The Icelandic Competition Authority (ICA) has launched a formal investigation into the Restaurant Employers’ Association (SVEIT) and the pseudo-union Virðing, following a complaint submitted by Efling Union, the Federation of General and Special Workers in Iceland (SGS), and the Icelandic Confederation of Labour (ASÍ).
Efling, SGS, and ASÍ submitted a letter to the ICA on March 14th, drawing attention to the fact that Virðing is not a genuine trade union but rather a shell organization founded by a group of employers to lower employee wages.
Efling considers that a collective agreement with a fake union controlled by employers cannot be regarded as a genuine collective agreement. As a result, the exemption granted in Article 2 of the Competition Act, which allows coordination between companies in the context of collective bargaining, does not apply.
Possible penalty of up to six years in prison
The ICA has now launched an investigation based on these allegations. On March 31st, the ICA sent four identical letters to SVEIT, Virðing, and two member companies of SVEIT: Skúli Craft Bar and ROK Restaurant. The recipients were informed that a formal investigation had been launched.
The ICA’s letter states that illegal coordination between competitors regarding pricing and other important business matters is one of the most serious violations under Icelandic competition law. It notes that fines for such violations can amount to up to 10% of a company’s total turnover, and that company executives may face up to six years of imprisonment. The letter also reminds recipients that competition laws apply not only to companies but also to their associations.
Exemption applies only to “genuine collective agreements”
The general principle of the Competition Act is that all coordination between companies is prohibited unless specifically permitted by listed exceptions. The ICA reiterates in its letter that Article 2 of the Act allows for coordination between companies for collective bargaining purposes.
However, it emphasizes that unless the agreements are part of a genuine collective bargaining process, all the usual rules of competition law fully apply. Coordination between companies that is intended to erode workers’ conditions, without involving genuine collective bargaining, may therefore constitute a breach of competition law.
Personal liability for company owners
The ICA’s letter highlights provisions of law that establish liability not only for companies and their associations, but also for individual board members (including alternates) and staff. It states that individuals can be held criminally liable for violations.
The ICA’s letters were sent to Aðalgeir Ásvaldsson (managing director of SVEIT), Valdimar Leó Friðriksson (managing director of Virðing), Hrefna Rósa Sætran and Björn Árnason (for Skúli Craft Bar), and Magnús Scheving and Hrefna Sverrisdóttir (for ROK Restaurant). Notably, Hrefna Sverrisdóttir is a former chair of SVEIT, and Björn Árnason is the current chair.
Six categories of documents requested
In its communication, the ICA demands that the named parties submit all documents related to the founding of Virðing and the drafting of the so-called collective agreement between SVEIT and Virðing, as well as all correspondence between the parties regarding the matter. The letter specifies six categories of documents, including emails, other electronic communications, meeting minutes, and memos.
The ICA asks that documents be retrieved and submitted from both employees and board members. It emphasizes that emails from outside domains, such as personal addresses or messages via messaging apps or social media, are also covered, not just emails on company domains.
The authority specifically requests that these communications be located through electronic searches and that such searches be carried out, described, and verified by a systems administrator or, if applicable, an independent service provider.
Actions are delivering results
Efling maintains that it is unacceptable in a functioning labor market for employers to negotiate with themselves over the terms and conditions of workers. Such actions undermine workers’ right to genuine collective bargaining and open the door to exploitative pay cuts.
Since December last year, Efling has warned its members and other hospitality workers about the fraudulent nature of SVEIT and Virðing. Efling also sent letters to all companies listed as members of SVEIT, urging them to respect workers’ rights and honor existing collective agreements. As a result, many restaurants have withdrawn from SVEIT, and others have declared that the fake agreement with Virðing does not apply to them.
Efling has also publicly disclosed clear connections between SVEIT and Virðing, and revealed the wage cuts entailed by their so-called agreement. The union has filed complaints with other public oversight bodies such as the Icelandic Data Protection Authority and the Directorate of Labour. Furthermore, it has brought the attention of international parent companies of Subway and Hard Rock Cafe to the conduct of the Icelandic businesses operating under those brands.
Additionally, Efling has sent letters to all public institutions that have done business with SVEIT member companies, urging them to direct their business toward restaurant companies that fully respect workers’ rights and labor market rules.