Sweden: Competition Authority

The Swedish Competition Authority’s (SCA) capacity to tackle a broad range of issues of vital importance for Swedish consumers can be seen in the diverse range of antitrust cases that are currently before the courts. The authority has also proven itself effective in meeting the demands of an increased number of complex merger reviews. Meanwhile, our advocacy efforts have brought into focus the importance of competition within prominent policy discussions around issues such as construction, housing and finance. With the transfer of national procurement support functions to a new authority in September 2015, the SCA is well placed to continue its dedicated enforcement of the competition and procurement rules, as well as its advocacy work.

Cartels

The SCA currently has two cases before the courts regarding prohibited, cartel-like collusion relating to bidding in public procurement procedures. The Stockholm District Court sided with the authority in its action against Aleris, Capio and Hjärtkärlgruppen regarding illegal collusion during a tender for healthcare services, and ordered the three companies to pay a total of 28 million kronor in fines. The case has been appealed to the Market Court. In the Telia-Gothnet case, Telia declined to submit a bid in a municipal procurement following a secret agreement with the municipal company Gothnet such that Telia would be appointed exclusive subcontractor when Gothnet won the contract. A main hearing in the Stockholm District Court is planned for October 2016.

In a case against three removals companies, the SCA intends to appeal a District Court ruling that rejected the authority’s application for fines against the companies Alfa Quality, NFB Transport and ICM Kungsholms. The case concerns the question of excessively long non-compete clauses, and the SCA considers it important to have it clarified by the Market Court that it is not permitted to pay other companies to refrain from competing for a period of five years.

We hope that in pursuing such a range of cases, we can send a clear signal to other companies that the SCA continues to give high priority to combating cartel activity in all its forms. Illegal collusion between companies ultimately harms consumers, whether it occurs in the telecoms sector, the healthcare sector, the banking sector or any other part of the Swedish economy. Collusion during tendering in public procurement procedures often has the purpose of frustrating the competitive process that the contracting authority aims to achieve. It is a serious infringement of the rules when a company that has the capacity to submit an individual bid limits competition in the procurement by striking different types of agreements. It is important that companies and their counsel realise that such behaviour can result in large fines.

Abuse of dominance

The SCA also has two abuse of dominance cases awaiting ruling by the courts. The authority’s case against the tobacco company Swedish Match concerns demands that the company made which limited competitors’ ability to market their wet snuff products, and is set for a main hearing in the Stockholm District Court in November 2016. Another case before the courts concerns Nasdaq OMX exerting pressure on the owner of a server hall not to allow a competitor to place its computers near Nasdaq OMX’s own servers, to the detriment of a new actor that wished to enter the market. This affected the market during the time that the stock exchange monopoly was removed and high-frequency trading was introduced. Both these cases involve an abuse of market power by foreclosing emerging competition. A recent case against the airport operator Swedavia concerned an alleged exploitative abuse of dominance whereby Swedavia had, for a period of time, imposed a fee on taxi owners that collected pre-booked customers from Arlanda airport. In a separate ruling, the Market Court had established that Swedavia had breached the competition rules, and the SCA therefore turned to the courts to request fines for the period of the infringement. The District Court recently delivered a ruling on the SCA’s action in which it considered that the conduct restricted competition, but decided not to issue fines against the company. The court reasoned that there were efficiencies which arose from the conduct that weighed against the anticompetitive effects. The SCA has yet to decide on whether to appeal the decision.

A reflection we can unfortunately make when we look at the list of current cases is that several of them relate to previously regulated markets and state-owned actors. An important task for the SCA is to continue to scrutinise the actions of former monopolists on previously strongly regulated markets, as well as other companies that appear to have trouble in finding their role in competitive markets.

Mergers

The past year has seen the authority undertake a large number of complex merger reviews, and this trend shows little sign of abating. Since its successful intervention in the Swedbank estate agent merger review, the SCA has turned to the District Court on three more occasions to seek a merger prohibition. In July 2015 the SCA went to court to stop Orkla, the largest operator on the Swedish market for meal replacement products, from acquiring the brand Allévo from the third-largest operator Cederroth. The purchase of the Allévo brand was part of a larger transaction involving the acquisition of the whole of Cederroth. If carried out, the acquisition of the Allévo brand would have greatly restricted competition in the Swedish market for food replacement and meal replacement products. Orkla agreed to undertakings that involved selling Allévo in conjunction with the purchase of Cederroth. In December the SCA decided to accept a suitable purchaser of the brand. The result will benefit consumers in the long run by maintaining competition in the market.

In January 2016 the SCA sought to prohibit Kronfågel’s planned acquisition of its competitor Lagerberg. Both are active on the market for the production and breeding of chickens and the SCA identified clear competition concerns regarding the segment of fresh chicken. Before the case reached the court another purchaser came in for Lagerberg, leading to a satisfactory resolution for all consumers of chicken.

The SCA has also turned to the courts to prohibit Logstor’s purchase of Powerpipe. Both companies sell pipes for district heating, and they are each other’s most important competitors. The merger would significantly reduce competition on the market, and Sweden’s district heating customers risk being the losers in the transaction. The District Court will deliver its ruling at the beginning of August.

Enhancing the SCA’s enforcement tools

Discussions have been ongoing for some time within Sweden and at an EU level about how to empower the national competition authorities to be more effective enforcers. For the internal market to function well for consumers, it is important that there is further harmonisation across the entire EU of the rules, and the enforcement of these rules. The SCA supports the European Commission’s initiatives in this regard.

In parallel to the discussions which are taking place at an EU level, a government inquiry has been appointed to look into the possibility of expanded decision-making powers for the SCA, such as in the field of competition fines and merger prohibitions. A comparison with other competition authorities in the EU shows that the SCA has less powerful tools than most other agencies, and the need to strengthen the position of competition law is clear. I look forward to the proposals that the inquiry will present shortly.

Inter-agency cooperation

Our ability to promote effective competition for consumers is greatly strengthened by cooperating with other international and national agencies. In a time when companies and consumers are increasingly unhindered by national boundaries, we must strive to deepen our cooperation with our Nordic, EU and international counterparts.

Equally important is our collaboration with national agencies. On the assignment of the government we have begun work on reaching an agreement on information exchange with a number of agencies such as the Swedish Tax Agency, Swedish Customs, the Swedish Economic Crime Authority and the Swedish Work Environment Authority. This kind of cooperation can underpin joint efforts against unfair competition in working life in order to promote a level playing field in the market. When companies that do not follow the rules are allowed to act on the market it is honest companies that suffer.

Advocacy and outreach

In the advocacy sphere the SCA has been proactive in its efforts to place competition at the centre of the policy discussion around housing and construction – one of Sweden’s most high-profile public policy issues. In 2015 the authority published no less than three different reports on the competition situation in the construction market.

In line with the growing attention given to the sharing economy and e-commerce – not least within the OECD and the ICN – the authority will consider how we should look at these issues from a competition perspective. It is positive to see the emergence of innovative solutions which challenge existing structures. However, it is clear that effective competition requires a level playing field for all. Different issues such as appropriate sector regulation, consumer protection and tax all come into play here. The authority has been assigned the task of reporting its findings and recommendations to the government by March 2017.

As part of a revised communication strategy, with transparency at its core, we are constantly looking towards new ways to engage with stakeholders. Our interactive web-based guidance tools provide targeted information about key areas where we have identified a need to enhance knowledge about the rules that we enforce. These innovative tools already cover cooperation during public procurement procedures, cooperation within trade associations, competitive neutrality, and direct awards of contracts in procurement procedures, and will soon be expanded to include guidance on vertical restraints. Alongside new videos with bite-sized information about the competition rules the SCA has embarked on a series of podcasts – Konkurrenten (The Competitor) – which delve deeper into competition and procurement issues.

A prerequisite to us being an open and transparent authority is communicating clearly the factors we take into account when prioritising which cases to investigate. The SCA has therefore had a publicly available prioritisation policy for some time. Following a stakeholder consultation this policy has recently been updated and published on our website, and it is also available in English.

Maintaining confidence in the work we do

Our regular stakeholder surveys confirm that confidence in the SCA remains high. That companies and the public have confidence in the authority is not just an end in itself; it is a means to generating the tip-offs and complaints about competition issues and infringements that are vital to the work we do. Through robust enforcement, effective advocacy and openness and transparency we will work continuously to consolidate and strengthen this confidence in the authority.