Norway’s Competition Authority (Konkurransetilsynet) has finally come to a decision in its long-running investigation into whether the municipal pensions giant KLP abused its dominant position in the market for public occupational pensions – and has all but ruled that it did.
Mads Magnussen, director general of the authority, said: “Our assessment is that KLP has harmed competition by actively and strategically influencing municipalities not to put public occupational pension services out to tender.”
“This may have resulted in higher costs and lower-quality services for municipalities,” he said in a statement today announcing the authority’s decision in the investigation it has been handling since 2022.
KLP, which now manages NOK1trn (€90bn) of assets, is now being required to change its practices to strengthen competition for the benefit of Norwegian municipalities, the authority said, and listed several specific commitments the pension provider has pledged to comply with over the next five years.
These include committing to not actively influencing municipalities to refrain from assessing or launching competitive tender procedures for public occupational pension services; communicating in an “objective and balanced” way that should “not create doubt about other providers’ ability to deliver public occupational pension services”, and not engaging in “one-sided or non-transparent influence through close relationships”.
The Competition Authority said KLP did not agree that it had abused its dominant position, but added that nevertheless, the company had proposed measures aimed at addressing the authority’s concerns.
“The measures KLP has committed to are binding, and the Competition Authority will monitor the company’s compliance going forward,” the authority noted, adding that the decision brought its investigation into KLP to a close.
Responding to the decision, Sverre Thornes, KLP’s chief executive officer, said: “We are pleased that the Norwegian Competition Authority has closed the case after four years of investigations.
“The Authority has been concerned with ensuring good competition in the market for public occupational pensions, and as a major player we understand that KLP has an extra responsibility,” he stated.
Thornes said that “even though the Norwegian Competition Authority has not concluded that there has been a violation of the Competition Act”, KLP had proposed measures addressing the concerns, measures he said KLP believed “make KLP better”.
Meanwhile Storebrand, which has been competing with KLP for the last few years to provide municipal occupational pensions in Norway, welcomed the decision.
Jon Mathias Hippe, head of public sector at the Norwegian financial services company, told IPE: “I consider this to be a correct and important decision that is likely to enhance competition in the market for municipal occupational pension.”
He said he believed it would lead to an increase in competitive procurement procedures in the years ahead, but also said a substantial problem remained - namely that customers continued to be locked into KLP because they did not have access to the surplus of their equity contributions as owners of KLP.
“This self-imposed customer lock-in mechanism is the underlying reason for Storebrand’s State aid complaint to ESA in 2022,” noted Hippe, adding that the municipalities should be entitled to recover this “unlawful State aid”.
The Norwegian Association of Pension Funds also responded to the ruling, saying it was positive that KLP was being obliged to stop using its influence to prevent municipalities from considering alternatives to KLP.
“We hope that these signals from the Norwegian Competition Authority will prompt more municipalities to consider their own pension fund,” Christer Drevsjø, chief executive officer of the association, told IPE.
