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Recycling old party tricks: shooting the regulators

Over the last two evenings, current affairs programme Kastljós has run an excellent report exposing a long-term price-fixing scheme between the two main shipping companies in Iceland – Eimskip and Samskip. The findings came in the wake of a raid by the Competition Authority on the offices of the two companies several months ago.

Iceland is a country that produces very little in the form of food or material goods. It is moreover an island. Consequently it is heavily dependent on shipping. Practically everything here is imported, and a large portion – if not most – of the goods are brought in by ship. Through their illicit scheme, those two companies have robbed the people of this nation of vast amounts of money, since the price of shipping that they collaborated to keep as high as possible gets funnelled into retail prices.

Sadly, by now we Icelanders have gotten used to this, as a scandal of this nature gets exposed every few years. The problem with living in a society as tiny as ours is that healthy competition tends to be a challenge – the market is simply not large enough to support numerous companies in the same sector.

Iceland government leadersThe other issue brought to light by the Kastljós report, which to my mind is far more insidious and frightening than this particular price-fixing scheme, is that the current government is now making overtures to abolish the Competition Authority as an independent body, planning instead to merge it with two other regulatory bodies. This would, of course, seriously impact its effectiveness. Which is no doubt what the government wants.

This comes in the wake of many other such “measures” by the government. Very soon after coming to power they did away with the Ministry for the Environment, no doubt to silence any pesky nagging about the use of natural resources. Last year there were major cuts to RÚV, the State Broadcaster, which among other things runs Kastljós. As some people may remember this came after overt and covert threats made by certain members of the government who were upset by RÚV’s reporting on issues that showed them in a negative light. Another, more recent, action was to slash the budget of the Special Prosecutor, an office set up to investigate crimes in connection with the economic meltdown. Granted, this came as no surprise – it was a given that this government would do this. After all, the two parties now in power are responsible for creating the conditions that led to the economic meltdown, which is still wreaking havoc in the lives of innocent people. It goes without saying that they are not keen to have this investigated.

It is six short years since this country was brought to its knees by the catastrophe that was the meltdown. It occurred largely because regulatory bodies failed – they had been abolished or rendered impotent through actions taken by the then-government. Suffice it to mention the dismantling of the National Economic Institute in 2002. It was issuing serious warnings about the government’s economic policies at the time and was simply done away with by then-prime minister Davíð Oddsson – he who today works diligently to rewrite history as editor-in-chief of Morgunblather Morgunblaðið, one of Iceland’s two daily newspapers. He wished to continue implementing his actions without the “negative” analysis by the regulator.

This present government seems bent on doing exactly the same thing – but even more meticulously and systematically. Gylfi Magnússon, an economics professor at the University of Iceland and Minister of Finance in the last government, was quoted in Kastljós as saying that the Competition Authority had saved the Icelandic nation approximately ISK 100 billion over the last eight years through its powerful regulatory practices. This is based on calculations that he prepared at the behest of the Authority. ISK 100 billion is a shitload of dosh, and the current government knows this. By abolishing the Authority, that money could potentially be going into the pockets of their relatives and cronies. I’ll say no more.

UPDATE: It was brought to my attention that the price-fixing scheme referred to in this article has not yet gone to court, so as yet we are talking about alleged price fixing. The CEOs of the two companies in question have been indicted by the Special Prosecutor’s Office, yet vehemently deny the charges. My apologies for the error.

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