Sweden: Swedish Competition Law Update

Last Updated: 5 December 2002
Article by Stefan Perván Lindeborg

1. THE COMPETITION ACT

The national Swedish competition/antitrust rules are contained in the Competition Act (Konkurrenslagen, 1993:20). The Competition Act was enacted in 1993 and completely changed Swedish competition law. At the time, Sweden was not a member of the European Community/European Union, but was just becoming a member of the EEA (and later became an EU member state in 1995). The Competition Act is to a large extent modelled on the corresponding EC rules, and it is explicitly stated in the preparatory works that developments under EC competition law, including the case law of the EC Court of Justice, should be followed to the extent possible.

The Competition Act contains two basic prohibitions, one against anti-competitive agreements and one against abuse of a dominant market position. These two prohibitions are identical with Articles 81 and 82 of the EC Treaty, save for the requirement under the EC rules that trade between member states must be affected. In addition, the Competition Act contains rules on control of concentrations. After considerable amendments in 2000, these rules are also similar to the corresponding rules in the EC Merger Regulation. The Competition Act is enforced by the Swedish Competition Authority (Konkurrensverket, below "the Competition Authority"). Appeals against decisions by the Competition Authority, and actions regarding fines under the competition rules etc, are brought before the Stockholm District Court and the Market Court (the court of final instance). Actions for damages under the Competition Act are, however, brought before a district court which is the respondent’s "home forum" under the general procedural rules.

Below is an outline of the main rules in the Competition Act and a description of the most important recent changes and developments under Swedish competition law.

2. ANTI-COMPETITIVE AGREEMENTS

The prohibition has the same wording as Article 81 of the EC Treaty and is interpreted in the light of the case law of the EC Court of Justice. Thus, for example, the prohibition covers not only agreements proper but also concerted practices. The difference is that whereas Article 81 is applicable only where inter-state trade may be affected, the Swedish prohibition is applicable as soon as there is an effect on the Swedish market.

In 2001, a general block exemption for vertical agreements, corresponding to the EC law block exemption enacted in 1999, was introduced in Sweden. The main difference between the two is that the market share cap in the Swedish block exemption is 35%, compared to 30% in the EC block exemption. Also in 2001, two new "horizontal" block exemptions for research & development agreements and specialisation agreements respectively were introduced. They are also similar to their EC law counterparts.

The Competition Authority has been particularly active in the field of fighting cartels recently. A case involving an alleged cartel between several major oil companies in Sweden is currently pending before the Stockholm District Court. The Competition Authority has requested the imposition of very high fines, amounting in total to around EUR 75 million (this is the first "large" cartel case under Swedish competition law). In addition, in October 2001, the Competition Authority carried out an on-the-spot investigation (a "dawn raid") on the premises of several large Swedish companies in the building/asphalt sector investigating a suspected market-sharing cartel. The Competition Authority is currently still investigating the case, and expects to bring a court action during the first half of 2003. Both these cartel cases have received considerable attention and have been much discussed in the Swedish media. Several additional cartels have been investigated and court actions have been brought resulting in fines being imposed.

The Competition Authority and the legislative organs in Sweden have also been active during 2001 and 2002 in investigating and discussing how to fight cartels efficiently. In 2000, the Government appointed a Committee to study and propose ways to make the fight against cartels more efficient. One point which the Committee was instructed to consider was the possibility to criminalize cartel behaviour, i.e. to make it a criminal offence for individuals to be involved in cartel co-operation. Following the Committee’s report, no proposal to criminalize cartels was submitted.

However, a "leniency" programme along the lines of the European Commission’s recently revised leniency principles was introduced. Under the new Swedish rules, which came into force on 1 August 2002, a company that discloses the existence of a cartel to the Competition Authority may benefit from total immunity from fines (provided that certain additional conditions are met). A company which does not disclose an unknown cartel, but which facilitates the Competition Authority’s investigation considerably by for example providing additional important information or evidence, may benefit from a reduction of the fine. The authorities hope that this system will give companies involved in cartels a strong incentive to "step off" and inform the authorities.

Also in order to increase the Competition Authority’s ability to investigate cartels efficiently, the secrecy rules have been amended to increase the confidentiality of information obtained by the Competition Authority, for example in the course of a dawn raid or from other companies. The purpose is to prevent companies subject to an investigation from being able to destroy evidence, co-ordinating their versions or otherwise interfering in or obstructing the investigation. Moreover, a possibility to keep the identity of complainants and informers confidential has been introduced.

3. ABUSE OF A DOMINANT POSITION

The prohibition against abuse of market dominance in the Competition Act is more or less identical to the corresponding prohibition in Article 82 of the EC Treaty (again with the exception that the Swedish rules do not require an effect on inter-state trade but only an effect on the Swedish market). Typical forms of abuse include excessive pricing, predatory pricing, loyalty rebates, discrimination, refusal to supply, tying, and exclusivity obligations.

There have been a few court cases where fines have been imposed. Still, fines have been relatively modest so far compared to cases under EC law. The highest fine to date imposed for abuse of a dominant position under the Competition Act is that imposed on the state-owned Swedish Rail (Statens Järnvägar) for predatory pricing against a small newcomer on the railway market, amounting to SEK 8 million (approximately EUR 0.9 million).

In a recent case, the Market Court has made it clear that it applies strict standards in terms of evidence presented by the Competition Authority when claiming that an infringement has been committed and requesting fines to be imposed. The Competition Authority claimed that AGA Gas AB, a leading supplier of industrial gases, had abused its dominant position on the Swedish market, basing its allegations on a number of supply contracts with various customers in respect of cylinder gases and liquid (bulk) gases. The Competition Authority contended that the purchasing quantities indicated in the agreements were very close to, or even above, the buyers’ total requirements, and that this meant that the agreements should be regarded as exclusive purchasing agreements unduly foreclosing AGA’s competitors. The Competition Authority brought an action before the Stockholm District Court requesting the court to impose a fine on AGA in the amount of SEK 3 million (approximately EUR 325,000).

AGA held that the Competition Authority had defined the relevant markets incorrectly and that AGA does not have a dominant position. AGA also contended that since the agreements only stipulated purchasing quantities, and since AGA could not predict reliably the total requirements of the customers, the agreements could not be regarded as exclusivity agreements. AGA also claimed that it was objectively justified for AGA to enter into relatively long-term agreements for considerable gas quantities given the investments involved. The District Court imposed a fine of SEK 600,000 on AGA for abuse of a dominant position. The Market Court, however, reversed the District Court’s decision and dismissed the Competition Authority’s action altogether. The Market Court took the view that the geographic markets were local, and accepted AGA’s argument that there was no evidence of the existence of a chain of substitution covering the whole of Sweden. On this basis, the Competition Authority had not proved that AGA held a dominant position. Moreover, the Market Court found that at least some of the agreements on which the Competition Authority had based its claim could not be regarded as exclusivity agreements, and also found AGA’s argument that the agreements were objectively justified to be at least partially well-founded. On the whole, the Market Court found that the Competition Authority had not supported its claim sufficiently, and dismissed the action. This case is interesting in that the Market Court made it more clear than previously that the Competition Authority, when bringing actions and requesting fines to be imposed, must take the tasks of defining the relevant markets and presenting evidence of an infringement very seriously.

4. CONCENTRATIONS

Following legislative changes in 2000, the Swedish rules on control of concentrations are highly similar to the corresponding EC law rules. Through these changes, the previous concept of "acquisition of a company" was abandoned and replaced by the notion of "concentration". This notion, and the principles regarding change of control etc, are now the same under Swedish law as under EC law. This also applies to the concept of "undertakings concerned", the principles on how to calculate turnover, and ancillary restrictions.

Also the substantive test is basically the same as under EC law, referring to the "creation or strengthening of a dominant position which significantly impedes, or is liable to significantly impede, the existence or development of effective competition in Sweden as a whole, or a substantial part of it". A concentration shall nevertheless not be prohibited, however, where the effect of a prohibition would be that significant national interests in respect of security or supply are not observed.

Under the Competition Act, a concentration must be notified to the Competition Authority where, in the preceding financial year, the undertakings concerned had a combined worldwide turnover in excess of SEK 4 billion (approximately EUR 430 million) and each of at least two undertakings concerned had turnover in Sweden (i.e. the value of sales to customers located in Sweden) in excess of SEK 100 million (approximately EUR 11 million). The previous requirement that the target company must have some form of physical business presence in Sweden no longer exists. It is thus sufficient that, in the case of a typical acquisition, both the acquirer and the target company make sales into Sweden amounting for both to more than SEK 100 million. Where in a particular case the first turnover threshold, but not the second one, is exceeded, the Competition Authority may order the parties to notify if there are strong reasons therefor. In such cases, the parties also have the right to notify voluntarily in order to speed up the process.

The procedural rules are in some respects different compared to the EC Merger Regulation. After submission of a complete notification, the Competition Authority has an initial period of 25 working days within which to either clear the notification or initiate an in-depth investigation. If the Competition Authority wishes to oppose the transaction, it must bring an action before the Stockholm District Court requesting a prohibition decision. While notification is mandatory if the turnover thresholds are exceeded, there is still no formal deadline for notification. However, there is a "standstill" obligation prohibiting the parties from taking measures to complete the notified transaction before the end of the phase 1 period. There are no automatic fines or other sanctions for violating standstill. However, in closing before clearance the parties do take the risk that ultimately the transaction is prohibited or that divestment or similar is ordered. The Competition Authority also has the power to order the parties, subject to a penalty for non-compliance, to respect the standstill obligation.

5. EC COMPETITION LAW IN SWEDEN

Under fundamental principles of EC law, Articles 81(1) and 82 of the EC Treaty have direct effect and can thus be applied by the Swedish courts in cases concerning for instance invalidity of contracts. Moreover, since 1 January 2001 the Competition Authority, the Market Court and the Stockholm District Court have the power to apply Articles 81(1) and 82 of the EC Treaty.

In a landmark case described in the 2002 edition of this publication, the Göta Court of Appeal ordered the Swedish Civil Aviation Administration (Luftfartsverket) to pay SEK 400 million (approximately EUR 43 million) to Scandinavian Airlines System (SAS) as compensation for abuse of a dominant position under EC competition law (as well as under the Competition Act). The abuse consisted of price discrimination in relation to the use of Stockholm’s Arlanda airport. The Civil Aviation Administration has lodged an appeal to the Supreme Court, requesting a review dispensation (which is required for a case to be reviewed in substance by the Supreme Court). The Supreme Court is expected to come to a decision on whether or not to review the case before the end of 2002.

Over the years, the European Commission has on several occasions carried out on-the-spot investigations (dawn raids) under the EC competition rules on the premises of Swedish companies (the Competition Authority has similar powers under the Competition Act). For example, a dawn raid was carried out by the Commission in August 2001 at the offices of a number of companies throughout Europe active in the plastic films industry, including a Swedish company. Typically, the Commission is assisted on such occasions by representatives of the Competition Authority.

6. OUTLOOK FOR 2003

The recently adopted new procedural rules modernising and decentralising EC competition law will naturally affect also how competition law is applied in Sweden. Swedish courts (like those in other Member States) will have the power to apply directly Article 81(3) of the EC Treaty, granting an exemption to agreements meeting the relevant criteria. It is likely that the corresponding development will follow under national Swedish competition law, so that similarly it will no longer be possible to submit notifications regarding agreements/co-operation between companies to the Competition Authority for an assessment as to whether an exemption should be granted under the Competition Act.

As mentioned above, the Competition Authority has been much focused recently on detecting and fighting cartels. The involvement in at least two major cartel investigations, requiring considerable resources for fact-finding, review and analysis of large amounts of documentation, interrogations with relevant people, work relating to court proceedings involving extensive exchanges of submissions and hearings etc, means that a considerable part of the Competition Authority’s resources are taken up for some time. This may reduce the ability and interest of the Competition Authority to deal with other matters, such as responding actively to complaints. It will be interesting to see how inclined the Competition Authority will be during the year ahead to also focus on other matters than cartels.

We have seen in the last year or two an increased amount of civil law litigation in Sweden relating to competition law, both allegations of invalidity of contracts under the competition rules and claims for damages for breaches of competition law. This trend may be further strengthened in the future, due to an increased awareness among companies and lawyers of the possibilities of using the competition rules "offensively". If the European Commission’s proposal for decentralisation of the application of EC competition law is finally adopted, this should also contribute to an increased volume of competition law related litigation. Losing the possibility to notify agreements to the competition authorities for an assessment will mean that parties will increasingly have to turn to courts and arbitrators in order to resolve these issues (although the possibility to lodge a complaint with the relevant competition authority will presumably be retained).

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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