Sweden: economist perspective

Competition Authority is the enforcement authority for Sweden. Read their profile.

Economic analysis continues to play an important role in Swedish competition cases, especially in complex merger cases where economists are often involved at the early stages of the process. Economic evidence is also important in abuse of dominance cases, an area where the Swedish Competition Authority (SCA) increasingly applies the interim decision tool.

This article is based on interviews with prominent Swedish competition lawyers from the law firms Bokwall Rislund, Cederquist, Delphi, Eric Ericsson, Front Advokater, Hammarskiöld & Co, Hannes Snellman, Kastell, Mannheimer Swartling, Roschier, Setterwalls and Vinge, and with the chief economist and head of the market abuse unit from the SCA. The interviews were conducted in June 2022.

Merger cases remain the core area for economic analysis

Mergers still constitute the most economics-intense cases in Sweden. In more complex mergers, economists are often involved at an early stage, from both the authority’s and the merging parties’ side. These cases are also the ones where more advanced economic analysis is most likely to be conducted. Both the SCA and the lawyers view the involvement of economists at the early stages of the notification process positively.

2021 was a record year in terms of mergers notified to the SCA. The SCA received 135 merger notifications, compared to around 80 notifications per year in 2019 and 2020. Based on the number of notifications received so far, the SCA expects 2022 to be another year characterised by intense merger work.

During the past year (the second half of 2021 and the first half of 2022), the SCA has cleared five mergers after Phase II investigations, one of them conditional on remedies; see Table 1.

Economic analysis played a particularly important role in two of the mergers listed in Table 1: the Axfood/Bergendahl merger and the GrandVision/Smart Eyes merger. In both these mergers, vertical theories of harm were the SCA’s main concern.

The Axfood/Bergendahl merger investigation assessed the effect of two interrelated transactions in the grocery sector, one at the wholesale level and one at the retail level.^[1] Since the transactions were conditioned on each other, they were assessed as a single merger. The main theory of harm, in this case, was that market players who are partly or fully independent of the large grocery chains would be left post-merger with only one wholesale supplier, which could harm competition.

To assess the validity of the theory of harm, both the parties and the SCA conducted local market analyses of the retail market. The parties also submitted a simulation model analysing the joint effects of the merger on the wholesale and retail markets. The SCA found the small price increases predicted by the simulation model to be seemingly robust but also noted that important factors were missing from the model, which could imply underestimated price effects. Given the limitations of the model, the SCA concluded that it should be interpreted with caution.

In the end, the merger was approved conditional on behavioural remedies. The remedies accepted imply that Dagab (owned by Axfood) will continue to supply its existing customers on equal or better terms than the ones offered before the merger. Dagab will also negotiate with new innovative customers to enter into commercial and non-discriminatory agreements relative to existing customers during a certain period. ^[2]

The optics industry merger between GrandVision and Smart Eyes also gave rise to both horizontal and vertical overlaps. To analyse the competitive impacts of the merger, the parties’ economists and the SCA conducted local market analyses. Both analyses reached the same conclusion: the merging parties would continue to face sufficient post-merger competitive pressure in the local markets.

The main theory of harm, however, concerned a potential input foreclosure by GrandVision. More specifically, the concern was that GrandVision would no longer supply sunglasses to (or worsen sales conditions for) opticians competing with SmartEyes at the retail level.

To analyse foreclosure incentives, the SCA conducted a vertical gross upward pricing pressure index (vGUPPI) analysis. While the SCA could not rule out the existence of foreclosure incentives based on the vGUPPI results, it still found that other factors, such as a limited potential for expansion at the retail level, made an incentive to foreclose competitors unlikely. ^[3]

Another merger investigation that has received attention is the acquisition of Meag VA-System by S:t Eriks, which was cleared in Phase I. The merger did not meet the Swedish merger notification thresholds, but the SCA requested a notification after receiving complaints from the merging parties’ customers. The SCA’s powers to request merger notifications below the turnover thresholds, a tool normally discussed concerning killer acquisitions in digital markets, was thus applied in a very analogue market this year. The merger was cleared without remedies, motivated by the observation that the relevant concrete products supplied by the parties also face competition from plastic products and that the geographic market is likely to be at least national.^[4]

Despite the large increase in merger notifications, the Swedish lawyers continue to praise the SCA for efficient and pragmatic case handling. At the same time, the lawyers perceive that the authority’s intense merger work is taking away resources from other, less time-sensitive, investigations of competition infringements, making these investigations very long.

Two interim decisions in abuse of dominance cases

When the SCA issued an interim decision against an app-based training aggregator in late 2019, several lawyers predicted that this could be the start of a new trend of increased use of interim decisions. Based on the two interim decisions issued by the SCA in the past year, it seems that they were right.

In July 2021, the SCA issued an interim decision regarding the alleged abuse of dominance by Svensk Mäklarstatistik, a company that collects data on 95 per cent of all housing transactions in Sweden. The SCA preliminarily concluded that the data concerned is unique enough to be considered its own product market. The SCA also found it likely that the alleged refusal to supply would eliminate all effective competition in the downstream market. The interim decision, therefore, obliges Svensk Mäklarstatistik to continue to supply its data to Valueguard Index Sweden and allow Valueguard Index Sweden to publish its statistics based on that data on its website. The decision applies until the SCA has finished its investigation.^[5]

In June 2022, the SCA issued another interim decision, this time concerning the stock exchange company Nasdaq. Nasdaq owns the largest of the three Swedish “growth markets”,^[6] a type of marketplace aimed at, inter alia, facilitating access to capital for small and medium-sized enterprises (SMEs). Nasdaq had announced that it intended to admit selected stocks listed at the competing Nordic growth market (NGM) to trading. Since SME shares are not traded to the same extent as shares in larger companies, liquidity is often not sufficient to allow trade in multiple marketplaces. This is one reason for the obligation to ask for issuer consent for trade in more than one growth market. The stocks concerned in this case, however, would not be traded on Nasdaq’s allegedly dominant growth market, but in a new segment. Therefore, the obligation to ask for issuer consent does not apply. Still, the SCA is concerned that Nasdaq’s listing of admittance of the stocks for trading without giving the issuers the possibility to object could significantly reduce the competitiveness of NGM. The SCA’s concern is that companies that are admitted without consent to trading on Nasdaq might, in the long run, have to be listed on Nasdaq instead of NGM, although they actively chose to be listed on NGM first. This could reduce competition between growth markets and lead to reduced choice and worsened conditions for issuers when seeking capital from investors. The SCA thus issued an interim decision, mandating Nasdaq not to admit stocks that are listed at NGM for trading without receiving issuer consent. ^[7]

Like merger investigations, the short timeline for interim decisions requires the SCA to gather significant resources and capabilities on short notice to issue timely decisions. The two interim decisions issued during the past year show that the SCA can do so. Like merger investigations, however, this probably implies that resources are taken from other less time-sensitive investigations.

Treatment of leniency applications, VBER and large RFIs are top-of-mind for Swedish lawyers

The main court case during the past two years for the SCA concerns the Swedish dairy producer Arla. Arla received a statement of objections in December 2020 for exchanging strategic information with a competitor before a procurement.^[8] The Patent and Market Court ruled in favour of the SCA in October 2020, but Arla has appealed the ruling to the Patent and Market Court of Appeals.^[9] This case has received attention from Swedish lawyers due to its relevance to the treatment of leniency applications. The question is what level of fine reduction should be granted for a leniency application submitted after already having received a request for information (RFI) from the authority.

Some Swedish lawyers experience an increased demand for guidance regarding information exchanges and vertical agreements following the European Commission’s review of the Vertical Block Exemption Regulation (VBER) and Vertical Guidelines. These questions may, for example, relate to compliance when companies have a dual role as both supplier and competitor.

While some lawyers perceive an improvement in communication regarding the timing of the next steps of investigations, the general view is that the SCA’s investigations of anticompetitive agreements take a long time. More transparency is also requested from the SCA, especially regarding the theory of harm that is being investigated.

The lawyers also continue to express concerns related to the increasing size of RFIs sent by the SCA. Large RFIs with short deadlines can imply large costs for the companies involved and the lawyers question the proportionality of these RFIs in some investigations.

The SCA is requesting new tools

During the past year, the SCA has requested new tools to complement its existing competition law toolbox. The request for new tools has two key objectives.

First, the SCA wants a more flexible tool, allowing it to intervene to correct market structures that impede effective competition in situations where competition law is not applicable. Such a tool could, for example, allow the SCA to impose information requirements or disallow the use of exclusivity contracts in certain sectors.

Second, the SCA wants a tool that increases its ability to discover potentially problematic mergers that do not meet the Swedish notification thresholds. This could be implemented by granting the SCA the right to mandate that all mergers in a certain industry should be notified.

Most lawyers are sceptical of the request for new tools, mainly due to concerns about how this increased flexibility for the SCA would affect legal certainty. Moreover, the lawyers question the proportionality of the requested tools and perceive the SCA’s motivation for the need for such tools to be insufficiently substantiated.

A new high-profile damage case could inspire increased private enforcement in the future

The hot topic in the Swedish private enforcement community has been the Swedish price comparison site PriceRunner’s lawsuit against Google for around €2.1 billion at the Patent and Market Court in Stockholm.^[10] The lawsuit was announced in February 2022, a few months after Google lost its appeal at the General Court against the €2.42 billion fine it received from the European Commission in 2017 for alleged abuse of dominance in the market for online general search services.^[11] PriceRunner’s claim is based on the argument that Google has manipulated search results to benefit its product and price comparison service, which has implied reduced profits for PriceRunner.^[12]

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. Private enforcement activity has been low in Sweden during the past few years.

While some lawyers believe that the PriceRunner case could inspire more private enforcement cases, most believe that such an effect is likely to materialise only if PriceRunner is successful after what is expected to be a long court process.

The SCA’s lack of success in court in recent years also 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 attempts to initiate stand-alone cases in recent years have not been successful.

Notes

^[1] The acquisition of Bergendahl Food AB by Dagab Inköp och Logistik AB at the wholesale level and the acquisition of 10 per cent of the shares in City Gross Sverige AB by Hemköp 119 AB at the retail level.

^[2] SCA Decision 361/2021.

^[3] SCA Decision 128/2022.

^[4] SCA Decision 178/2022.

^[5] SCA Decision 348/2021.

^[6] Based on the EU Directive MiFID II and consequent changes to Swedish law, a new type of marketplace was established. These types of marketplaces, aiming to benefit small and medium-sized enterprises (SMEs), are called growth markets. The rules on growth markets aim to, inter alia, facilitate access to capital for SMEs and promote the development of specialised markets aimed at meeting the needs of such enterprises.

^[7] SCA Decision 366/2022.

^[8] The competitor of the dairy producer was declared bankrupt in 2019 and the SCA will not bring an action against this firm.

^[9] https://www.konkurrensverket.se/konkurrens/tillsyn-arenden-och-beslut/arendelista/arla-foods-ab/.

^[10] https://nyhetsrum.pricerunner.se/posts/pressreleases/pricerunner-stammer-google-pa-22-miljarder-kr.

^[11] Google has appealed the judgment to the Court of Justice.

^[12] General Court of the European Union (2021), Judgment in Case T-612/17.