Sweden: economist perspective

Economic analysis continues to play an important role in Swedish competition cases. Economic evidence and theories of harm are becoming increasingly common in the early stages of investigations. A focus on digital markets continues to characterise the activities of the Swedish Competition Authority (SCA). After publishing its sector inquiry into digital platform markets earlier this year, the SCA is now assessing competition developments in Swedish e-commerce.

The article is based on interviews with prominent Swedish competition lawyers from the law firms Bokwall Rislund, Cederquist, Delphi, DLA Piper, Eric Ericsson, Front Advokater, Gernandt & Danielsson, Hammarskiöld & Co, Hannes Snellman, Kastell, Mannheimer Swartling, Roschier, and Vinge, as well as with the director general and chief economist of the SCA.

Mergers and acquisitions

Competition economics plays an especially important role in complex mergers. Due to the time pressure in complex merger processes, economists are often engaged early on so that lawyers and economists can develop a common work strategy.

The number of merger filings does not appear to have been affected by the pandemic. After a quick dip in the spring of 2020, merger activity seems to be back to normal. In 2020, the SCA received 80 merger notifications, which is on par with previous years. Out of the 80 notifications, two entered into Phase II assessments.

The largest Swedish merger case from the past year is the merger between the two wine and spirits companies, Altia and Arcus. This merger involved extensive economic analysis, both from the SCA and from consultants hired by the merging parties. Based on its Phase II investigation, the SCA found that the merger implied a risk of restricting competition in the markets for sales of aquavit,[1] cognac, and vodka[2] by creating or strengthening a dominant position. However, in the end, the SCA considered commitments offered by the merging parties sufficient to keep the merger from significantly impeding competition.[3]

The merger between Altia and Arcus was also notified in Finland and Norway, and the national competition authorities in the three countries cooperated on the case through a cooperation agreement allowing Nordic competition authorities to exchange information in investigations. This agreement is in addition to the cooperation in the European Competition Network and it allows the SCA to have informal discussions around the relevant competition issues of the case with the other Nordic authorities. The Nordic cooperation agreement was last updated in 2017, and as of September 2020, all Nordic countries have ratified the agreement. The SCA intends to develop this cooperation agreement further in the future. Even if the Nordic competition authorities cooperate closely in some cases, lawyers still note significant differences between the three competition authorities. For example, the competition authorities in Finland and Norway both required an up-front buyer as part of accepting the commitments, which was not a requirement of the SCA.

Another noteworthy merger case from the past year was Orifarm’s acquisition of certain assets from Takeda, which was also notified in Austria, Denmark, Finland, and Poland. The acquisition covered a product portfolio including several pharmaceuticals and manufacturing sites in Denmark and Poland. While the SCA found that the merger would lead to market shares of around 60–80 per cent in three of the five products segments where there was an overlap between the supply of the parties, the merger was deemed unlikely to have anticompetitive effects. The reason for this was unrestricted parallel imports in one of the product segments and price caps imposed by the Swedish Dental and Pharmaceutical Benefits Agency in the two other segments. In one of the segments subject to a price cap, the price had already reached the cap and there was consequently no room for price increases. While it was still possible to increase prices in the other capped segment, this segment was characterised by low entry barriers and several active competitors. Despite high market shares, the SCA thus approved the acquisition during its Phase I investigation in September 2020.[4]

As in previous years, several lawyers praised the SCA’s efficiency and flexibility in merger filings, in particular when they engage in constructive dialogue about the potential complications of the concentration early on in the process. At times, however, the lawyers would welcome more transparency and clearer communication on the specific theory of harm being investigated by the SCA.

Anticompetitive agreements

The SCA issued an interim decision in December 2019 prohibiting an app-based training aggregator’s exclusivity agreements with training studios.[5] The SCA was concerned that the exclusivity agreements could harm competition and consumers by foreclosing competing training aggregators from the training studio input. The decision was motivated based on the large market share of the accused training aggregator compared to its competitors, limited substitutability between the offers of different training studios, and the small incentive or ability for training studios to refuse the exclusivity agreements. The reasoning behind the interim decision was that it may be necessary to act swiftly in fast-moving markets to protect competition and consumers. In most digital markets with substantial network effects, there is a risk of tipping the market in favour of a single company. The decision was upheld by the Patent and Market Court in January 2020, and the eight-month investigation was closed in July 2020 after the SCA had accepted voluntary commitments to stop the use of those exclusivity agreements that were covered by the interim decision and to limit the number of exclusivity agreements for two years.

Another investigation of note from 2020 concerned retail price maintenance. In this case, a Swedish supplier of lighting products accepted to pay a fine of around 1.8 million kronor (corresponding to around €175,000) for restricting one of its retailer’s rights to independently set prices towards consumers. The retailer escaped sanction by informing the SCA of the practice through a leniency application. The SCA classified the case as a by object restriction and did not rely on economic analysis to investigate the effects of the agreement in its decision. The decision from December 2020 is the first time that the SCA has proposed a fine for resale price maintenance.

In December 2020, the SCA also issued a statement of objections to a Swedish dairy producer for exchanging strategic information with a competitor before a procurement. The Patent and Market Court will now try the SCA’s claim. The competitor of the dairy producer was declared bankrupt in 2019 and the SCA will not bring an action against this firm.

After four years of investigation, the SCA closed its investigation into a suspected anticompetitive agreement between several insurance companies and an insurance intermediation company in March 2021. The suspected infringement concerned contacts in advance of procurements of insurance products carried out via the insurance intermediation company. The investigation was narrowed down in 2019 and 2020 and was finally closed in 2021 since the SCA did not find any evidence of direct or indirect contacts between competitors that could be considered to constitute an agreement or a concerted practice.

Abuse of dominance and anticompetitive public sales activities

The SCA has closed two abuse of dominance investigations in the past year.

The first case concerned an alleged predatory pricing practice in the market for lawyers’ insurance. The SCA decided not to continue its investigation since it found that the company accused of abusing its dominant position did not hold a dominant position on the relevant market.

The second case concerned an alleged abuse of dominance via exclusivity agreements for payment services for gambling companies. The SCA decided not to continue its investigation since it found that there was a wide selection of customers to which competing payment service providers could offer their services, both in the gambling sector and in other sectors.

Regarding anticompetitive public sales activities, the Patent and Market Court ruled in favour of the SCA in December 2020 and prohibited a Swedish municipality from categorically refusing private operators to lay broadband cables on land owned by the municipality. The SCA first issued a statement of objections against this practice in 2017. After the Patent and Market Court ruled in favour of the SCA in 2019, the Patent and Market Court of Appeal referred the case back to the first instance for continued processing since the prohibition was not considered to be sufficiently well-defined. The new ruling of the Patent and Market Court from December 2020 states that the municipality cannot refuse access or only allow conditional access to the private operator laying broadband cable in the whole municipality. The ruling was not appealed and has now become final.

New developments at the SCA

In March 2021, several changes to the enforcement powers of the SCA came into force. Most notably, the SCA was granted decision-making powers for competition fines. Most lawyers agree that the newly introduced powers, bringing the SCA’s powers closer to those of other EU countries, are reasonable in principle. The lawyers hope that this will lead to more efficient processes, but some lawyers are also concerned about whether the SCA will be able to live up to the increased responsibility that comes with greater enforcement powers.

The SCA has continued its focus on digital markets. In February 2021, the SCA published the results of its market study on the functioning of competition on digital platforms after one year of investigation. The market study is based on input from companies and practitioners and aims to enhance the SCA’s knowledge of digital markets and help the SCA understand the challenges faced by companies in these markets. In its report, the SCA concludes that there is a need for complementary regulation in Sweden to efficiently handle competition concerns in platform markets. Such complementary regulation should preferably target whole markets rather than specific companies and aim to address structural market failures rather than specific practices. The SCA thus proposes an investigation into the need for, and the design of, a regulatory framework that can be used to address competition problems (also in relation to merger control) that cannot efficiently be addressed under the current framework. The market investigation tool available to the UK competition watchdog, CMA, is mentioned as an example of such complementary regulation, but the SCA also suggests that alternative solutions are assessed.

The lawyers generally find it positive that the SCA has improved its knowledge of digital markets, but some lawyers would have welcomed more dialogue between the SCA and the stakeholders rather than a collection of information via extensive requests for information.

The SCA is currently working on an investigation into Swedish e-commerce markets, a task which was assigned to it by the Swedish government at the end of 2020. The study aims to investigate topics such as price formation, market power in the distribution chain, competition on equal terms, entry barriers, and the role played by e-commerce platforms concerning these topics. The SCA is currently interviewing market players and collecting information via requests for information to legal practitioners. The results of the investigation will be published in October 2021.

Economic evidence and the burden of proof in courts

The debate among competition law practitioners in Sweden about the burden of proof and legal certainty in competition cases is still highly topical (as in previous years). Notably, there is a perceived uncertainty among legal practitioners regarding what quality of evidence the Patent and Market Court of Appeal deems sufficient in proving anti-competitive conduct. Since the Patent and Market Court of Appeal was established in 2016, no party has been able to prove a restriction of competition with evidence based on competition economic analysis. In every instance, the upper court has rejected the presented economic evidence as insufficient or inconclusive. In the long run, some argue that this may weaken the deterrent effect of the competition law in Sweden. Some also worry that this has made the SCA more passive and reluctant to take on new types of cases. Nonetheless, most lawyers have confidence in the judicial system and welcome high standards for economic evidence as it provides legal certainty and ensures that judgements are robust to scrutiny. In the long run, however, the weakened deterrence mechanism could result in under-enforcement or necessitate more resources for economic support in such cases.

Private enforcement

The Patent and Market Court is the only Swedish forum with the jurisdiction to hear private antitrust claims brought under the Competition Damages Act. However, private antitrust litigation has yet to be successful in the Patent and Market Court of Appeal. There are currently no closed or ongoing damage cases under the new rules and there has never been a class action concerning competition damage claims in Sweden.

The SCA’s lack of success in court in recent years limits the potential for follow-on damage cases, and the few competition cases where a fine has been imposed have been small and thus not suitable for class actions. Moreover, the standard of proof is considered high for stand-alone cases and stand-alone attempts in recent years have not been successful.

While some lawyers expect private enforcement cases to become more prevalent in the coming years, most expect that such an increase will be modest at best. Most lawyers expect private enforcement activity to stay low as long as the SCA continues to prioritise cases in small markets and has limited success in the Patent and Market Court of Appeal.

[1] In Swedish: Akvavit and kryddat brännvin.

[2] In Swedish: Vodka and okryddat brännvin.

[3] The commitments included the sale of two of Altia’s aquavit brands and one of Arcus’ vodka brands as well as the sale or sublicensing of one of Arcus’ cognac brands.

[4] In Denmark, where there were no price caps in place, the merger was thoroughly investigated before it was approved subject to commitments in March 2021.

[5] A training aggregator collects offers from different training studios and offers consumers access to these studios under one membership and at a fixed price.

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