Sweden: Swedish Competition Law Update

Last Updated: 19 September 2003
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 (at least potentially) 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 (or before the Stockholm District Court, which is always competent).

Below is an outline of the main rules in the Competition Act and a description of the most important recent changes and developments in 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 is currently particularly active in the field of fighting cartels. In a case involving an alleged cartel between several major oil companies in Sweden, the first major cartel case in Sweden, the Stockholm District Court imposed fines totalling approximately EUR 6 million in April 2003. However, the Competition Authority had requested much higher fines of around EUR 75 million in total, and the Competition Authority has lodged an appeal to the Market Court. In addition, the Competition Authority has brough a court action against several large Swedish companies in the asphalt sector for a suspected market-sharing (bid-rigging) cartel, requesting the Stockholm District Court to impose fines amounting in total to approximately EUR 180 million. 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.

In August 2002, a leniency programme along the lines of the European Commission’s recently revised leniency principles was introduced in Sweden. Under the new rules, a company that discloses the existence of a cartel to the Competition Authority may benefit from total immunity from fines on certain conditions. 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 in order 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 with or obstructing the investigation. Moreover, a possibility to keep the identity of complainants and informers confidential has been introduced.

Following the recent modernisation of EC competition law, a Swedish Government Committee has considered to what extent the Swedish procedural rules should also be amended. In July 2003, the Committee proposed a number of changes, some of which are the following:

  • The relationship between EC law and Swedish law. The Committee proposes that the Competition Act be applicable only in cases where the effect on trade criterion under Community law is not met, and that there be no right to apply stricter Swedish law to unilateral conduct.
  • System of ex post control. Considering the abolishment under Community law of the ex ante (notification-based) system, the Committee proposes that the corresponding rules at Swedish level likewise be replaced by a directly applicable legal exception system. Hence, neither exemption decisions nor negative clearance decisions will be available.
  • Block exemptions. In contrast with the modernisation of Community competition law, the Committee finds it feasible to remove the Swedish block exemption regulations. The main reasons for this are (i) that block exemptions cannot serve as an administrative relief once the system with individual exemptions has been abolished and (ii) that the block exemptions under Community law will provide adequate guidance for companies also in cases where Swedish law applies.

The Committee proposes that the new Swedish rules should come into effect simultaneously with the modernised Community rules, i.e. on 1 May 2004. The Committee is continuing its work, now focusing on a number of additional questions, including possible changes to the rules on compensation for damages incurred as a consequence of violations of the Competition Act. The Committee shall present any additional proposals no later than 31 January 2004.

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 several court cases where fines have been imposed for abuse of dominance in Sweden. 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 was 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 courts found that the Swedish Civil Aviation Administration had abused its dominant position in violation of Article 82 of the EC Treaty and the corresponding provision in the Competition Act (see below).

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 world-wide 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, in the case of a typical acquisition, that each of the acquirer and the target company make sales in Sweden amounting to more than SEK 100 million (possibly only through export sales into Sweden). Where in a particular case the SEK 4 billion threshold, but not the SEK 100 million threshold, 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 either to clear the notified transaction or to initiate an in-depth investigation. An in-depth (phase 2) investigation lasts a maximum of three months. If the Competition Authority wishes to oppose the transaction, it must bring an action before the Stockholm District Court requesting a prohibition decision. Whilst 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 the standstill rule. However, in closing before clearance the parties do run the risk that ultimately the transaction will be prohibited or that divestiture or similar will be ordered. The Competition Authority also has the power to order the parties in a particular case, subject to a penalty for non-compliance, to respect the standstill obligation.

To date, there has been no outright prohibition against a concentration. However, in one case, the parties abandoned the transaction once the Competition Authority had brought a court action. Moreover, there have been a number of examples of parties accepting commitments relating to e.g. divestiture in the context of "negotiated" solutions with the Competition Authority.

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. Following the recent modernisation of the procedural rules of Community competition law, the Competition Authority and the Swedish courts will be competent to apply Article 81 in its entirety, including the exemption criteria in Article 81(3). As outlined above, a similar system change has been proposed under domestic Swedish competition law.

In a landmark case described in previous editions of this publication, the Swedish Civil Aviation Administration (Luftfartsverket) was found to have abused its dominant market position in violation of Article 82 of the EC Treaty (as well as the corresponding Swedish prohibition) through price discrimination in relation to the use of Stockholm’s Arlanda airport. The Administration was ordered to repay approximately SEK 400 million (approximately EUR 43 million) to Scandinavian Airlines System (SAS) as restitution due to invalidity. Following an appeal by the Administration, the Supreme Court denied review dispensation (which is required for a case to be reviewed in substance by the Supreme Court).

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 officials of the Competition Authority.

6. Outlook for 2004

The current modernisation and decentralisation of EC competition law will naturally affect how competition law is applied in Sweden. From 1 May 2004, the Swedish courts (like those in other EU Member States) as well as the Competition Authority will have the power to apply directly Article 81(3) of the EC Treaty, thereby "exempting" agreements meeting the relevant criteria. As mentioned above, a corresponding change has been proposed under Swedish competition law, so that similarly it would no longer be possible to submit notifications regarding agreements/co-operation or conduct to the Competition Authority for an assessment as to whether negative clearance or exemption is available under the Competition Act. This means that we are heading towards a pure "self-reliance" or "self-assessment" system where it is up to companies (and their advisers) to assess whether their agreements, conduct etc violate the competition rules and, in case of restrictive agreements, whether they fulfil the criteria for exemption.

The Competition Authority is currently much focused on detecting and fighting cartels. The Authority’s involvement in at least two major cartel investigations/court cases requires 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. This 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.

There has been an increased amount of civil law litigation in Sweden relating to competition law, involving 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". The modernisation and decentralisation of EC competition law may also be expected to contribute to an increased volume of competition law related litigation. If the pending proposal for similar changes to the Competition Act are adopted, this should further strengthen this trend. 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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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