as

precisely as possible the presumed facts which it intends to investigate, namely

what it is looking for and the matters to which the inspection must relate. More

specifically, the inspection decision must contain a description of the features of

the suspected infringement, indicating the market thought to be affected, the

nature of the suspected restrictions of competition and the sectors covered by the

alleged infringement to which the investigation relates, and explanations of the

way in which the undertaking is supposed to be involved in the infringement (see,

5 The judgment in Casino, Guichard-Perrachon and AMC v Commission, T-249/17, EU:T:2020:458, is part of a complex

of cases which also includes, from the General Court, the judgments in Intermarché Casino Achats v Commission, T-254/17, EU:T:2020:459, and Les Mousquetaires and ITM Entreprises v Commission, T-255/17, EU:T:202:460; and, from the Court of Justice, the judgments in Les Mousquetaires and ITM Entreprises v Commission, C-682/20 P, EU:C:2023:170, Casino, Guichard-Perrachon and AMC v Commission, C-690/20 P, EU:C:2023:171, and Intermarché Casino Achats v Commission, C-693/20 P, EU:C:2023:172. Through these six judgments, the Commission inspection decisions at issue were all ultimately annulled in full.

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inter alia, the judgment in Casino, Guichard-Perrachon and AMC v Commission,

T-249/17, EU:T:2020:458, paragraph 110 and case law cited).

(13) That obligation to state specific reasons constitutes a fundamental requirement

in order to show not only that the proposed intervention within the undertakings

concerned is justified, but also to enable the undertakings concerned to

understand the scope of their duty to cooperate while at the same time

maintaining the rights of the defence. Indeed, it is important to enable the

undertakings covered by inspection decisions imposing obligations on them,

which entail interferences with their private life and failure to comply with which

can expose them to heavy fines, to grasp the reasons for those decisions without

excessive interpretative effort, so that they can exercise their rights efficiently

and in good time. It follows, moreover, that the scope of the obligation to state

reasons for inspection decisions, as set out in the preceding paragraph, cannot in

principle be restricted on the basis of considerations concerning the effectiveness

of the investigation (see, inter alia, the judgment in Casino, Guichard-Perrachon

and AMC v Commission, T-249/17, EU:T:2020:458, paragraph 111 and case law

cited).

(14) In an inspection decision, ESA must supply information showing that it has

serious indicia of an infringement. Albeit without having to disclose the indicia in

the inspection decision itself, ESA is required to disclose in detail in the decision

that it had in its file information and indicia providing reasonable grounds for

suspecting the infringement of which the undertaking subject to inspection is

suspected (see, inter alia, the judgment in Casino, Guichard-Perrachon and AMC v

Commission, T-249/17, EU:T:2020:458, paragraph 114 and case law cited).

(15) ESA failed to meet this standard in the contested decision.

(16) Key parts of the contested decision were, and remain, difficult for SKEL to

understand.

(17) In recital (4), chapeau, of the contested decision, ESA alleges that "Lyf og heilsa

benefits from Lyfjaval's closure of certain of its traditional walk-in pharmacies,

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which previously directly competed with Lyf og heilsa's traditional walk-in

pharmacies". This is difficult to understand, for five reasons.

(18) First, in August of 2022, Lyfjaval opened a new pharmacy in Suðurfell 4, no more

than a four or five minute drive from its old pharmacy in Mjóddin.6 The new

location is in a property owned by another company in the same entity, the move

was commercially motivated, and it enabled Lyfjaval to keep competing

effectively in the area. Almost a year and half later, in December 2023, the old

pharmacy in Mjóddin was then closed. Contrary to what is alleged in recital (4),

chapeau, of the contested decision, it is difficult to see this case as an example of

Lyf og heilsa benefitting from losing direct competition through a closure of a

Lyfjaval pharmacy. On the contrary, Lyfjaval moves just around the corner and

strengthens its presence in this local market by improving its service with longer

opening hours and a drive-through option.

(19) Second, Lyfjaval also moved its pharmacy in Reykjanesbær to a better location in

January/February of 2023, opening in the new location the week after closing in

the old location. Moreover, the Lyfjaval pharmacy in the new location in

Reykjanesbær remains in direct competition with Lyf og heilsa's pharmacy in

Reykjanesbær; again, it is a four or five minute drive.7 Contrary to what ESA

alleges in recital (4) of the contested decision, it is difficult to see this case as an

example of Lyf og heilsa benefitting from losing direct competition through a

closure of a Lyfjaval pharmacy. Rather, Lyfjaval strengthens its presence in this

local market as well, through offering a better location, longer opening hours and

better services for customers, including a drive-through option.

(20) Third, no other Lyfjaval pharmacy has been closed. And so SKEL is at a loss as to

what exactly ESA is referring to.

6 Suðurfell 4, 111 Reykjavík, Iceland to Mjóddin - Google Maps.

7 Apótekarinn Keflavík to Lyfjaval Reykjanesi (Apótek Suðurnesja) - Google Maps.

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(21) Fourth, Lyfjaval even opened an entirely new pharmacy in direct competition

with two of Lyf og heilsa's pharmacies in Miklabraut,8 in February 2024.

(22) Fifth, every move, opening and closure of any one of Lyfjaval's pharmacies is a

matter of public record.9 All the more so, it is difficult to understand ESA's

allegation.

(23) In recital (4), point b, ESA refers to "SKEL's new drive-through pharmacy

strategy". SKEL struggles to identify with this. For nearly two decades, Lyfjaval

has offered a drive-through service to its customers. In 2005, the former owner

of Lyfjaval opened the first pharmacy with drive-through windows in

Hæðarsmári. He also had drawn up plans to alter his pharmacy, in Reykjanesbær,

by including drive-through windows.

(24) In July 2020, Lyfsalinn ehf. ("Lyfsalinn") opened a pharmacy with drive-through

windows in Vesturlandsvegur. At that time, Skeljungur ehf. (now SKEL) held only

a 10% stake in Lyfsalinn, and so did neither control that entity nor dictate its

strategy. The following year, Lyfsalinn bought Lyfjaval, and Skeljungur later

gained control over Lyfjaval by way of majority shareholding.

(25) Skeljungur was (and still is, now as Orkan) an Icelandic petrol station operator

with about 70 petrol stations around the country.10 Therefore, Skeljungur was in

a good position to continue with Lyfjaval’s strategy to emphasise the use of drive-

through windows to improve services to their retail customers.11 This strategy is

not new, and has been a matter of public record for years.

(26) By way of example, when the pharmacy in Reykjanesbær was moved to a better

location (see paragraph (19) above) and outfitted with a drive-in option, this was

8 Lyfjaval Miklubraut to Lyf & heilsa Kringlunni - Google Maps.

Apótekarinn Austurveri to Lyfjaval Miklubraut - Google Maps.

9 See e.g. Um okkur - Lyfjaval.is.

10 Orkan: Um okkur.

11 For comparison, the owner of the largest petrol station operator in Iceland (Festi hf.) recently acquired the largest pharmacy chain in Iceland (Lyfja hf.). Following the merger, Festi hf. will focus on shared use of retail space, by using drive-through services for pharmaceutical sales. Presentation available here (see slide 7): PowerPoint Presentation or through the link on Festi's website: Financial information (2024 – 2. Quarterly – Investor presentation).

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according to the plans laid by the former owner and the drawings he had made.

The plans were executed under SKEL's ownership, but were by no means new

(see paragraph (23) above).

(27) Moreover, all of Lyfjavals pharmacies are walk-in pharmacies, even as a number

of them have a drive-through option for customers.12 Lyfjaval has no such thing

as a pure "drive-through pharmacy". Indeed, Icelandic law does not allow for pure

drive-through pharmacies, as every physical pharmacy must have an entrance

where customers can enter on foot, and a secluded space where the customer can

consult the pharmacist in private. This follows from the Medicinal Products Act

No 100/2020 and the Regulation on Pharmacy Licenses and Drug Stores No

1340/2020, especially Article 26, paragraphs 1 and 2 of the latter. For

confirmation of this interpretation of national law, reference is made to

explanations provided by the Icelandic Medicines Agency ("Lyfjastofnun") in

February 2023 (Annexes A.5 and A.6).

(28) Further, the allegations in recital (4), point c, that the suspected practices may

have involved "a restriction on Lyfjaval's ability to open traditional walk-in

pharmacies" are confusing. In April 2021, Lyfjaval made an offer to open and run

a traditional pharmacy in Kirkjusandur (Annexes A.7 to A.10), a complex owned

by a third party, but ultimately Lyfjaval's offer was not accepted. In early 2022,

Lyfjaval tried opening a traditional pharmacy in Austurstræti in one of SKEL’s

convenience stores (Annexes A.11 to A.14), but could not get the necessary

permits. Furthermore, in October 2023, SKEL – through its subsidiary Heimkaup

ehf., which since 1 July 2023 owns Lyfjaval13 – engaged an external advisor in a

search for opportunities to buy other pharmacies, i.e. Lyfjaver (Annexes A.15

and A.16, bottom of page 1). In 2024, SKEL considered buying Borgarapótek

(Annexes A.17 and A.18).

(29) Equally puzzling are the allegations in recital (4), point c, that the suspected

practices may have involved "a restriction on Lyf og heilsa's ability to open drive-

12 See e.g. Opnunartími - Lyfjaval.is.

13 Heimkaup.

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through pharmacies", as there is no indication – and certainly not in the contested

decision – why Lyf og heilsa, as one of the two big players in the Icelandic retail

pharmacy sector, would coordinate with a small player such as Lyfjaval, of one

fourth the size, and agree to restrict its own ability to open "drive-through

pharmacies". There is also no indication why Lyfjaval would desire any such

coordination. In fact, there are no obvious indications that Lyf og heilsa is – or

ever has been – inclined to offer drive-through services at all, as it does not have

access to suitable retail spaces without substantial investment or cooperation

with a third party.

(30) Further, according to recital (6) of the contested decision, the alleged

anticompetitive conduct may have started as early as in May 2021. However, no

indication is given as to what might have happened in May of 2021, or at any other

time that year, so as to initiate an infringement of Article 53 EEA. Indeed, the only

indication provided of potentially anticompetitive conduct at a more specific

point in time, is the reference to the asset swap agreement, of 26 April 2022, see

recital (4), point a.

(31) Especially viewed against the background of the national merger proceedings,

which concerned precisely the transactions that in recital (4), point a, is referred

to as an asset swap agreement (see section V below), the remainder of recitals (3)

to (6) appears to SKEL as an ill-founded attempt to justify ESA's jurisdiction.

(32) For all these reasons, ESA has infringed its obligation under Article 16 SCA.

(33) In the event that the Court nonetheless should find the contested decision to be

sufficiently reasoned, and the Court therefore must review the merits of the

decision, SKEL submits that in accordance with settled case law this review must

take into account the information on which ESA based the decision. To that end,

seeing as ESA has not disclosed the information referred to in the contested

decision, SKEL will propose that the Court adopt a measure of organisation of

procedure requiring ESA to produce the information (see section VI below) and

requesting that SKEL express its views on the information produced.

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III. SECOND PLEA: NO EFFECT ON TRADE

(34) Retail pharmacy operations are very much local, in Iceland as in many other

countries, and the use of the private car is the preferred way of transport. People

tend to go to the nearest pharmacy to where they are, or to a pharmacy "just

around the corner" from their home or workplace, and they tend to go there by

car. The one pharmacy does not sell better medication than the other, and for

prescription drugs you pay basically the same, so convenience in the form of

accessibility plays an important role.

(35) The local nature of competition in retail pharmacy operations is also reflected in

e.g. the Statement of Objections from the ICA in the merger cases concerning the

asset swap agreement (see further section V below). There, ICA's preliminary

assessment was that the concentrations would significantly distort competition

in the market, as they entailed "harmful local competitive effects of the former

concentration in Mjóddin, and the immediate vicinity on the one hand, and by the

harmful local competitive effects of the second concentration in Glæsibær and the

immediate vicinity on the other" (Annexes A.19 and A.20, page 16, paragraph

65).

(36) Further, arguing in its Statement of Objections that the asset swap agreement

violated Article 10 of the Icelandic Competition Act and Article 53 EEA, the ICA

described the small, local shopping centres in Glæsibær and Mjódd as separate

"competitive areas" (Annexes A.19 and A.20, pages 23–24, paragraphs 96–

97). In this light, SKEL struggles to see how the transactions could now be

considered to have an effect on trade within the EEA.

(37) Whereas ESA is not required, in an inspection decision, to delimit the relevant

market precisely, and so by extension cannot be required to positively

demonstrate the required effect on trade within the EEA (compare the judgment

in České dráhy v Commission, C-538/18 P and C-539/18 P, EU:C:2020:53,

paragraphs 42 and 80 and case law cited), the particular type of markets involved

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forms the background against which ESA's competence – or lack of such – must

be assessed.

(38) Agreements that are local in nature are in themselves not capable of appreciably

affecting trade between EEA States.14 It is therefore especially difficult to see how

the asset swap agreement could have the required effect on trade.

(39) In any event, given the particularly local nature of retail pharmacy markets,15 ESA

should not be considered to have sufficiently established the potential

application of Article 53 EEA, and thereby ESA's competence, through the one

recital in the contested decision that appears to address this issue, namely recital

(5):

According to the information available to the Authority, the involved undertakings

operate pharmacies as pharmacy chains both within and outside the Reykjavik

capital area. The Reykjavik capital area represents almost 70% of all retail sales of

pharmaceuticals in Iceland. The alleged anti-competitive conduct therefore covers

a significant part of the Icelandic market.

IV. THIRD PLEA: SUFFICIENTLY SERIOUS INDICIA NOT PRESENT

Legal standard

(40) The requirement for protection against arbitrary interference by the public

authorities with the sphere of private activities, as reflected in e.g. Article 8 ECHR,

prohibits ESA from ordering an inspection if it did not have serious indicia to

suspect an infringement of the competition rules.

14 See ESA's Guidelines on the effect on trade concept contained in Articles 53 and 54 of the EEA Agreement, OJ C

291/46, 30.11.2006, paragraph 91.

15 Again, this goes for Iceland as it does for many other countries. For comparison, see the judgment in Sbarigia, C-393/08, EU:C:2010:388, paragraph 32, where the Court of Justice found it "quite obvious" that the rejection of an exemption in relation to the opening periods of "a pharmacy located in a specific municipal area of the municipality of Rome, cannot… affect trade between Member States within the meaning of Articles 81 EC and 82 EC", even as the pharmacy was situated "in the heart of the city’s tourist area" (paragraph 6), and even if another pharmacy "located near the 'Termini' railway station, with the same specific type of clientele", did get an exemption (paragraph 8).

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(41) Indeed, at the time of adoption of an inspection decision, ESA must have material

and actual serious indicia that lead it to suspect the existence of an infringement.

Or, in other words, indicia of such a kind as to give rise to a reasonable suspicion

leading to presumptions of an infringement (see the judgment in Casino,

Guichard-Perrachon and AMC v Commission, T-249/17, EU:T:2020:458,

paragraph 183 and case law cited).

(42) It is for the Court, in order to be satisfied that an inspection decision is not

arbitrary, that is to say, that it was not adopted in the absence of any circumstance

of fact and of law capable of justifying an inspection, to ascertain whether ESA

had sufficiently serious indicia to suspect an infringement of the competition

rules by the undertaking concerned (see, inter alia, the judgment in Casino,

Guichard-Perrachon and AMC v Commission, T-249/17, EU:T:2020:458,

paragraph 166 and case law cited).

(43) It is therefore necessary to determine the indicia in ESA's possession and on the

basis of which it ordered the inspection at issue (and to this end, the Applicant

proposes a measure of organisation of procedure, see section VI below), before

assessing whether those indicia were sufficiently serious for it to suspect that the

infringements at issue had been committed and to justify in law the adoption of

the contested decision (see the judgment in Casino, Guichard-Perrachon and AMC

v Commission, T-249/17, EU:T:2020:458, paragraph 168).

ESA cannot have had sufficiently serious indicia

(44) SKEL refers to its submission in sections II and III above regarding insufficient

reasoning and lack of effect on trade. Given how the public record of pharmacy

moves and openings, etc., does not square with ESA's allegations, SKEL fails to

understand that ESA could have had information in its possession, according to

which SKEL and Toska "eliminated direct competition between each other".

(45) In any case, SKEL pleads – for the same reasons as set out in sections II and III

above – that ESA cannot have had sufficiently serious indicia of a breach of Article

53 EEA.

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(46) In particular, SKEL highlights that ESA cannot have had sufficiently serious

indicia that the asset swap agreement referred to in recital (4), point a, of the

contested decision, could constitute an infringement of Article 53 EEA, seeing as

the asset swap agreement consists of two previously notified and approved

concentrations under Section 17, litra c, of the Icelandic Competition Act. On this

particular issue, see further section V below.

Cherry-picking

(47) It is standard practice for ESA to work closely with national authorities, in

particular the national competition authority. ESA has not disclosed the origin of

this investigation, however, at a meeting SKEL had asked for with ESA, in Brussels

on 26 November 2024, it came to light that the investigation could stem from

information provided by a national authority.

(48) Also, under Article 20(4) of Chapter II of Protocol 4 SCA, ESA shall take an

inspection decision only after consulting the competition authority in whose

territory the inspection is to be conducted, i.e. the ICA. That this was done, is

confirmed in the preamble to the contested decision. ESA's press release also

points to cooperation with the ICA. Moreover, effectively the same conduct has

already been the subject of investigation by the ICA, and it appears inconceivable

that the ICA and ESA would be running competing investigations.

(49) In any event, given the public history of the asset swap agreement in Iceland, ESA

must have been in possession of documentation from the merger cases when

adopting the contested decision. However, as information in the merger cases is

effectively exculpatory for SKEL, it appears that ESA may have cherry-picked

information when referring to indicia in the contested decision.

(50) Such cherry-picking, too, would entail arbitrary interference with the sphere of

private activities and SKEL's rights in this respect.

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Fishing expedition

(51) To the extent that the statement of reasons for an inspection decision

circumscribes the powers conferred on ESA's agents, a search may be made only

for those documents coming within the scope of the subject-matter of the

inspection (see the judgment in České dráhy v Commission, C-538/18 P and

C-539/18 P, EU:C:2020:53, paragraph 99 and case law cited).

(52) When the contested decision defines the potential temporal scope of the

suspected infringement, seemingly randomly, as May 2021 until today, the

contested decision effectively constitutes a vehicle for a fishing expedition.

Indeed, at the inspection ESA searched for information predating May 2021, even

going back to 2019. A screenshot of the first few results of this search is annexed

(Annexes A.21 and A.22).16 ESA also seized a significant number of documents

from 2020 and the first months of 2021. SKEL has compiled a list of the

documents at issue (Annexes A.23 and A.24).17

(53) For this reason, too, the contested decision entails an arbitrary interference with

the sphere of private activities and SKEL's rights in this respect.

V. FOURTH PLEA: CONDUCT CLEARED BY WAY OF APPROVED MERGERS

(54) In recital (4), point a, of the contested decision, ESA specifies that the suspected

practices may, notably, have involved the asset swap agreement.

(55) The asset swap agreement consists of the selling of retail spaces in two small,

local shopping centres in Reykjavík municipality, i.e. Mjóddin18 and Glæsibær19.

16 The Applicant assumes that ESA will not dispute the fact that the search encompassed these messages, and so has

not annexed the whole search, which includes a large number of messages, also from later years. The evidentiary point, however, is only that the search encompassed messages all the way back to 2019.

17 On the assumption that ESA will confirm, or at the very least not dispute, that the listed documents were indeed seized by ESA at the inspection, and so as not to unnecessarily overburden the Application with annexes, especially seeing that the evidentiary point is when the seized documents date from, and not their substantive contents, SKEL has not annexed the documents themselves.

18 Forsíða | Mjóddin.

19 Forsíða | Glæsibær.

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Both parties owned a retail space in each centre, where one of their pharmacies

was located. Due to stipulations in its loan agreement with Arion banki hf.,

Lyfjaval was under the obligation to sell its retail space in Mjóddin (Annexes

A.25 and A.26, Articles 8.2(b) and 14.2). The buyer was Faxi ehf., and as

consideration, Lyfjaval got Faxi’s retail space in Glæsibær, where Lyf og heilsa’s

pharmacy was located, and a cash payment. Lyf og heilsa had already decided to

close its pharmacy in Glæsibær, due to poor financial performance. Lyfjaval had

also, already long before, decided to open another pharmacy in Suðurfell 4, just

around the corner from Mjóddin. As these real estate transactions would have the

same effect on the retail market for sale of pharmaceuticals as selling the

pharmacies as such, they were notified to the ICA, by late autumn 2022, as two

separate concentrations under Article 17, litra c, of the Icelandic Competition Act.

(56) The ICA investigated the transactions and issued a Statement of Objections. After

receiving comments from both parties, the ICA adopted a decision to discontinue

its assessment of the concentrations. On appeal, the Competition Appeals

Committee ("CAC") found that the ICA had erred in law when discontinuing its

assessment, without approving or prohibiting the mergers. The CAC ruled that

the ICA was obliged to conclude the merger cases pursuant to the Icelandic

Competition Act. As the ICA had not adopted any prohibition decisions within the

deadline for intervention, the concentrations were effectively approved following

rulings No 1/2023 and 2/2023 of the CAC.20

(57) SKEL submits that suspected practices, insofar as they involve the asset swap

agreement, have already been assessed and approved under the merger control

regime in Iceland, based on comprehensive information and documentation. The

ICA cannot then choose ex post to investigate the very same conduct as an alleged

breach of Article 53 EEA, and neither can ESA.

(58) The system of a harmonised and one-stop shop merger filing regime presupposes

that notified and approved mergers are not subject to ex-post infringement

20 Ruling No 1/2023: https://www.samkeppni.is/media/urskurdir-2023/Urskurdur-AFNS-1-2023.pdf.

Ruling No 2/2023: https://www.samkeppni.is/media/urskurdir-2023/Urskurdur-AFNS-2-2023.pdf.

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assessment by the competition authorities. Any other solution would undermine

the effectiveness, predictability and legal certainty that must be guaranteed to the

parties to a concentration (compare the judgment in Illumina v Commission, C-

611/22 P and C-625/22 P, EU:C:2024:677, paragraph 206). Companies having

had their notified mergers approved would lose the required legal certainty with

respect to the lawfulness of the transactions, and with it the necessary

predictability. In turn, the system would be rendered ineffective.

(59) Granted, a concentration between two competitors could have the same

structural effects on competition as a market sharing agreement may have. But in

terms of enforcement of competition rules, different rules apply. The former may

be approved or prohibited based on an ex-ante assessment by the relevant

competition authority. The latter may be subject to ex-post assessment. A

concentration, however, should not as such be subject to ex-post assessment

under Article 53 EEA where it has already been controlled and approved ex ante.

(60) Looking at the asset swap agreement in this case, the ICA has assessed

coordinated and non-coordinated effects of the notified concentrations that may

limit effective competition. In its Statement of Objections, the ICA also argued that

the concentrations would amount to an infringement of Article 10 of the Icelandic

Competition Act and Article 53 of the EEA Agreement by way of market sharing.

(Annexes A.19 and A.20, page 24, paragraph 101). The ICA has therefore not

only been able to assess the filed concentrations as such, but in the view of the

ICA itself, has also been given sufficient information and documentation to assess

the same alleged infringement that the contested decision is based on.

(61) SKEL submits that the contested decision must thus be based on information and

documentation already assessed and approved by the ICA and the CAC under the

Icelandic merger control regime. In consequence, neither the ICA nor ESA has the

competence to review the very same conduct again, ex post, under Article 53 EEA.

The effect of this being that ESA was not competent to adopt the contested

decision on the cited basis.

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(62) The principles underpinning this conclusion find expression, in particular, in

Article 21(1), cf. Article 3, cf. recitals (6) and (7), of Regulation (EC) No 139/2004

("EUMR"). Concentrations, as defined by the EUMR, are regulated by the merger

rules, and Regulation (EC) No 1/2003 implementing the rules on competition laid

down in Articles 101 and 102 TFEU specifically does not apply. In line with the

system of the EUMR and Article 57 EEA, ESA's competence to assess and enforce

concentrations is thus limited by the EUMR.

(63) In a situation where a concentration without a Community or EFTA dimension is

assessed and approved by the competent national competition authority, the

EUMR does not allow ESA to effectively second-guess the national merger

clearance through a review under Article 53 EEA. The judgment in Towercast,

C-449/21, EU:C:2023:207, does not alter this, as Towercast did not concern

notified and approved mergers, but rather a concentration falling below national

merger thresholds, and which was never notified, assessed or approved ex ante

by a competition authority. That is, as stated by the Court of Justice in paragraph

34 of the judgment, a situation where "no ex ante control under the law on

concentrations has been carried out".

(64) In the view of SKEL, most if not all of the contested decision appears to be based

on the same factual and legal allegations that the ICA put forward during the

merger procedures. Although not a prerequisite for the annulment of the

contested decision on grounds of lack of competence, the Court should take this

into consideration.

VI. REQUEST FOR A MEASURE OF ORGANISATION OF PROCEDURE

(65) Pursuant to Article 57(4) RoP, SKEL proposes the adoption of a measure of

organisation of procedure in the form of the Court (i) ordering ESA to produce

the information referred to in recitals (3) to (6) of the contested decision, any

information otherwise forming the basis for the adoption of the contested

decision, and any information of a potentially exculpatory nature which ESA had

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in its possession at the time of adopting the contested decision; and (ii) asking

SKEL to express its views on the documents and information produced.

(66) Such a measure of organisation of procedure is foreseen under Article 57(3) RoP,

in particular litra (d) and litra (a) thereof. The measure would serve the purpose,

in particular, of ensuring the efficient conduct of the written and the oral part of

the procedure, and determining the points on which the parties must present

further argument or which call for measures of inquiry, see Article 57(2) RoP.

(67) In SKEL's submission, the Court's review of the contested decision must take into

account the information that ESA based the contested decision on or had at its

disposal so as to inform the adoption of the contested decision, but which so far

has remained undisclosed. Moreover, in order to inform the Court's review, it is

further necessary to take into account any comments from the Applicant.

(68) To illustrate how such measures of organisation of procedure are employed in

practice, in a case such as this, reference may be made to e.g. the judgment in

Casino, Guichard-Perrachon and AMC v Commission, T-249/17, EU:T:2020:458,

paragraphs 11 and 14. This approach is a matter of settled case law,21 and is

necessary for the Court to properly assess the merits of the contested decision.

VII. FORM OF ORDER SOUGHT

(69) SKEL requests that the Court:

1. adopt a measure of organisation of procedure ordering ESA to produce

all of the documents and other information on the basis of which it

considered on the date of the contested decision that it had sufficiently

serious indicia to justify carrying out an inspection at the Applicant's

21 See e.g. the judgments in Intermarché Casino Achats v Commission, T-254/17, EU:T:2020:459, paragraph 14, and Les

Mousquetaires and ITM Entreprises v Commission, T-255/17, EU:T:202:460, paragraph 18, as well as České dráhy v Commission, T-325/16, EU:T:2018:368, paragraphs 72 et seq, České dráhy v Commission, T-621/16, EU:T:2018:515, paragraphs 14 and 31–34, and Deutsche Bahn and others v Commission, T-289/11, T-290/11 and T-521/11, EU:T:2013:404, paragraphs 28, 132 and 182.

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premises, and requesting the Applicant to express its views on the

documents and information produced;

2. annul ESA Decision No 159/24/COL of 3 October 2024 requiring SKEL

fjárfestingafélag hf. together with all undertakings directly or

indirectly, solely or jointly controlled by it, including Lyfjaval ehf., to

submit to an inspection pursuant to Article 20(4) of Chapter II of

Protocol 4 to the Surveillance and Court Agreement; and

3. order ESA to pay the costs of the proceedings.

For SKEL fjárfestingafélag hf.

Gjermund Mathisen, Counsel

Avenue des Arts 19H, B-1000 Brussels, tel: +32 2 286 18 11, www.eftasurv.int

Brussels, 03 March 2025 Case No: 93335 Document No: 1510389

ORIGINAL

IN THE EFTA COURT

DEFENCE

submitted, pursuant to Article 107 of the Rules of Procedure of the EFTA Court, by

THE EFTA SURVEILLANCE AUTHORITY

represented by Claire Simpson, Daniel Vasbeck, Sigrún Ingibjörg Gísladóttir

and Melpo-Menie Joséphidès, Department of Legal & Executive Affairs,

acting as Agents, in

CASE E-32/24

SKEL fjárfestingafélag hf.

Applicant

v

EFTA Surveillance Authority

Defendant

regarding the application, pursuant to Article 36 of the Agreement between the EFTA

States on the Establishment of a Surveillance Authority and a Court of Justice (“SCA”),

for the annulment of Decision No 159/24/COL of 3 October 2024 of the EFTA

Surveillance Authority in Case No 91392, requiring SKEL fjárfestingafélag hf. together

with all undertakings directly or indirectly, solely or jointly controlled by it, including

Lyfjaval ehf. (“SKEL”), to submit to an inspection pursuant to Article 20(4) of Chapter

II of Protocol 4 to the SCA.

Registered at the EFTA Court under NºE-32/24-08 on 3 day of March 2025.

Table of Contents

1 INTRODUCTION .................................................................................................. 1

1.1 OVERVIEW .................................................................................................. 1

1.2 PRELIMINARY REMARKS AND FACTUAL BACKGROUND ...................... 1

1.2.1 The Authority had sufficiently serious indicia to suspect the Applicant’s involvement in an infringement ............................................................................ 3

2 FIRST PLEA: THE DECISION COMPLIES WITH THE OBLIGATION TO STATE

REASONS ................................................................................................................... 7

2.1 LEGAL PRINCIPLES GOVERNING THE REQUIREMENT TO STATE REASONS: INSPECTION DECISIONS IN COMPETITION CASES ....................... 7

2.2 NO FAILURE TO STATE REASONS ......................................................... 10

2.2.1 The Decision was sufficiently reasoned .................................................. 10

2.2.2 The complaints raised at Application ¶¶16-31 are irrelevant to the First Plea and/or unfounded ....................................................................................... 11

2.3 NO REQUIREMENT TO ASSESS ON THE MERITS ................................ 16

3 SECOND PLEA: THE STANDARD FOR EFFECT ON TRADE WAS MET ........ 16

4 THIRD PLEA: SUFFICIENTLY SERIOUS INDICIA WERE PRESENT ............... 18

4.1 LEGAL PRINCIPLES ................................................................................. 18

4.2 EXISTENCE OF SUFFICIENTLY SERIOUS INDICIA ............................... 20

4.3 COOPERATION WITH NATIONAL COMPETITION AUTHORITY ............ 23

4.4 AN UNDERTAKING MAY NOT PLEAD ALLEGED UNLAWFULNESS OF INSPECTION PROCEDURES IN SUPPORT OF A CLAIM FOR ANNULMENT OF THE INSPECTION DECISION .............................................................................. 24

5 FOURTH PLEA: THE AUTHORITY IS COMPETENT TO INVESTIGATE UNDER

ARTICLE 53 EEA ...................................................................................................... 26

6 REQUEST FOR A MEASURE OF ORGANISATION OF PROCEDURE ............ 29

7 CONCLUSION .................................................................................................... 30

8 SCHEDULE OF ANNEXES ................................................................................ 31

1

1 INTRODUCTION

1.1 OVERVIEW

1. The Authority hereby responds to the application (“the Application”) of SKEL

fjárfestingafélag hf. (“the Applicant”), for the annulment of Decision No 159/24/COL

of 3 October 2024 of the EFTA Surveillance Authority in Case No 91392 (“the

Decision”).

2. The Decision requires the Applicant to submit to an inspection ordered by the Authority

under Article 20(4) of Chapter II of Protocol 4 to the SCA.1

3. The Applicant requests the Court to: (i) annul the Decision; (ii) adopt a measure of

organisation of procedure ordering the Authority to produce the information and indicia

on the basis of which the Authority adopted the Decision; and (iii) order the Authority

to pay the costs of the proceedings.

4. In support of its action for annulment, the Applicant raises four pleas: (i) that the

Decision contains insufficient reasoning; (ii) that there was not the required effect on

trade; (iii) that the Authority did not have sufficiently serious indicia to suspect the

Applicant’s involvement in an infringement of the competition rules; (iv) that the

conduct relied on by the Authority to justify the inspection had already been approved

as mergers by the Icelandic Competition Authority (Samkeppniseftirlitið) (“ICA”).

5. In the Authority’s submission, and for the reasons given below, the Application should

be dismissed in its entirety.2 Before addressing the four pleas, the Authority makes the

following preliminary remarks.

1.2 PRELIMINARY REMARKS AND FACTUAL BACKGROUND

6. At its heart, the Application is based on two erroneous factual presumptions, namely

that the Authority: (i) seeks merely to reinvestigate an asset swap agreement of 26

April 2022 (“the asset swap agreement”) in relation to “two small, local shopping

centres in Reykjavík municipality”;3 and (ii) did not have sufficiently serious indicia

1 “Chapter II Protocol 4 SCA”. 2 To the extent that this Defence does not expressly address points set out in the Application, this does not constitute acceptance of the Applicant’s position. 3 See e.g. Application ¶¶3, 36, 38, 46, 55, 57 and 61.

2

providing reasonable grounds for suspecting the Applicant’s involvement in a

competition law infringement. These factual presumptions are flawed, as follows.

7. First, the suspected infringement which forms the subject matter of the Decision is not

the (local) asset swap agreement of 26 April 2022. Instead, the Decision clearly

identifies the suspected infringement as anticompetitive coordination of the conduct of

SKEL4 (the operator of a pharmacy chain) with its competitor Toska5 (the operator of

a pharmacy chain) on the Icelandic retail pharmacy market.6 Recital 4(a) of the

Decision specifies that the asset swap agreement is one of the ways in which this

anticompetitive coordination may have been implemented. In other words, the asset

swap agreement and its execution constitute indicia of suspected wider anticompetitive

collusive conduct, which is of a different geographic and temporal scope, pre- and post-

dating the asset swap7. It is this wider suspected collusion which the Decision seeks

to investigate. The Applicant’s failure to acknowledge this means inter alia that: (i) its

arguments on effect on trade (the Second Plea) in relation to the “local”8 nature of the

asset swap are misguided and ineffective (Section 3 below); (ii) its contention under

the Third Plea that the Authority cannot have had sufficiently serious indicia that “the

asset swap agreement […] could constitute an infringement”9 is misdirected and

ineffective (Section 4); and (iii) its arguments under the Fourth Plea that the Authority

is seeking to investigate “the very same conduct”10 as that assessed under the

Icelandic merger rules by ICA are unfounded (Section 5).

8. Second, the Decision is based on sufficiently serious indicia. The fact that the Authority

was in possession of such indicia was sufficiently disclosed in the Decision, which also

precisely defined the presumed facts the Authority wished to investigate and the

matters to which the inspection related. The Applicant has failed to cast doubt on the

reasonableness of the Authority’s grounds or indicia for suspecting an infringement of

EEA law. Accordingly, the Authority submits that there is no need for the Court to order

4 This includes (as defined in the Decision, in particular Recitals 1-2) all undertakings directly or indirectly, solely or jointly controlled by it, including, in particular, Lyfjaval ehf. 5 This includes (as defined in the Decision, in particular Recital 3) all undertakings directly or indirectly, solely or jointly controlled by it, including, in particular, Lyf og heilsa hf. 6 Recitals 2-6 and Article 1 of the Decision, and see in particular paragraphs 48, 49 and 67 below. 7 Recital 6 of the Decision specifies that the anticompetitive conduct may have started at least in May 2021, and may still be ongoing. The asset swap agreement is dated 26 April 2022. 8 Application ¶¶35, 36 and 38. 9 Application ¶46. 10 Application ¶¶57, 61.

3

the further disclosure of such indicia (Sections 2.3, 4 and 6 below). In the interests of

the expeditious execution of these proceedings however, and to assist the Court, the

Authority nevertheless provides, in Section 1.2.1 below, a more detailed description of

its indicia. The Authority respectfully submits that, on any view, this more detailed

description sufficiently enables the Court to determine, without the need for a measure

of organisation of procedure, that the Authority possessed sufficiently serious indicia

justifying the adoption of the Decision.

9. Further and more generally, various parts of the Application (in particular the First Plea)

raise arguments contesting the very existence of the suspected coordination. While

such arguments may be relevant at the second, inter partes, stage of the administrative

proceedings,11 or in the context of any eventual finding of infringement, they: (i) are

irrelevant to whether the duty to give reasons was complied with (Section 0); and (ii)

fail to take into account the correct legal standard for inspection decisions, namely

whether the Authority had reasonable grounds to suspect the existence of an

infringement (Section 4). In short, it is important to bear in mind that, at this exploratory

stage, the Authority has made no finding of infringement. Instead, the Authority had

information and indicia reasonably leading it to suspect unlawful conduct. The

inspection seeks to verify whether these suspicions were well-founded.

1.2.1 The Authority had sufficiently serious indicia to suspect the Applicant’s

involvement in an infringement

10. The Decision is based on sufficiently serious indicia, reflecting information drawn from

various sources, including information received from ICA, publicly available documents

and information (such as investor presentations, annual reports, and newspaper

articles) and the Authority’s own monitoring of market conduct. The Authority examined

these indicia carefully and critically.

11. Based on these indicia, the Authority had reasonable grounds for suspecting that SKEL

and Toska have been and may still be participating in anti-competitive agreements

and/or concerted practices related to coordination of their conduct on the Icelandic

retail pharmacy market.

11 See paragraphs 54-55 below for a description of the distinct and successive stages of the administrative procedure under Chapter II Protocol 4 SCA. Inspections form part of the preliminary investigation stage.

4

12. The Authority had indicia suggesting that: (i) SKEL and Toska eliminated direct

competition between each other in certain locations; and (ii) SKEL concentrates on

drive-through pharmacies, while Toska does not open any such pharmacies; and that

(iii) this conduct reflected anti-competitive coordination between these undertakings

rather than their independent commercial behaviour.

13. The Authority’s indicia included the following information:12

(i) The competitors, Toska and SKEL, exchanged retail locations in Reykjavík

through the asset swap agreement of 26 April 2022.13 Toska sold SKEL its

retail property in the Glæsibær shopping centre. In that retail property, Toska

operated a traditional walk-in pharmacy in direct competition with a

traditional walk-in pharmacy of SKEL in the same centre. SKEL sold Toska

its retail property in the Mjódd shopping centre. In that retail property, SKEL

operated a traditional walk-in pharmacy in direct competition (next door) with

a traditional walk-in pharmacy of Toska. Subsequently, Toska closed its

pharmacy in Glæsibær (while SKEL’s pharmacy remained) and SKEL

closed its pharmacy in Mjódd (while Toska’s pharmacy remained).14 This

resulted in the elimination of direct competition between Toska and SKEL in

each of these shopping centres.

(ii) Toska and SKEL ambiguously described the real nature of this asset swap

in their interactions with ICA, presenting it in some instances as a retail

12 For some of these indicia, the Authority is in possession of documents that are similar for SKEL and Toska. In this Defence, the Authority will however only refer to, and annex, supporting documents that can be shared with SKEL, excluding documents that are or may be confidential for Toska. 13 Asset swap agreement: Application, Annexes A.2 (English translation) and A.1 (Icelandic original). 14 The closure of these pharmacies is a fact, which the Authority assumes to be not contested. See also ICA’s Statement of Objections (“SO”): Application, Annexes A.20 (English translation) and A.19 (Icelandic original), ¶¶93 and 241, where ICA preliminarily concludes that the asset swap agreement will result in the disappearance of (i) the pharmacy of SKEL in Mjódd and (ii) the pharmacy of Toska in Glæsibær, leaving only one pharmacy operated by either SKEL or Toska in each shopping centre.

5

pharmacy market transaction,15 and in others as a pure real estate

transaction.16

(iii) Under the asset swap agreement, SKEL sold its Mjódd retail property to

Toska for a total consideration of ISK 352.5 million, which consisted of a ISK

280 million cash payment and the transfer of ownership of Toska’s Glæsibær

premises (valued at ISK 72.5 million). The total consideration appeared

excessive when compared with the 2023 public property valuation of the

Mjódd retail property (ISK 135.9 million)17 and the property value appraisal

(ISK 87.9 million) attributed in a Lyfjaval investor presentation,18 suggesting

that it was in part a payment to SKEL for possibly wider restrictive actions,

to the benefit of Toska.19

(iv) Direct competition between Toska and SKEL was eliminated in Keflavík

(Reykjanesbær),20 through the closure in early 2023 by SKEL of its

traditional walk-in pharmacy located at Hringbraut 99 (Apótek Suðurnesja),21

15 Merger notification form submitted by SKEL on 25 October 2022 to ICA, Annexes B.1 (English translation; all translations submitted in English are unofficial translations of the Authority) and B.1a (Icelandic original): ¶33 explains that it can be assumed that the position of SKEL will likely be strengthened due to the closure of the pharmacy of Toska in Glæsibær (which is referred to as the pharmacy in Álfheimar, as Glæsibær is the name of the shopping centre and Álfheimar is the name of the area in Reykjavík); ¶¶37 and 41-42 set out the competitive impact which the asset swap transaction will, in the submission of SKEL, produce on the retail pharmacy market (the pharmacy in Glæsibær is referred to as Apótekarinn, as it was operated under this brand name); Merger notification form submitted by Toska on 22 September 2022 to ICA (confidential). 16 ICA SO, Application, Annexes A.20 (English translation) and A.19 (Icelandic original) ¶¶91-92, where ICA preliminarily concludes that the title of the asset share agreement (i.e. “purchase agreement of real estate”) and other descriptions or references in the agreement are misleading as the scope of the agreement appears to encompass not just real estate but also pharmacy operations. Reply of 27 February 2023 of SKEL to the ICA SO, Annexes B.2 (English translation) and B.2a (Icelandic original), where SKEL argues that the mergers are particularly concerned with real estate transactions between competitors and not the acquisition of part of a business (¶56), contests that the scope of the agreement is broader than a purchase of real estate (¶60) and submits that there is no causal relationship between the real estate transactions and the closures of the relevant pharmacies (¶¶61-63). Reply of 27 February 2023 by Toska to the ICA SO (confidential). 17 ICA SO, Application, Annexes A.20 (English translation) and A.19 (Icelandic original) ¶242, where ICA observes that Toska will pay ISK 352.5 million to SKEL, despite the public property valuation of the Mjódd premises in 2023 representing only ISK 135.9 million, resulting in a difference of ISK 216.6 million. 18 Lyfjaval investor presentation (information memorandum) for bids to purchase Lyfjaval by 17 May 2021, Annexes B.3 (English machine translation, apart from page 16, translated by the Authority) and B.3a (Icelandic original), page 16, where the Mjódd premises are given an estimated value of ISK 87.9 million (highlight added by the Authority), resulting in a difference of ISK 264.6 million. 19 Presentation of Toska (confidential). 20 In Application ¶19, SKEL refers to the old location of the closed pharmacy as being in Reykjanesbær, which area includes Keflavík (where the closed pharmacy was located). 21 Newspaper article of 24 February 2023 published in Víkurfréttir, Annexes B.4 (English translation) and B.4a (Icelandic original). This article shows that SKEL’s original pharmacy, Apótek Suðurnesja, moved its operations from Hringbraut to a new area. While the pharmacy representatives interviewed describe the new location as the new centre of the town for the future, the fact remains that the new

6

within 550 metres of Toska’s traditional walk-in pharmacy (with the Keflavík

hospital being in between).

(v) There were indications that SKEL implemented its drive-through strategy by

prioritising the opening of drive-through pharmacies and the closure of its

traditional walk-in pharmacies in locations where those traditional

pharmacies competed directly with Toska’s traditional walk-in pharmacies

(e.g. Mjódd and Keflavík (Reykjanesbær)).22

(vi) Documentation showing that the actions of SKEL in closing two of Lyfjaval’s

pharmacies in Mjódd and Keflavík were actions which SKEL’s competitor

Toska had assessed and considered highly beneficial to itself.23

(vii) SKEL has not opened any traditional walk-in pharmacies in Iceland since

May 2021 and Toska has not opened any drive-through pharmacies in

Iceland24 (despite indicia suggesting that the operation of such pharmacies

could be considered desirable).25

14. These indicia26 provided reasonable grounds for the Authority to suspect SKEL and

Toska’s involvement in a competition law infringement, as described in the Decision.

To gather evidence in order to verify the validity of the Authority’s suspicions,27 the

Authority considered it necessary to order an unannounced inspection at the premises

of SKEL and Toska.

location is further away from the Keflavík hospital and SKEL’s competitor Toska than the traditional walk-in pharmacy that was closed. 22 This pattern of behaviour was observed by the Authority in particular from publicly available information on openings and closings of these pharmacies. 23 Confidential documents of Toska. 24 This pattern of behaviour was observed from publicly available information on openings and closings of these pharmacies. The absence of openings by Toska (“one of the two big players in the Icelandic retail pharmacy sector”: Application ¶29) of any drive-through pharmacies in Iceland must be viewed in a context where there is significant and growing demand for this service, as highlighted by a SKEL investor presentation for the second half of 2023 (Annex B.5 slide 19) and a newspaper interview of 22 March 2024 with a representative of Lyfjaval who is describing Lyfyaval’s position on this market as unique (Annexes B.6 (English translation) and B.6a (Icelandic original)). 25 Confidential documents of Toska. 26 The various indicia on the basis of which an infringement may be suspected must be assessed not in isolation but as a whole and they may reinforce each other: Case T‑249/17 Casino v Commission, EU:T:2020:458 (“Casino GCEU”), ¶223. 27 Cases C-538/18 P and C-539/18 P, České dráhy v Commission, EU:C:2020:53 (“České dráhy CJEU”), ¶43.

7

2 FIRST PLEA: THE DECISION COMPLIES WITH THE OBLIGATION TO STATE

REASONS

15. Section II of the Application (¶¶11-33) claims: (i) that the Decision was insufficiently

reasoned and (ii) that, if the Court should nevertheless find the Decision to be

sufficiently reasoned (¶33) “the Court therefore must review the merits of the decision”.

16. For the reasons given below, these claims are without basis and should be rejected.

17. Before addressing the individual arguments raised in the First Plea (Sections 2.2.2 and

2.3 below), the Authority sets out the legal principles it must respect when drafting an

inspection decision (Section 2.1).28 For the reasons given in Section 2.2.1, the Decision

satisfies these requirements.

2.1 LEGAL PRINCIPLES GOVERNING THE REQUIREMENT TO STATE

REASONS: INSPECTION DECISIONS IN COMPETITION CASES

18. The statement of reasons required under Article 16 SCA is a fundamental requirement.

It enables affected parties to understand the reasons behind a measure, their

obligations (for example the scope of their duty to cooperate29), and to exercise their

rights of defence.30 It enables the Court to ensure that the principle of protection against

arbitrary and disproportionate intervention is respected, in so far as the statement of

reasons makes it possible to show that the intervention envisaged on the premises of

the undertakings concerned is justified.31

19. As the Court has held, the statement of reasons must be appropriate to the measure

in question, and therefore depends on the circumstances of each case, in particular

the content of the measure in question, the nature of the reasons given and the interest

which the addressees of the measure may have in obtaining explanations. It is not

necessary for the reasoning to go into all the relevant facts and points of law, since the

28 Application ¶¶12 and 14 present these principles in only a truncated manner. 29 See e.g. České dráhy CJEU ¶40, referring to the duty to cooperate during inspections in competition cases. In this Defence, the Authority refers extensively to case-law of the EU Courts. While this case- law concerns the powers of the European Commission, the Authority considers that it applies mutatis mutandis to its own powers, given the need to ensure a homogeneous interpretation of inter alia the substantively identical provisions of Article 20 of Council Regulation (EC) No 1/2003 (OJ L 1, 4.1.2003, p.1) and Article 20 of Chapter II Protocol 4 SCA. 30 Case E-1/22 Modiano Ltd and Standard Wool (UK) Ltd v ESA (“Modiano”), ¶¶84-85; Casino GCEU ¶111. 31 Case T-325/16 České dráhy a.s. v Commission, EU:T:2018:368 (“České dráhy GCEU”), ¶51.

8

question of whether the statement of reasons meets the requirements of Article 16

SCA must be assessed with regard not only to its wording but also to its context and

to all the legal rules governing the matter in question.32

20. Inspection decisions of the Authority take place within the legal framework of Articles

4 and 20 of Chapter II Protocol 4 SCA. These confer powers of inspection on the

Authority, which are designed to enable it to perform its task of protecting the internal

market from distortions of competition and to penalise any infringements of the

competition rules on that market.33

21. Article 20(4) of Chapter II Protocol 4 SCA provides (emphasis added): “[u]ndertakings

and associations of undertakings are required to submit to inspections ordered by

decision of the EFTA Surveillance Authority. The decision shall specify the subject

matter and purpose of the inspection, appoint the date on which it is to begin

and indicate the penalties provided for in Articles 23 and 24 and the right to have

the decision reviewed by the EFTA Court. […]”

22. It is settled case-law that, to comply with these requirements, the Authority must state

in its inspection decision “as precisely as possible the presumed facts which it intends

to investigate, namely what it is looking for and the matters to which the inspection

must relate.”34 The case-law requires “[m]ore specifically”35 that the inspection decision

must contain four “essential features of the suspected infringement”, by stating: (i) the

market thought to be affected; (ii) the nature of the suspected restrictions of

competition; (iii) the supposed degree of involvement of the undertaking concerned;

and (iv) the powers conferred on the Authority.36

23. The degree of precision, and the extent of the reasoning required in an inspection

decision is moderated by the fact that inspections, by definition, take place at a very

32 Modiano ¶¶84, 85, Casino GCEU ¶¶107-108; Case C-264/16 P, Deutsche Bahn AG a.o. v Commission (“Deutsche Bahn CJEU”), EU:C:2018:60, ¶41. 33 Casino GCEU ¶108; Case C-37/13 P Nexans and Nexans France v Commission, EU:C:2014:2030 (“Nexans CJEU”), ¶33. 34 Casino GCEU ¶110 and case-law cited; Case T‑402/13 Orange v Commission, EU:T:2014:991 (“Orange”), ¶80. 35 Casino GCEU ¶110 and case-law cited. In České dráhy GCEU ¶39 and Cases T‑289/11, T‑290/11

and T‑521/11, Deutsche Bahn a.o. v Commission, EU:T:2013:404 (“Deutsche Bahn GCEU”), ¶171 the phrasing is similar: “To that end”. 36 České dráhy GCEU ¶39, Casino GCEU ¶110, and the case-law cited.

9

preliminary stage of the investigation. It is settled case-law that, at such a stage, the

Authority does not yet have precise information allowing it to make a specific legal

assessment of whether the conduct in question may be characterised as an

infringement, and must first verify the validity of its suspicions and the scope of the

facts that occurred, “the purpose of the inspection being precisely to gather evidence

relating to a suspected infringement.”37

24. Accordingly, in order to safeguard the effectiveness of an inspection, it is settled case-

law that the Authority is not required to communicate to the addressee of an inspection

decision all the information at its disposal concerning the presumed infringements, or

to delimit precisely the relevant market, or to set out the exact legal nature of the

infringements, or to indicate the period during which those infringements are alleged

to have been committed.38 The fact that the products/services or geographic scope are

described in “general terms” does not mean that the decision is insufficiently reasoned,

provided the description allows the undertaking to understand the full scope of the

decision.39

25. Given the preliminary stage of the investigation, the Authority is also not required to

inform the undertaking in its inspection decision of the information or indicia which

justified the inspection: that is to say, the material which leads it to suspect an

infringement of Article 53 EEA.40 The only information which must be supplied in the

inspection decision is that showing that the Authority had sufficiently serious indicia of

an infringement, but without disclosing those indicia themselves. The decision must

therefore disclose whether the Authority was in possession of information and indicia

providing reasonable grounds for suspecting the infringement in question.41

37 České dráhy CJEU ¶43; see also Nexans CJEU ¶37 and Casino GCEU ¶112. 38 České dráhy CJEU ¶¶41-42; Case T-254/17 Intermarché v Commission, EU:T:2020:459 (“Intermarché GCEU”), ¶111; Casino GCEU ¶112; Deutsche Bahn GCEU ¶170. 39 For example, in Nexans CJEU the CJEU found (¶¶38-39) that an inspection decision indicating that the suspected agreements/practices “probably have a global reach” had a sufficient statement of reasons regarding the geographical scope of the suspected infringement. 40 Casino GCEU ¶¶85, 91, 113 and case-law cited: the rationale being that earlier disclosure could compromise the effectiveness of the inspection, and that the undertaking will have the opportunity to challenge evidence relied upon by the Authority at the inter partes stage: see ¶¶87, 88. 41 Casino GCEU ¶114, Deutsche Bahn GCEU ¶172, Case T-339/04 France Télécom v Commission, EU:T:2007:80 (“France Télécom”), ¶60. The Decision met this requirement: see Section 4 below.

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2.2 NO FAILURE TO STATE REASONS

26. Contrary to the Applicant’s claims at Application ¶¶15 and 32, the Decision was

sufficiently reasoned and meets the legal requirements set out in Section 2.1 above.

27. In the following, the Authority first sets out, by reference to the requirements in Section

2.1 above, how the Decision complies with the obligation to state reasons. The

Authority then addresses the complaints raised at Application ¶¶16-31, which

complaints are irrelevant to the First Plea, and/or unfounded.

2.2.1 The Decision was sufficiently reasoned

28. The Decision precisely specifies the subject matter and purpose of the inspection, in

accordance with the requirements set out in Section 2.1 above.

29. The Decision clearly identifies each of the four essential features of the subject matter

and purpose of the inspection, as required by case-law.42

30. First, the market thought to be affected: Recital 3 and Article 1(1) of the Decision

identify this as “the Icelandic retail pharmacy market” and “the retail pharmacy market

in Iceland.” Recital 5 specifies that the involved undertakings operate pharmacy chains

both within and outside the Reykjavík capital area, an area which “represents almost

70% of all retail sales of pharmaceuticals in Iceland”, and that the alleged anti-

competitive conduct therefore “covers a significant part of the Icelandic market.”

31. Second, the nature of the suspected restrictions of competition: Recitals 3-5 and Article

1(1) of the Decision describe this as “anti-competitive agreements and/or concerted

practices related to coordination of their conduct with Toska”; the undertakings under

investigation “eliminated direct competition between each other that took place using

traditional walk-in pharmacies”; “Lyf og heilsa benefits from Lyfjaval’s closure of certain

of its traditional walk-in pharmacies, which previously directly competed with Lyf og

heilsa’s traditional walk-in pharmacies”; “Lyfjaval concentrates on drive-through

pharmacies, while Lyf og heilsa does not enter the drive-through pharmacy segment”;

possible implementation of the suspected practices involving “an asset swap

42 The Applicant (Application ¶12) appears to agree that these four features must be shown, yet does not allege (at least not clearly) that any feature was missing from the Decision.

11

agreement of 26 April 2022 between Lyf og heilsa and Lyfjaval related to certain of the

parties’ walk-in pharmacies operated and subsequently closed in Mjóddin and

Glæsibær”; “coordination on the realisation of Lyfjaval/SKEL’s new drive-through

pharmacy strategy”; “a restriction on Lyf og heilsa’s ability to open drive-through

pharmacies and a restriction on Lyfjaval’s ability to open traditional walk-in

pharmacies”.

32. Third, the supposed degree of involvement of the undertaking concerned: Recitals 1

and 2 of the Decision identify the Applicant and its activities in the Icelandic retail

sector, and its subsidiary Lyfjaval, which subsidiary is identified as “active in the

Icelandic retail pharmacy market”, to which the suspected infringement(s) relate.

Recitals 3-5 and Article 1(1) of the Decision describe the supposed degree of

involvement of these undertakings, while Recital 6 specifies that the conduct “may

have started at least in May 2021 and could still be ongoing.”

33. Fourth, the powers conferred on the Authority: Recitals 12 and 13 and Article 2 of the

Decision recall the powers conferred on the Authority in conducting the inspection.

34. Further, page 5 of the Decision indicates the penalties provided for in Articles 23 and

24 of Chapter II Protocol 4 SCA and the right to have the Decision reviewed by the

EFTA Court, while Article 3 appoints the date on which the inspection was to begin (or

shortly thereafter).

2.2.2 The complaints raised at Application ¶¶16-31 are irrelevant to the First

Plea and/or unfounded

35. The complaints made in Application ¶¶16-31 are irrelevant to the First Plea and/or

unfounded. While the Application (¶¶11-14) purports to set out the key case-law criteria

which must be followed, it fails to apply these (or any relevant legal principles) to the

Decision. Rather than identifying any insufficiency in the reasoning itself, the

complaints made at Application ¶¶16-31 in essence challenge the merits of the

reasons and information given in the Decision – in other words, whether there was

unlawful conduct at all. However, the Applicant’s disagreement with potential anti-

competitive inferences which might be drawn from matters described in the Decision,

12

and its alternative explanations for certain facts, are not relevant to the question of

whether the obligation to state reasons has been complied with.43

36. Further, while the Applicant maintains that certain aspects of the Decision are “difficult

to understand”44 or “puzzling”,45 the arguments made at Application ¶¶16-31 reveal

that the Applicant has indeed been able to “grasp the reasons for th[e] decision […]

without excessive interpretative effort.”46 In short, while the First Plea alleges defective

reasoning, in reality the arguments made therein simply disagree with the substance

of whether there may have been anti-competitive conduct.

37. The following matters are therefore irrelevant and ineffective for the purposes of the

First Plea:

(i) The claim (Application ¶18) that the Applicant’s decision to open a pharmacy in

a new location with a drive-through option and close its traditional walk-in

pharmacy47 in Mjóddin (where its competitor Lyf og heilsa had a traditional walk-

in pharmacy48) was commercially motivated49 and that the new location did not

prevent it competing directly with Lyf og heilsa.50

43 Thus, as the GCEU held in T-340/04 France Télécom, EU:T:2007:81 at ¶97 (emphasis added): “The fact that the Commission may, at a later stage of the procedure, be unable to establish the existence of [the suspected infringement] is not relevant. First of all, that question involves an analysis of the merits, which is made on the basis of the information collected during the inspection in question, and is not therefore to be examined in the context of a review of the Commission’s observance of the obligation to give reasons. […]” See also T‑486/11 Orange Polska v Commission, EU:T:2015:1002 at ¶70: “a distinction should be made between the question of the obligation to state reasons, which requires that the contested decision contain the key factual and legal elements in order to show clearly and unequivocally the reasoning of the institution which adopted the measure, and the merits of the reasons given by that institution.” Further, given the still open-ended nature of the Authority’s inquiry into the alleged facts and circumstances, the fact that the material taken into consideration may be open to different interpretations does not preclude it from constituting sufficiently serious indicia, provided that the interpretation favoured by the Authority is plausible: Intermarché GCEU ¶234; T-296/11 Cementos Portland Valderrivas v Commission, EU:T:2014:121 (“Cementos”) ¶59; Casino GCEU ¶222. The question whether the Authority was in possession of sufficiently serious indicia to suspect an infringement, which is separate from the question of the sufficiency of the statement of reasons, is addressed in the context of the Third Plea, below. 44 Application ¶¶16, 17, 22. 45 Application ¶29. 46 Casino GCEU ¶111; see similarly České dráhy CJEU ¶40. 47 The Applicant has plainly understood what is meant by the use of the term “traditional walk-in pharmacy” as compared with a drive-through pharmacy (i.e. one with a drive-through option). See further paragraph 43 below. 48 The Applicant does not expressly accept that its competitor Lyf og heilsa had a traditional walk-in pharmacy in Mjóddin, but this description is not challenged and appears implicitly to be accepted. 49 No evidence is adduced by the Applicant to support this claim. 50 The Applicant claims, inter alia by reference to a hyperlink in footnote 6 to the Application, that the new location was sufficiently close that direct competition was not lost with Lyf og heilsa. The hyperlink leads to a Google Maps page. A similar hyperlink approach is adopted by the Applicant in footnotes 7, 8, 9, 10, 11, 12 and 13 (and, in respect of the introduction and other pleas, at footnotes 1, 2, 3, 4, 18

13

(ii) The claim (Application ¶19) that the Applicant’s closing of its traditional walk-in51

pharmacy in Reykjanesbær (Keflavík) and the opening of a new pharmacy with

a drive-through option did not prevent it continuing to compete directly with Lyf

og heilsa’s pharmacy in Reykjanesbær.

(iii) The assertion in Application ¶21 that Lyfjaval opened a new pharmacy in direct

competition with those of Lyf og heilsa in Miklabraut.

(iv) The assertion in Application ¶28 that the Applicant continues to seek

opportunities to open traditional walk-in pharmacies.52

(v) The question raised in Application ¶29, as to why (large) Lyf og heilsa would wish

to coordinate with (small) Lyfjaval, to restrict its ability to open drive-through

pharmacies. Further, the implication that this – the concrete motive or incentive

for engaging in coordination – should have been explained in the Decision must

be rejected. The case-law does not require such an assessment at this

preliminary stage of the investigation.53

38. The following arguments also fail to demonstrate that the Decision was insufficiently

reasoned.

39. The Applicant (¶20) states that (apart from the walk-in pharmacies in Mjóddin and

Reykjanesbær) no other Lyfjaval pharmacies have been closed, and that it is “at a loss

as to what exactly ESA is referring to.” This statement simply demonstrates that the

Applicant has understood this part of Recital 4 of the Decision, which refers to

“Lyfjaval’s closure of certain of its traditional walk-in pharmacies […].” In other

words, the Decision refers to those of Lyfjaval’s traditional walk-in pharmacies which

were closed.

and 19) of the Application. If the Applicant wishes to rely on the hyperlinked documents or pages, and have them admissible as evidence, it must annex these to its Application: Rules of Procedure of the EFTA Court, Articles 54(5) and 101(1)(e). In any event, the hyperlinked documents in footnotes 6-13 are referred to in support of arguments related to whether or not there was anti-competitive conduct, which is not relevant to the First Plea. 51 Again, the term used in the Decision appears to have been understood and is not challenged. 52 This counter-argument (asserting that the Applicant’s ability to open walk-in pharmacies was not restricted) demonstrates that the Applicant has perfectly understood the nature of the suspected restriction, and that that restriction has been adequately described. 53 See paragraphs 23-24 above and the case-law cited.

14

40. Application ¶22 claims that because every move, opening and closure of any Lyfjaval

pharmacy is a matter of public record, “it is difficult to understand ESA’s allegation.”54

The Application fails to specify how the fact of publicity is relevant to the plea of failure

to give reasons. In any event, the fact that certain events are public does not preclude

undertakings from colluding on their commercial strategy in private, and the existence

of collusion (or not) is what the inspection seeks to uncover: see Recitals 3, 4 and 10

of the Decision.

41. Application ¶¶23-26 refer to Recital 4(b) of the Decision. The Applicant claims to

“struggle […] to identify” with the description “SKEL’s new drive-through pharmacy

strategy”, but does not explain with any precision why, nor does it explain how this

claim is relevant to the alleged failure to give reasons. In any event, the matters raised

in Application ¶¶23-26 do not cast doubt on the description used, but rather tend to

confirm that it was accurate, as follows.

42. The complete description used in the Decision reads (emphasis added)

“Lyfjaval/SKEL’s new drive-through pharmacy strategy.” That is, the combined

strategy of these undertakings (or of this company group). Application ¶¶24-26 explain

how in 2021 Lyfsalinn ehf. bought Lyfjaval, and how later Skeljungur ehf. gained control

of Lyfjaval and was, as “an Icelandic petrol station operator with about 70 petrol

stations in the country […] in a good position to continue with Lyfjaval’s strategy to

emphasise the use of drive-through windows to improve services to their retail

customers”. This is precisely the strategy to which Recital 4(b) refers,55 and in relation

to which (Recitals 3 and 4) the Decision states that SKEL may have coordinated with

its competitor, Toska.56

43. Application ¶27 observes that customers may also “walk-in” to “drive-through”

pharmacies. This misses the point: the terms used in the Decision of “traditional walk-

in” versus “drive-through” pharmacies seek simply to distinguish those pharmacies with

54 The Applicant does not specify which allegation. The Authority assumes it means this reference in Recital 4 of the Decision: “Lyf og heilsa benefits from Lyfyaval’s closure of certain of its traditional walk- in pharmacies.” 55 Whether or not Lyfjaval can properly be said to have had a pre-existing drive-through ‘strategy’ is, in the Authority’s view, open to debate. As Application ¶23 acknowledges, Lyfjaval previously opened only one drive-through pharmacy, in 2005. 56 Application footnote 11 (and the hyperlinked documents) indicate that another Icelandic petrol station operator may also commence drive-through pharmacy activities. This is irrelevant to the plea of failure to give reasons.

15

a drive-through option (which may be a factor of competition) compared with those

which do not. The arguments made by the Applicant make plain that it has understood

this distinction (see in particular paragraph 37(i) and (ii) and the related footnotes 47,

48 and 51 above).

44. Application ¶30 refers to Recital 6 of the Decision, which provides: “[a]ccording to the

information available to the Authority, the alleged anticompetitive conduct may have

started at least in May 2021 and could still be ongoing.” The Applicant complains that

no indication is given as to what might have happened at that date, or at any other time

that year, so as to initiate an infringement of Article 53 EEA. The Authority recalls that

neither Article 20 of Chapter II Protocol 4 SCA, nor the related case-law require it to

indicate the period during which the infringements are alleged to have been committed,

still less the exact date at which the alleged infringement may have commenced.57 As

a consequence, the Authority may not be reproached when it decides, notwithstanding

such jurisprudence, to state that it had information in its possession which indicated a

date by reference to which the anticompetitive conduct may “at least” have

commenced. For example, in České dráhy the GCEU held that: “the Commission

cannot be criticised for having simply stated, in the contested decision […], that ‘such

alleged anti-competitive practices may have existed at least since 2011 […] and

could still be ongoing’” (emphasis added).58 Further and in any event, at the time of

adopting the Decision, the Authority had information that Lyfjaval was offered for sale

in May 2021 and was purchased by SKEL (via Lyfsalinn ehf.) in June 2021.59

45. Application ¶31 simply asserts, without further precision, that the remainder of Recitals

3 to 6 are an ill-founded attempt of the Authority to assert jurisdiction. This vague and

unsupported claim must be dismissed. The Applicant refers in passing to its arguments

under the Fourth Plea, but its notification of the asset swap agreement to the national

competition authority is not relevant to the Authority’s duty to give reasons.60

57 Intermarché GCEU ¶¶111 and in particular 127; České dráhy CJEU ¶¶41-42; Casino GCEU ¶112; Deutsche Bahn GCEU ¶170; and see more generally paragraph 24 above. 58 České dráhy GCEU ¶47. 59 See Investor Teaser for the sale of Lyfjaval (bids to be received by 17 May 2021: see page 1), Annexes B.7 (English translation) and B.7a (Icelandic original) and SKEL company announcement dated 25 June 2021 Annexes B.8 (English translation) and B.8a (Icelandic original). 60 See České dráhy CJEU ¶50: the CJEU held that the fact that the Commission in that case had “information collected by the Czech competition authority […] cannot, as such, have any consequences for the Commission’s obligation to state reasons.”

16

2.3 NO REQUIREMENT TO ASSESS ON THE MERITS

46. Contrary to Application ¶33 (“the Court therefore must review the merits”), there is no

legal requirement for the Court to review the merits of the Decision, should it consider

it to be sufficiently reasoned. The Court’s jurisdiction under Article 36 SCA involves a

review of legality.61 If by “merits” the Applicant means that the Court must, if it

concludes that the decision is sufficiently reasoned, then call for and check the content

of the Authority’s indicia, this too, is incorrect. It is settled case-law that the Court may

conclude that an inspection decision was not arbitrary without it being necessary to

check the content of the Authority’s indicia, if the facts which the Authority wishes to

investigate and the matters to which the inspection relates are defined sufficiently

precisely in the decision.62 This point is addressed further in Sections 4 and 6 below.

3 SECOND PLEA: THE STANDARD FOR EFFECT ON TRADE WAS MET

47. The Second Plea essentially contends that there is “no effect on trade”63 within the

meaning of Article 53 EEA, and that therefore the Authority was not competent to adopt

the Decision. This plea is without basis and must be rejected. As a preliminary point,

the Authority recalls that, at the preliminary stage of an inspection decision, all that is

required are reasonable grounds for suspecting that the conditions of Article 53 EEA

are met,64 and thus for suspecting an actual or potential effect on trade (see Section

2.1 above).65 It is in no way a requirement for the Authority at this stage to provide

evidence which establishes the existence of even a potential effect on trade between

Contracting Parties.

48. First, the Decision (Recital 3, Article 1) clearly identifies that the suspected infringement

relates (emphasis added) to the “Icelandic retail pharmacy market.” Recital 5 states

that, according to information available to the Authority, “the involved undertakings

operate pharmacies as pharmacy chains both within and outside the Reykjavík capital

area. The Reykjavík capital area represents almost 70% of all retail sales of

61 E-12/20 Telenor v ESA, ¶¶79-80, and see further Section 4 below, in particular paragraphs 56-57. 62 České dráhy GCEU ¶51; Orange ¶91. 63 See also Application ¶8. 64 České dráhy GCEU ¶¶36, 43, 48; Cementos ¶43; Case T‑251/12, EGL and Others v Commission, EU:T:2016:114, (“EGL”), ¶149. See also Casino GCEU ¶230. 65 The Authority recalls that, even at the stage of a final finding of infringement, potential (rather than actual) effects on trade are enough: see Cases T-259/02 to T-264/02 and T-271/02 Raiffeisen Zentralbank Österreich AG and others, EU:T:2006:396, ¶166.

17

pharmaceuticals in Iceland. […].” These matters are not disputed by the Applicant.

Recital 5 concludes: “[t]he alleged anti-competitive conduct therefore covers a

significant part of the Icelandic market.” The Decision therefore identified the nature

and scope of the suspected infringement(s) in such a way that there were reasonable

grounds for suspecting that there would be an actual or potential effect on trade

between Contracting Parties. It is settled case-law that an agreement or practice

covering all or part of a territory may be capable of affecting trade between Member

States.66 The geographic dimension of the markets affected by the conduct is therefore

not in itself determinative, since even conduct that affects part of a territory may be

capable of affecting trade between Contracting Parties.67 The Applicant’s insistent

claims about the “local nature of competition in retail pharmacy operations” (¶35), some

of which are wholly unsubstantiated,68 are therefore not decisive.

49. Connected to this point and second, the Application wrongly fixates on the asset swap

agreement, thus mischaracterising the extent of the Authority’s concerns. The Decision

(Recital 4(a)) makes plain that the asset swap is merely one example of how the

suspected infringement may have been implemented. As explained in paragraph 48

above, the concerns expressed in the Decision were broader, also in geographic

scope. The Applicant’s claims in relation to the asset swap agreement being “local in

nature” and not having the “required effect on trade” (¶38), or to what occurred in

“small, local shopping centres” under that agreement (¶36), or to the “harmful local

competitive effects” of that agreement (¶35) therefore miss the point and are

ineffective.69

66 Case C-211/22, Super Bock Bebidas, EU:C:2023:529, ¶¶59-65, and case-law cited. See also Case E-14/15 Holship ¶76. 67 The suspected conduct relates at least to an area representing almost 70% of sales of pharmaceuticals in Iceland. In such circumstances, the Authority had reasonable grounds to suspect that the conduct may have had an influence, direct or indirect, actual or potential, on the pattern of trade between EEA States: see e.g. EGL ¶64; and ¶23 of the Authority’s Guidelines on the effect on trade concept contained in Articles 53 and 54 of the EEA Agreement (“Effect on Trade Guidelines”) (OJ C 291, 30.11.2006, p.46), and the case-law cited. Further, while the Authority was not required to disclose such information in the Decision (see paragraphs 24-25 above), it refers to figures from the European Federation of Pharmaceutical Industries and Associations (2022 and 2023) at Annexes B.9 and B.10, in each case at p. 19, which indicated, together with other publicly available data, that a significant amount of the pharmaceuticals sold in Iceland were imported. 68 E.g. Application ¶34 contains various claims without offering any evidence or substantiation in support. 69 The Applicant repeatedly asserts (¶¶34, 39) that retail pharmacy markets are (very) local in nature, but notably fails to address the point that the suspected conduct as a whole relates at least to an area covering almost 70% of all retail sales of pharmaceuticals in Iceland (Recital 5 of the Decision). The reference in Application footnote 15 to Sbarigia, Case C-393/08, EU:C:2010:388, which concerned the effects of the regulatory treatment of a single pharmacy in Rome (¶¶ 6, 24, 28, 32 of the judgment),

18

50. Third, the Applicant’s inference from ICA’s merger assessment (¶¶ 35-36) that only

very local markets were affected (thus there could be no effect on trade) is also flawed,

because the Authority is legally required to make its own assessment, under Article 53

EEA, of the relevant market and any related effects.70 As explained above, this

assessment is based on different facts and has a wider scope.

51. Fourth, Application ¶37 cites case-law but fails correctly to apply it. Paragraph 80 of

České dráhy provides that it is not essential in an inspection decision to show the

“appreciable nature” of any effect on trade,71 yet this is precisely what Application ¶38

appears to reproach the Authority for not having done.72

4 THIRD PLEA: SUFFICIENTLY SERIOUS INDICIA WERE PRESENT

52. The Third Plea alleges that the Authority did not have sufficient indicia providing

reasonable grounds for suspecting an infringement and therefore for ordering an

inspection. For the reasons set out in this Section 4, this allegation is unfounded. The

Authority first sets out the relevant legal principles, as the summary at Application

¶¶40-43 omits certain important elements (Section 4.1 below). The Authority then

addresses the individual arguments raised in the Third Plea, alleging that it: (i) was not

in possession of sufficient indicia to order an inspection (Section 4.2); (ii) chose its

indicia selectively while failing to take account of exculpatory evidence (Section 4.3);

and (iii) seized documents outside the temporal scope of the inspection (Section 4.4).

4.1 LEGAL PRINCIPLES

53. While the exercise of the powers of inspection conferred on the Authority by Article

20(4) of Chapter II Protocol 4 SCA vis-à-vis an undertaking interferes with the latter’s

rights of privacy,73 an inspection decision is arbitrary “only when it has been adopted

therefore misses the point and is irrelevant to the effects of the suspected conduct in the present case, which involves chains of pharmacies on the Icelandic retail pharmacy market, within and outside the Reykjavík capital area. See further footnote 67 above. 70 E-12/20 Telenor v ESA, ¶97; Joined Cases T-125/97 and T-127/97, Coca-Cola v Commission, EU:T:2000:84, ¶82. 71 České dráhy CJEU ¶80. 72 In any event, where the suspected conduct relates at least to an area covering almost 70% of all retail sales of pharmaceuticals in Iceland (Recital 5 of the Decision), the Authority submits that it is reasonable to conclude that any appreciability threshold would be met: see e.g. ¶90, Effect on Trade Guidelines. 73 České dráhy GCEU ¶169; Deutsche Bahn GCEU ¶65. The right to respect for private life is recognised as a general principle of EEA law, enshrined also in Article 8 ECHR: Case E-11/23 Låssenteret AS v

19

in the absence of any facts capable of justifying an inspection.”74 That is not the case

where it is aimed at collecting the documentation necessary to check the actual

existence and scope of a specific factual and legal situation in respect of which the

Authority already “has reasonable grounds to suspect an infringement of the

competition rules by the undertaking concerned.”75

54. As noted in Section 2.1 above, inspections form part of the preliminary investigation

stage.76 As the Applicant acknowledges (Application, ¶¶41-43), to justify inspections

therefore, it is not necessary for the information in the Authority’s possession to be of

such a kind as to establish the existence of an infringement. It is sufficient that the

Authority is in possession of information and indicia providing “reasonable grounds for

suspecting an infringement”77 (also referred to as “sufficiently serious indicia”78).

Further, the Authority is not required to inform the undertaking in its inspection decision

of the information or indicia which justified the inspection. As the GCEU has held, the

Commission is:

“under no obligation to indicate, at the preliminary investigation stage [when an inspection is ordered], apart from the suspicions of an infringement which it proposes to verify, the indicia, that is to say, the material that leads it to consider that there may have been an infringement of Article

101 TFEU, since such an obligation would upset the balance which the legislature and the Courts of the European Union have sought to establish between preserving the efficiency of the investigation and preserving the rights of defence of the undertaking concerned.”79

55. It is not until the beginning of the inter partes administrative stage that the

undertaking concerned is informed, by notification of a statement of objections (“SO”),

of all the essential evidence on which the Authority relies at that stage of the procedure

and that that undertaking has a right of access to the file to ensure that its rights of

defence are effectively exercised.80 If those rights were extended to the period

Assa Abloy Opening Solutions Norway AS, ¶46; České dráhy GCEU ¶34; Orange ¶83; Intermarché GCEU ¶141. Interference by a public authority can, however, “go further for professional or commercial premises or activities than in other cases:” see Deutsche Bahn CJEU ¶20, and the case-law cited. 74 České dráhy GCEU ¶108; Case T‑135/09, Nexans France and Nexans v Commission, EU:T:2012:596 (“Nexans GCEU”), ¶43 and the case-law cited. 75 České dráhy GCEU ¶108; Nexans GCEU ¶43; Casino GCEU ¶¶165-166. 76 Casino GCEU ¶182. See generally Orange ¶¶77-78. 77 České dráhy GCEU ¶66 (emphasis added); Cementos ¶43; EGL ¶149. See also Casino GCEU ¶221. 78 See e.g. Casino GCEU ¶165 and the case-law cited. 79 Casino GCEU ¶¶164 (emphasis added) and 91; České dráhy GCEU ¶¶38, 45; Deutsche Bahn GCEU ¶170. 80 České dráhy GCEU ¶46; Orange ¶78 and the case-law cited.

20

preceding the notification of the SO, the effectiveness of the Authority’s investigation

would be compromised, since the undertaking concerned would already be able, at the

preliminary investigation stage, to identify the information known to the Authority,

hence the information that could still be concealed from it.81

56. When the Court is called upon, as in the present case, to review an inspection decision

for the purposes of ensuring that it is not arbitrary, it must therefore satisfy itself that

there were, at the time, “reasonable grounds for suspecting an infringement of the

competition rules by the undertaking concerned.”82 Contrary to how matters are

presented in Application ¶¶41-43, the Court may however conclude that an inspection

decision was not arbitrary without it being necessary to check and examine

substantively the content of the Authority’s indicia, provided that the facts the Authority

wishes to investigate and the matters to which the inspection relates are defined

sufficiently precisely in its Decision.83 Thus, the Court may conclude (as the GCEU did

in Orange) that the statement of reasons alone is sufficient for it to presume that, on the

date of adoption of the Decision, the Authority did indeed have reasonable grounds to

suspect an infringement and order an inspection.84

4.2 EXISTENCE OF SUFFICIENTLY SERIOUS INDICIA

57. The Authority submits (paragraph 58 below) that the Decision sufficiently precisely

stated the information required by case-law, namely showing that the Authority

considered it was in possession of serious indicia of the existence of the suspected

anti-competitive conduct.85 In other words, the statement of reasons alone sufficiently

disclosed that the Authority was in possession of information and indicia providing

reasonable grounds for suspecting the infringement in question.86 The Authority

submits (see paragraphs 59-60 below) that the Applicant has failed to “produce

evidence casting doubt” on whether the Authority had reasonable grounds for adopting

its Decision, and that the Court is not therefore required to examine those grounds and

81 Casino GCEU ¶87-88, Orange ¶78 and the case-law cited. 82 České dráhy GCEU ¶¶43,48-49; Nexans GCEU ¶43; Casino GCEU ¶166. 83 České dráhy GCEU ¶¶49-51; Orange ¶91. 84 Orange, ¶¶91-93; České dráhy GCEU ¶¶49-51. 85 Casino GCEU ¶114; Deutsche Bahn GCEU ¶172; France Télécom ¶60. 86 České dráhy GCEU ¶¶49-51; Orange, ¶¶87, 91-93.

21

determine whether they are reasonable.87 The Authority accordingly submits that it is

not necessary for the Court to adopt measures of organisation of procedure to check

the content of the Authority’s indicia, as sought by the Applicant in Section VI of its

Application (see further paragraphs 72-73 and Section 6 below).

58. First, the Decision sufficiently precisely specified that the Authority was in possession

of information (indicia) in relation to all essential elements of the suspected

infringement,88 and therefore that the Authority had reasonable grounds for suspecting

the infringement in question. The Decision describes the information as follows:

(i) Recital 3 (nature of suspected conduct and relevant market) states that the

Authority had “information in its possession indicating that” the Applicant may

have been and may still be participating in anti-competitive agreements and/or

concerted practices related to coordination of its conduct with Toska on the

Icelandic retail pharmacy market;

(ii) Recital 4 (further details of suspected conduct) states that “according to

information in the Authority’s possession” SKEL and Toska eliminated direct

competition between each other using traditional walk-in pharmacies, and

explains how “[a]ccording to that information” Lyf og heilsa benefits from

Lyfjaval’s conduct, and Lyfjaval concentrates on drive-through pharmacies while

Lyf og heilsa does not enter that segment. Sub-paragraphs (a)-(c) of the Recital

further explain how the suspected practices may have been implemented, by

reference inter alia to “an asset swap agreement of 26 April 2022”;

(iii) Recital 5 (geographical area of suspected conduct) states that “[a]ccording to the

information available to the Authority” the involved undertakings operate

pharmacy chains within and outside the Reykjavík capital area. It states that this

capital area “represents almost 70% of all retail sales of pharmaceuticals in

Iceland” and that the suspected conduct therefore covers a significant part of the

Icelandic market;

87 Nexans GCEU ¶72; České dráhy GCEU ¶49. See also Orange ¶88: “Only when a request to that effect is brought before the Court and the undertakings to which a[n] [inspection] decision […] is addressed have put forward certain arguments liable to cast doubt on the reasonableness of the grounds on which the Commission relied in order to adopt that decision may the Court take the view that it is necessary to carry out such a [review of the indicia and determination whether the Commission had reasonable grounds for suspecting an infringement].” Emphasis added, and see the case-law cited. 88 See in particular paragraph 22, and paragraphs 23-25 and 29-34 above.

22

(iv) Recital 6 (possible temporal scope of suspected conduct) states that “[a]ccording

to the information available to the Authority”, the alleged anticompetitive conduct

may have started at least in May 2021 and could still be ongoing.

Thus in these Recitals of the Decision, the Authority disclosed in detail that it

considered that it had in its possession serious information/indicia that led it to suspect

the anticompetitive conduct at issue.89

59. Second, nothing raised by the Applicant calls the sufficiency of these indicia (i.e.

whether the Authority had reasonable grounds for ordering the inspection) into

question. Application ¶¶44-46 simply cross-refer to other pleas, which the Authority

has addressed: no further arguments are made. As set out in Sections 0, 3 and 5 of

this Defence, the Decision was properly reasoned, all essential features of the

suspected anticompetitive conduct were properly described, and the Applicant’s

arguments under the First, Second and Fourth Pleas must be rejected.90

60. Moreover, many of the key matters described in the Decision are undisputed. The

Applicant does not dispute that certain of its walk-in pharmacies (which were closely

located to Lyf og heilsa pharmacies) were closed, that Toska is its competitor, that it

and Toska are active on the Icelandic retail pharmacy market, both within and outside

the Reykjavík capital area, or that the asset swap agreement of 26 April 2022 was

entered into.91 The Applicant accepts that it is in a good position (as a petrol station

operator) to continue with the strategy of emphasising the use of drive-through

pharmacies.92 What the Applicant disputes is essentially that it coordinated with its

competitor Toska in relation to such a strategy and certain other conduct, and/or that

competition (or trade) was eliminated or adversely affected by such conduct. It

therefore advances alternative explanations or interpretations of matters described in

the Decision, unsupported by any evidence, or any evidence of probative value.93 The

89 Such indicia must be assessed not in isolation but as a whole, and they may reinforce each other: Casino GCEU ¶223 and case-law cited. 90 The argument in Application ¶44 (matters of public record) was addressed in paragraph 40 above. 91 Application ¶46 claims “ESA cannot have had sufficiently serious indicia that the asset swap agreement […] could constitute an infringement of Article 53 EEA” because it was notified to/assessed by ICA. This misses the point: the Decision states that the implementation of the suspected practices may have involved, inter alia, the asset swap agreement. The Applicant’s further claims in relation to this are addressed under the Fourth Plea below. 92 Application ¶25. 93 As set out in footnote 50 above, the Applicant has failed to annex any of the hyperlinked material referred to in its Application, as it must if it wishes to rely on such documentation in evidence. In any event, such material fails to cast doubt on the reasonableness of the Authority’s grounds for ordering an

23

Authority however recalls the case-law according to which “the fact that the material

taken into consideration may be open to different interpretations does not preclude it

from constituting sufficiently serious indicia, provided that the interpretation favoured

by the [Authority] is plausible. […].”94 The Authority submits that this plausibility

standard is met, and that, even if the Applicant’s assertions were correct, they would

not call into question the existence of sufficient indicia.

4.3 COOPERATION WITH NATIONAL COMPETITION AUTHORITY

61. As the Applicant observes (Application ¶¶47-48), it is standard practice and even a

legal requirement for the Authority to work closely with the relevant national

competition authority, here ICA, which was consulted before the Decision was

adopted, as required by Article 20(4) of Chapter II Protocol 4 SCA.95 The Applicant

asserts (Application ¶¶47-50) that the Authority must have been in possession of

exculpatory information from “the merger cases” when adopting the Decision, and that

it has therefore ‘cherry-picked’ the information used as indicia in the Decision. It claims

that such ‘cherry-picking’ would entail an arbitrary interference with the Applicant’s right

to private life. This claim must be rejected.

62. First, the Applicant simply asserts that “information in the merger cases is effectively

exculpatory for SKEL.” It fails to specify which information, which mergers, and why.96

Assuming the Applicant refers to the concentration it notified to ICA under the asset

swap agreement,97 the Applicant has the relevant information available to it: there is

no justification for its failure to specify and/or annex such information. This part of the

Third Plea should therefore be rejected as inadmissible. Second and in any event, as

set out at paragraphs 58-60 above, the Decision disclosed the existence of sufficiently

inspection and is of no or doubtful probative value. For example Application ¶28: (i) refers to an offer of “Lyfjaval” made in April 2021, but it appears from Annexes A.7-A.10 that the expression of interest was in fact that of Lyfsalinn, which at the time was not a SKEL subsidiary; (ii) states that: “[i]n 2024, SKEL considered buying Borgarapótek”, but the short email chain (Annexes A.17-A.18), spanning four days, tends to suggest rather a lack of interest “[n]o drive-through windows and much less expensive for us to open a new one.” No conclusion can in any event be drawn as the email chain is incomplete: no emails are provided after 10 September 2024. 94 Casino GCEU ¶222. See also Intermarché GCEU ¶234; Cementos ¶59; České dráhy CJEU ¶64. 95 Application ¶48’s claim (that ICA has already investigated effectively the same conduct) is addressed in Section 5 below. 96 Further, references elsewhere in the Application to the merger proceedings are not necessarily of an exculpatory nature: e.g. Application ¶60 notes how ICA identified “market sharing” concerns in connection with the concentrations. 97 Referred to at Application ¶3 and the Fourth Plea.

24

serious indicia, which the Applicant has failed to call into question. The purpose of an

inspection decision is not to set out in a balanced fashion all available information and

evidence, including any potential exculpatory information (even if it existed, which is

not admitted). At this preliminary stage of the investigation, the Authority is not required

to have assessed exculpatory evidence, let alone disclose it in its inspection decision.

This is confirmed by case-law of the CJEU, which has held that the Commission

“cannot be required to assess equally all evidence pointing in the opposite direction.”98

Such case-law is relevant here: even more so since exculpatory evidence, if any, may

be put forward by the Applicant in the context of its defence in any further inter partes

administrative stage of the proceedings.99

4.4 AN UNDERTAKING MAY NOT PLEAD ALLEGED UNLAWFULNESS OF

INSPECTION PROCEDURES IN SUPPORT OF A CLAIM FOR ANNULMENT OF THE INSPECTION DECISION

63. Application ¶¶ 51-53 appear to allege that the Authority seized documents outside the

temporal scope of the subject-matter of the inspection (‘fishing expedition’). The

Authority denies that this is the case.100 However, even if the Applicant were correct

(which is not accepted), it is settled case-law that the way in which a decision ordering

an inspection is applied has no bearing on the lawfulness of the inspection decision

itself.101 An undertaking may not therefore rely on the illegality of the manner in which

inspection procedures were carried out in support of a claim for annulment of the act

on the basis of which the Authority carried out that inspection.102 Instead, it is settled

case-law that the undertaking must challenge the way in which the inspection was

conducted in an action for annulment of any final decision finding an infringement.103

64. Further and in any event, firstly, the Decision defines the alleged anti-competitive

conduct as starting “at least” in May 2021, which makes clear that the conduct may

98 České dráhy CJEU ¶¶ 52, 64. 99 See paragraph 55 above. 100 See further paragraph 44 above and the case-law cited: the Authority is not required to define precisely the temporal scope of the inspection. 101 Casino GCEU ¶100; České dráhy GCEU ¶22; Deutsche Bahn GCEU ¶49 and the case-law cited. 102 České dráhy GCEU ¶22; Cases T-125/03 and T-253/03, Akzo Nobel Chemicals and Akcros Chemicals v Commission, EU:T:2007:287, ¶55; and the case-law cited. 103 See e.g. Casino GCEU ¶58; C-690/20 P, Casino v Commission, EU:C:2023:171, ¶¶28 (overview of potential remedies), 43, 45.

25

have started earlier. Any search for documents in a reasonable period104 preceding

May 2021 is not therefore disproportionate or arbitrary where the search remained

within the subject-matter and purpose of the Decision (as it did). Further, case-law

confirms that even evidence from outside an infringement period may be relied upon if

it forms part of the body of evidence relied upon to prove the infringement.105 Secondly,

Application ¶52 makes much of the “seemingly random” date of May 2021. As the

Applicant admits however,106 Lyfjaval was sold to Skeljungur ehf. in 2021. Given the

nature of the suspected anticompetitive conduct, it is not arbitrary or disproportionate

to indicate a date in that (2021) time period in relation to which the conduct “at least”

may have commenced.107

65. More generally, the Applicant (Application ¶52 and footnote 16) is inaccurate when it

presents the screenshot excel list in Annexes A.21 and A.22 as proof that the Authority

‘fished’ for information going back to 2019. During the inspection, the Authority saw

indications that the email account [email protected], of the chairman of the board of

directors of SKEL (Jón Ásgeir Jóhannesson), appeared to be used for SKEL business

purposes and therefore contained SKEL business records. The Authority therefore

sought access to this email account. The Applicant refused, on the basis that it was a

private email account of Mr Jóhannesson. The Authority’s IT inspectors therefore

generated a list in excel format to demonstrate the extent of that email account’s

involvement in SKEL business. This excel file lists email correspondence of target

people (‘custodians’) identified within SKEL, whose correspondence involved the email

account “[email protected]” (as sender, addressee, or in copy). The excel list is not

an export list showing documents copied by the Authority, nor does it support the

Applicant's more general contention that the Authority was simply 'fishing' for

information going back to 2019.

104 Application ¶52 and Annexes A.23 and A.24 for example refer to a very limited number of documents from 2020 and from 2021 (in the period prior to May 2021). 105 See e.g. Case T-655/11 FSL Holdings v European Commission, EU:T:2015:383, ¶178. 106 The Applicant is noticeably vague on the timing. Application ¶24 states “the following year, […] Skeljungur later gained control of Lyfjaval.” It can however be deduced from the rest of the paragraph that this was in 2021, the year following 2020. More generally, as set out in paragraph 44 above, at the time of adopting the Decision, the Authority had information that Lyfjaval was offered for sale in May 2021 and was purchased by SKEL (via Lyfsalinn ehf.) in June 2021. 107 See further paragraph 44 and the case-law cited in footnotes 57 and 58 above. The Authority is not required to specify the precise temporal scope of the suspected infringement.

26

5 FOURTH PLEA: THE AUTHORITY IS COMPETENT TO INVESTIGATE UNDER

ARTICLE 53 EEA

66. By its Fourth Plea, the Applicant contends that, as the matters falling under the asset

swap agreement were already approved by ICA under the Icelandic merger control

regime, the Authority has no competence to investigate “the very same conduct”

(Application ¶¶57, 61) again under Article 53 EEA. This claim is based on a number of

inaccuracies, is unsupported by any legal authority and must, for the following reasons,

be rejected.

67. First, as set out also in paragraphs 7 and 49 above, the suspected infringement which

forms the subject matter of the Decision is not the asset swap agreement, which related

to two retail locations in Reykjavík. Recitals 3, 4, 6 and Article 1(1) of the Decision

make clear that: (i) the suspected infringement, commencing at least in May 2021, is

anticompetitive coordination of SKEL’s conduct with its competitor Toska on the

Icelandic retail pharmacy market; and that (ii) the asset swap agreement of 26 April

2022 is one of the ways in which this anticompetitive coordination (which may still be

ongoing) may have been implemented.108 Thus, the conduct under investigation by the

Authority is not “the very same conduct” as that assessed under the merger rules by

ICA: it is of a different nature and geographical and temporal scope. Put differently, the

asset swap agreement and its execution constitute indicia of suspected wider

anticompetitive collusive conduct (pre- and post-dating the asset swap), which

suspected collusion the Authority seeks to investigate.

68. Accordingly, second, even if the transactions under the asset swap agreement were

approved by ICA as mergers,109 this does not affect the Authority’s competence to

108 Recital 4(a) specifically refers to the asset swap agreement as being part of the “implementation” of the suspected practices. Recitals 4(b) and (c) of the Decision refer to other methods by which such implementation may have taken place. 109 The Authority understands that there is some dispute between ICA and the Applicant about the extent to which the transactions were properly “concentrations” within the scope of the Icelandic merger regime, and therefore whether they were even capable of being approved (or prohibited) as mergers. Even however on the Applicant’s view, the Authority understands that the mergers were approved not on the substance, but by default, because they were not approved (or remedies imposed) within the legal time limit imposed by Icelandic law: Application ¶¶4, 56. It appears from the rulings of the Icelandic Competition Appeals Committee referred to in Application footnote 20 (No 1/2023 and No 2/2023 respectively), in the Sections, V Verdict, Part 4, that the Applicant and other party to the mergers recognised and agreed that ICA’s decision to terminate proceedings did not entail a substantive assessment, but was rather a procedural end to proceedings.

27

investigate whether such transactions were evidence of a broader anticompetitive

conduct, distinct from the asset swap agreement itself, and of which the swap merely

formed part.110 As admitted by the Applicant, ICA’s (merger) SO also identified the

preliminary concern that the asset swap agreement “may … provide for unlawful

market sharing within the meaning of Article 10 of the Competition Act and, where

applicable, Article 53 of the EEA Agreement.”111 The Authority was fully entitled to

investigate, on the basis of this and also its own information, whether anticompetitive

coordination in breach of Article 53 EEA has taken, or is taking place. The system

instituted by Chapter II Protocol 4 SCA is one of consultation, cooperation and

information exchange between the Authority and the competition authorities of the

EFTA States.112 It is settled case-law that the Authority is entitled to conduct an

inspection based inter alia on information obtained from a national authority.113 Further,

it is not prohibited from conducting an inspection solely because a national authority is

(or has been) investigating the same conduct under Articles 53 or 54 EEA.114 Contrary

to the Applicant’s claims, there is therefore nothing improper in the Authority taking into

account information from an ICA investigation and commencing its own investigation.

69. Third, the fact that the Authority is investigating a broader concern than ‘just’ the

merger transactions/asset swap means that the following arguments of the Applicant

are ineffective and must therefore be rejected:115

110 In for example a recent case examined by the French Competition Authority (Autorité de la concurrence), Décision No 24-D-05 of 2 May 2024, Annexes B.11 (English translation) and B.11a (French original), that authority reviewed under Article 101 TFEU exchanges between the parties inter alia prior to the relevant mergers (¶¶107-120). Specifically, the French Competition Authority analysed whether the information in the case file established the existence of an overall market allocation plan which included, but was not limited to, the merger transactions. On the facts of the case, it ultimately concluded that the existence of such a plan outside the scope of the mergers had not been proven (¶119). 111 Annex A.20 ¶101 (and see also ¶¶23, 67, 293 and 297). 112 Article 11(1) of Chapter II Protocol 4 SCA provides: “[t]he EFTA Surveillance Authority and the competition authorities of the EFTA States shall apply the EEA competition rules in close cooperation.” See further Articles 11(2)-(7) and 12 of Chapter II Protocol 4 SCA. 113 See e.g. České dráhy GCEU ¶117; Orange ¶52: indeed in that case (¶55) the GCEU regretted that the Commission ordered an inspection without first examining the information obtained by the French competition authority “in relation to similar conduct”. The Commission’s inspection decision nevertheless remained lawful. 114 České dráhy GCEU ¶¶117-119; Orange ¶¶26-27. The Authority understands that ICA has not opened any further investigation into the Article 53 EEA concerns identified in its merger SO. 115 As for the descriptions in Application ¶55 of the circumstances and reasons (e.g. financial performance) surrounding the asset swap agreement, the Authority observes that these are largely unsupported by evidence and, as they relate to the substance of whether there was anti-competitive conduct, they are in any event not relevant to the question of the Authority’s competence to act under Article 53 EEA (the Fourth Plea).

28

(i) Contrary to Application ¶¶58 and 62-63, the Authority’s investigation does not

undermine any legal certainty obtained under the merger regime, or

impermissibly apply Article 53 EEA to conduct already assessed and approved

under the merger rules: the conduct under assessment goes beyond the

transactions under the asset swap agreement and therefore the Applicant can

have no expectation that its broader conduct would not be investigated.116 If the

contrary were true, notifying a transaction between colluding businesses under

the merger rules would, if cleared, remove or insulate any broader cartel

behaviour from scrutiny. Further, contrary to Application ¶58, the ‘one-stop shop’

EEA merger regime is not relevant, because the asset swap transactions did not

meet the relevant EEA merger thresholds.117

(ii) Similarly, the reference in Application ¶62 to Article 21(1) of the EUMR118 does

not advance the Applicant’s case: there is no question of the Authority seeking to

apply the competition rules solely to the merger transactions resulting solely from

the asset swap. For this reason also, the matters considered in the Towercast

judgment119 (referred to at Application ¶63) are not relevant to the present case.

70. Finally, Application ¶60 asserts that ICA was already given sufficient material to assess

the broader Article 53 EEA market sharing conduct (“the same alleged infringement”)

now under consideration. Even if this were correct, the Authority is entitled under

Chapter II Protocol 4 SCA – especially at this preliminary stage – to investigate the

same broader Article 53 conduct.120

116 French Competition Authority (Décision No 24-D-05 of 2 May 2024), Annexes B.11 and B.11a, ¶¶107-120. See also the Opinion of Advocate General Kokott in Case C-449/21, Towercast, EU:C:2022:777, ¶60: where the conduct of the undertaking goes beyond that which was subject to merger review, the conduct may be subject to scrutiny under Article 101 or 102 TFEU. 117 The asset swap transactions did not meet the thresholds for concentrations with an “EFTA dimension”: Article 1 of the act referred to at point 1 of Annex XIV to the EEA Agreement (Regulation (EC) No 139/2004, commonly referred to as “the EU Merger Regulation” or “EUMR”). Accordingly, the Authority did not have competence to act under the EEA merger rules (see Chapter IV Protocol 4 SCA for the relevant rules). 118 In the EFTA pillar of the EEA Agreement, the correct legal reference is Article 21(1) Chapter IV Protocol 4 SCA. 119 C-449/21 Towercast, EU:C:2023:207. 120 České dráhy GCEU ¶119 et seq. The Applicant can therefore have had no legitimate expectation that only ICA would have investigated the Article 53 conduct: see České dráhy GCEU ¶¶151-156. Note that the Protocol 4 SCA mechanism is such that if the Authority formally initiates proceedings against the Applicant under Article 11(6) of Chapter II Protocol 4 SCA, this will have the effect of relieving ICA of its competence to apply Article 53 EEA. On this point, see Case T-589/22, Silgan Holdings Inc v European Commission, EU:T:2024:662 ¶¶41, 47, 60: the Commission was entitled to relieve the German national competition authority of its competence to apply Article 101 TFEU to a case, even at

29

6 REQUEST FOR A MEASURE OF ORGANISATION OF PROCEDURE

71. In respect of the Applicant’s request for a measure of organisation of procedure

(Application ¶¶65-68), the Authority submits that such a measure is unnecessary.

72. First, as submitted at paragraphs 57-60 above, the Decision’s statement of reasons

sufficiently disclosed that the Authority was in possession of information and indicia

providing reasonable grounds for suspecting the infringement in question, and the

Applicant has failed to “produce evidence casting doubt” on whether the Authority had

reasonable grounds for adopting its Decision. Accordingly, and in line with settled

case-law,121 the Court may conclude that there is no need for it to order the further

disclosure of such information and indicia.

73. Second and in any event, the Authority refers to the additional explanations and indicia

provided, in Section 1.2.1 above, in the interests of the expeditious execution of these

proceedings, and to assist the Court. The Authority respectfully submits that these

explanations and indicia sufficiently enable the Court to determine, without the need

for a measure of organisation of procedure, that the Authority possessed sufficiently

serious indicia justifying the adoption of the Decision.

74. Should the Court nevertheless consider that a measure of organisation of procedure

(or of inquiry) is necessary, the Authority: (i) recalls that certain documents in its

possession emanate from SKEL’s competitor Toska, and will therefore require

confidential treatment; (ii) submits that the scope of such measure should be limited to

verifying whether the Authority was in possession of information and indicia providing

reasonable grounds for suspecting the infringement described in the Decision.

a relatively late stage of the national proceedings, in particular where this was necessary to ensure the effectiveness of Article 101 TFEU. 121 Nexans GCEU ¶72; České dráhy GCEU ¶49; Orange ¶88: “Only when a request to that effect is brought before the Court and the undertakings to which a[n] [inspection] decision […] is addressed have put forward certain arguments liable to cast doubt on the reasonableness of the grounds on which the Commission relied in order to adopt that decision may the Court take the view that it is necessary to carry out such a [review of the indicia and determination whether the Commission had reasonable grounds for suspecting an infringement].” Emphasis added, and see the case-law cited. Contrary to how matters are presented in Section VI of the Application (¶68 in particular), it is not “settled case-law” that it is in every case “necessary” for courts to call for a competition authority’s information and indicia, in order to assess whether that authority had reasonable grounds for its decision. It is simply that in those cases the EU courts considered it necessary, on the facts, to do so.

30

7 CONCLUSION

Accordingly, the Authority respectfully requests the Court to:

1. Dismiss the Application in its entirety;

2. Order the Applicant to pay the costs of the present proceedings.

Claire Simpson Daniel Vasbeck

Sigrún Ingibjörg Gísladóttir Melpo-Menie Joséphidès

Agents of the EFTA Surveillance Authority

31

8 SCHEDULE OF ANNEXES

Annex

No

Description

Where

Mentioned

in Defence

Number of

pages

B.1 Merger notification form submitted by SKEL to ICA (25 October 2022) - Translation

Fn. 15, p. 5 8

B.1a Merger notification form submitted by SKEL to ICA (25 October 2022) - Icelandic original

Fn. 15, p.5 8

B.2 Reply of SKEL to the ICA Statement of Objections (27 February 2023) - Translation

Fn. 16, p. 5 18

B.2a Reply of SKEL to the ICA Statement of Objections (27 February 2023) - Icelandic original

Fn. 16, p. 5 19

B.3

Lyfjaval investor presentation (information memorandum) for bids to purchase Lyfjaval by 17 May 2021 - Translation

Fn. 18, p. 5 38

B.3a

Lyfjaval investor presentation (information memorandum) for bids to purchase Lyfjaval by 17 May 2021 - Icelandic original

Fn. 18, p. 5 35

B.4 Newspaper article of 24 February 2023 published in Víkurfréttir – Translation

Fn. 21, p. 5 3

B.4a Newspaper article of 24 February 2023 published in Víkurfréttir - Icelandic original

Fn. 21, p. 5 3

B.5 SKEL investor presentation for the second half of 2023 – English original

Fn. 24, p. 6 45

B.6 Newspaper interview of 22 March 2024 with representative of SKEL – Translation

Fn. 24, p. 6 3

B.6a Newspaper interview of 22 March 2024 with representative of SKEL - Icelandic original

Fn. 24, p. 6 3

B.7 Investor teaser for the sale of Lyfjaval (bids to be received by 17 May 2021) - Translation

Fn. 59, p. 15 2

B.7a Investor teaser for the sale of Lyfjaval (bids to be received by 17 May 2021) - Icelandic original

Fn. 59, p.15 2

B.8 SKEL company announcement that SKEL will acquire Lyfsalinn which will

Fn. 59, p.15 2

32

acquire Lyfjaval (25 June 2021) – English original

B.8a

SKEL company announcement that SKEL will acquire Lyfsalinn which will acquire Lyfjaval (25 June 2021) – Icelandic original

Fn. 59, p.15 2

B.9

European Federation of Pharmaceutical Industries and Associations, The Pharmaceutical Industry in Figures, Key Data 2022 – English original

Fn. 67, p. 17 28

B.10

European Federation of Pharmaceutical Industries and Associations, The Pharmaceutical Industry in Figures, Key Data 2023 – English original

Fn. 67, p. 17 28

B.11 French Competition Authority Décision No 24-D-05 of 2 May 2024 - Translation

Fn. 110, p.27 Fn.116, p.28

47

B.11a French Competition Authority Décision No 24-D-05 of 2 May 2024 - French original

Fn. 110, p.27 Fn.116, p.28

47

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1, rue du Fort Thüngen, L-1499 Luxembourg. Telephone: +352 42 108-1

E-mail: [email protected]

Case E-32/24-11

Luxembourg, 6 March 2025

Sent via e-EFTACourt

Dear Sir/Madam,

Please find enclosed copies of the application from SKEL fjárfestingafélag hf., dated

14 December 2024, initiating proceedings before the EFTA Court in Case E-32/24 –

SKEL fjárfestingafélag hf. v EFTA Surveillance Authority, and the defence from the

EFTA Surveillance Authority, dated 3 March 2025. Copies of annexes to the

application and the defence can be requested by contacting the Registry.

The application was received electronically on 14 December 2024, and entered in the

register of the Court (reg. No E-32/24-1) under Case No E-32/24.

The defence was received electronically on 3 March 2025 and entered in the register of

the Court on that day (reg. No E-32/24-8).

In accordance with Article 20 of the Statute of the EFTA Court, the Governments of the

EFTA States, the Union and the European Commission are entitled to submit statements

of case or written observations, in English, to the Court within two months from the date

of this notification, i.e. by Tuesday, 6 May 2025.

On behalf of the Registrar.

Yours faithfully,

Bryndís Pálmarsdóttir

Senior Administrator

Encl.