Economic analysis continues to play an important role in Swedish enforcement of competition law. There is an increasing trend among parties of using bite-sized economic support, analysis and screening early in the process. In addition, effects analysis is becoming more important to succeed in court, thereby putting more pressure on the parties to present careful economic documentation and analysis. Both these trends require an enhanced integration of the lawyer-economist collaboration.
This article is based on interviews with prominent Swedish competition lawyers from the law firms Bokwall Rislund, Cederquist, Delphi, Eric Ericsson, Front Advokater, Gernandt & Danielsson, Hannes Snellman, Kastell, Lindahl, Mannheimer Swartling, Roschier, Setterwalls and Vinge, as well as with the management of the Swedish Competition Authority (SCA).
Mergers: economists involved early in the process
There has been much merger-related work in the past year, but no Phase II investigations since summer 2017. While the SCA has, since 1 January 2018, had the power to prohibit mergers, lawyers do not believe that this explains the lack of Phase II investigations. Economists are increasingly involved early in the process to help lawyers with screening and to prepare brief analyses on potential issues and remedies, as well as more comprehensive economic analysis that can be used proactively. Defining the relevant market is still key in most merger cases. More sophisticated methods, such as upward pricing pressure (UPP) analysis and merger simulations, appear only in complex mergers.
Anticompetitive agreements: effects analysis is necessary
Swedish courts have increasingly required careful effects analysis, including in cases involving anticompetitive agreements. Lawyers and the SCA are unanimous in the view that this is often now necessary in Sweden. They believe effects analysis will consume a substantial amount of the SCA’s resources and consequently lead to fewer prioritised cases and fewer cases taken to court. To pass the SCA’s increasingly strict prioritisation or to be successful in court, it will be crucial for parties to demonstrate anticompetitive effects (or a lack thereof), which often require economic analysis.
One recent case emphasised the need to demonstrate effects. It centred around a five-year non-compete clause between two merging firms in the international moving industry. The Patent and Market Court of Appeal rejected the SCA’s claim that the clause had been anticompetitive by object, thereby confirming the judgement at first instance. It did not find the clause to be anticompetitive by object because it found it unreasonable that the clause could be considered procompetitive in the first few years and then, literally overnight, be viewed as anticompetitive by object. In the absence of a sufficient effects analysis from the SCA, the court dismissed the claim. This shows that the further away from the typical hardcore restrictions, the more important it becomes to demonstrate effects.
Abuse of dominance: closed investigations and acquittals
There has been little work for economists in relation to abuse of dominance in the past year. According to most of the lawyers, many clients do not prioritise compliance with rules regarding abuse of dominance as much as compliance with rules regarding anticompetitive agreements, public procurement and corruption. One reason is that the clients find the risks of non-compliance in terms of fines and negative publicity to be comparatively low.
In November 2017, the SCA closed two four-year investigations into potential abuse of dominance. A key reason for closing the first investigation, concerning wholesale locksmith hardware, was that the as-efficient competitor test of the pricing scheme showed no sign of foreclosure. The second investigation, concerning a nationwide lottery and its agreements with its beneficiaries, was ultimately closed after several years of investigation. The two cases indicate that the SCA may close investigations if there are no exclusivity conditions or anticompetitive effects cannot be demonstrated.
There have also been court verdicts of acquittal in two abuse of dominance cases brought by the SCA. Economists provided analysis and expert testimony in both cases. The first case concerned Swedish Match, producing and selling snuff, which had introduced a uniform labelling system on its snuff coolers. The second case concerned Nasdaq OMX, operating a stock exchange, which had made an operator of server rooms refuse to supply a competing stock exchange operator.
Looking forward, lawyers partly differ in their views regarding the potential effects of the Intel judgement in Sweden. They agree that the judgement is likely to lead to fewer cases taken to court because of the increased need for careful effects analysis. However, they disagree on how quickly this will be manifested in practice.
Damages: Swedes rarely sue
There is consensus among lawyers that the main explanation for the few damages cases in Sweden is a culture of not suing for damages. Clients do not find it worthwhile to engage in a process with an uncertain outcome that will take several years and potentially ruin the relationship with a trading partner. In addition, there have been few judgments on breaches of competition law in recent years to base new damages claims on. The damages directive, implemented in December 2016, is not expected to affect this situation significantly.
However, three long-lasting damages cases, Yarps/Telia, Tele2/Telia and Net at Once/GothNet, have been ruled upon in the past year. All three cases concerned telecommunications services and relied heavily on analysis and expert testimony by economists. In both cases involving Telia, the second instance overturned the first instance’s judgment. No damages were awarded in any of the cases, which may lead to smaller incentives to claim damages in the future.
The SCA: winds of change
On 1 September 2017, Rikard Jermsten, a judge from the Administrative Court of Appeal took office as the new director general of the SCA. Many lawyers interpret his early actions, including closing long-lasting investigations, as a sign that he wants to start with a clean slate and prioritise cases that are more likely to be won. The SCA has also recruited Marie Östman as new chief legal officer, starting on 1 September 2018. She has previously worked for the SCA and most recently as a lawyer at the law firm Vinge.
Internal quality assurance of the SCA’s own analysis has become more important with its new power to prohibit mergers. As a response, the chief economist and the chief legal officer will have more pronounced roles as quality assurers. Lawyers welcome this but believe that it will consume even more of the SCA’s resources. Together with the need for more careful effects analysis, this is likely to make the SCA more selective in its prioritisation. This provides both a challenge and an opportunity for parties. Being proactive and providing the SCA’s team with information and analysis may increase the possibilities of influencing an investigation, by for example affecting the likelihood that an abuse case is prioritised.
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