Sweden: Competition Authority
This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight
A reflection that can be made when looking back on the work of the Swedish Competition Authority (SCA) over the past year is that enforcement produces results. We have pursued a relatively large number of cases in court, and have initiated several investigations into suspected infringements of the competition rules. As we look forward, we remain committed to a robust enforcement of the competition rules, and will give high priority to investigating bid-rigging cartels. The SCA will also continue important work to ensure efficient and transparent working methods.
In 2016 the Patent and Market Court heard our case against Telia and Göteborgs Energi (Gothnet), which we claimed had engaged in illegal cooperation prior to a public procurement. In December the Court sided with the Authority and fined each company 8 million krona. The judgment has been appealed by Telia to the Patent and Market Court of Appeal, while Gothnet chose not to appeal.
Another case involving illegal anticompetitive agreements related to environmental and transport services in the north of Sweden. In this case, the parties accepted a fine order, meaning that we did not need to pursue the case in court. This was the fourth time that a fine order has been used since the possibility was introduced in the competition rules, and it can be noted that it is an efficient way of rectifying competition problems. However, relatively few cases are appropriate for this kind of procedure.
An ongoing court case involves non-compete clauses in the removals sector. Here, the SCA considers that the five-year non-compete clauses which were entered into in connection with mergers were far too extensive, and hindered competition on the market for international removals. The District Court rejected the SCA's claim in May 2016, and the case will have its hearing in the Patent and Market Court of Appeal in September 2017.
In January 2017 the Patent and Market Court of Appeal heard an appeal by three healthcare companies against fines issued by the court of first instance for illegal cooperation relating to a public procurement. In April, the appeal court overturned the first judgment. Unlike the District Court, the Patent and Market Court of Appeal did not find the arrangement to be a restriction by object.
A common thread throughout the court cases over the past year is that they involve cooperation in connection with public procurements. Bid-rigging cartels are the most common type of cartel investigated by the SCA. When tip-offs of this nature come in to us they are always given the highest priority. We are clear that when suppliers manipulate markets through illegal cartels, the incentives to offer the best quality and the best price are drastically reduced. Cartels make it more difficult, or impossible, for procuring authorities to get the best deal, and it is the taxpayer that ultimately pays for these illegal agreements. I believe that it is essential to investigate these types of cases and pursue them in court.
Looking forward, the SCA is currently investigating a number of suspected infringements, and it is my hope that we can bring these to a conclusion as quickly as possible. During autumn 2016 and spring 2017 we have carried out a number of dawn raids to secure evidence relating to suspected anticompetitive agreements. In one case on the market for sanitary ware - toilet seats - we suspect that a supplier may have been involved in illegal price coordination between market actors on the retail level.
Abuse of dominance
The SCA also currently has two pending court cases regarding abuse of dominance. The Patent and Market Court heard our case against the tobacco company Swedish Match in September, and upheld the SCA's action regarding conduct which limited competitors' ability to market their wet snuff products. The court fined the company close to 38 million krona. The company has appealed the ruling.
The case against Nasdaq OMX which we reported in last year's Antitrust Review is set to have its main hearing in autumn 2017. The SCA alleges that the company exerted 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.
The SCA and other EU competition authorities have recently completed a monitoring exercise into investigations into online hotel booking services carried out by national authorities. In 2015 the SCA accepted commitments from Booking.com, meaning that the company modified its agreements with hotels, removing so-called ‘wide parity' clauses.
The monitoring exercise demonstrated that it is now more common that hotels offer different prices and different product offerings with different online travel agencies than was the case before the contractual changes. The competitive conditions between online travel agencies have therefore improved.
Unfortunately, a comparatively large number of hotels in Europe are not aware of the changes and what they mean. We have recently informed hotels in Sweden about what the rules imply, as well as the opportunities that hotels have to make decisions about pricing. It is important that individual hotels are guaranteed the right to set their own prices on online travel agencies, and that consumers are given the possibility to compare terms and prices.
A total of 74 mergers were notified to the SCA in 2016, which is the highest number for some years. The vast majority of these were unproblematic from a competition perspective and could be decided upon relatively quickly within the phase one deadline. Four went to a phase two investigation, and in two cases we went to court to prohibit the merger.
As reported in last year's Antitrust Review, the SCA submitted a summons application to court to prohibit the merger of Kronfågel and Lagerbergs, two companies active on the market for chicken products. Before the main hearing, the deal was abandoned after the seller found another solution that did not impede competition.
The second merger case to be brought to court involved competitors on the market for district heating pipes, Logstor and Powerpipe. Both the District Court and the Patent and Market Court of Appeal came to a different conclusion from the Authority in the definition of the relevant geographic market, and rejected the plea to prohibit the merger. In order to learn the lessons of this case and see how we can improve our analysis we will evaluate the effects of this merger. We will assess with interest whether we had grounds for our concerns that the merger would weaken competition, or whether the parties' view was correct.
In March we submitted a report to the government on e-commerce and the sharing economy. Increased digitalisation creates new challenges for competition authorities, and among the issues we looked at in the report was the impact these areas can have on our application of the competition rules.
Access to data and price transparency can have both positive and negative effects. If they are used to improve services and reduce costs for consumers, this should be welcomed. At the same time, price transparency can be harmful if used to the detriment of consumers and competition. Algorithms could potentially make it possible to come to sophisticated agreements on prices. Our position is that companies should not be able to hide behind computer programs; if algorithms are used for illegal cooperation we will hold the offending companies responsible.
The report also acknowledges that e-commerce platforms or other digital platforms that facilitate services between private parties may have very large operations despite only charging small fees for their services. As a result they may be valued highly in a future acquisition. There may therefore be cause to reassess turnover thresholds used for merger notifications to consider whether there are grounds for introducing other criteria.
Ensuring efficient investigations
We have noted with interest the European Commission's introduction of a new system for whistleblowers to be able to provide information anonymously on suspected cartels or abuses of a dominant position. Other countries such as Denmark have a similar function available. We are also investigating the possibility of accepting anonymous tip-offs and information in an effective manner. If this proves possible to implement, we believe that it would strengthen the information channels available to us, working in parallel with leniency applications and open tip-offs.
Enhanced decision-making powers
Work is currently being undertaken at a government level regarding the possibility of granting the SCA the power to adopt decisions on the prohibition of mergers. Currently the SCA must raise an action in court to block a merger. This builds on an inquiry last year which investigated more expansive decision-making powers including the power to prohibit mergers and issue fines for competition law infringements.
I am very satisfied with this first step towards more efficient and faster procedures. With an enhanced decision-making power, the time from merger notification to legally binding decision can be reduced, which is beneficial for the companies involved. If a merger is harmful for competition and the market, it is positive if a decision can be issued as soon as possible in order that parties, competitors and customers are not left in a position of uncertainty. At the same time, it is essential that legal certainty is not undermined. The proposals that we have seen so far would ensure that the right to appeal is guaranteed.
We look forward to the government presenting a bill to parliament, which could mean that new rules could be in place by the start of 2018. The SCA will be well prepared to handle such a new system, and we have begun work internally to ensure that the necessary expertise and rules of procedure are in place to meet the new requirements.
Similar decision-making powers are already in place in most other EU countries, and the new rules will be a welcome alignment with these jurisdictions.
Strengthening the national competition authorities of the EU
Another area where we anticipate further alignment is in respect of the tools available to the national competition authorities of the EU. The European Commission has recently presented a proposal of a directive (known as ECN+) that aims to strengthen the national competition authorities' application of the common EU competition rules. The proposal suggests introducing certain common minimum standards and instruments in respect of, for example, investigative powers, leniency and fining. One area where we have identified that Sweden diverges from most other EU countries is the ability to issue fines for companies that obstruct an investigation, for example by providing misleading, incomplete or incorrect information. The proposal to guarantee these powers across the EU is something that we particularly welcome.
Communication and transparency
Digital communication is given high priority in the SCA's operational plan for 2017. We intend to focus on deterrence in order, where possible, to prevent infringements of the competition rules from occurring. We have a broad range of online interactive guidance tools on our website, and this is something that we will continue with in the future.
Our ambition is to be transparent about the work we do. Parties to investigations and other stakeholders should have an understanding of and insight into how we work. To this end, we have recently published a report on our enforcement work during 2015-2016. We intend to publish similar reports on a regular basis in the future. I am convinced that with greater openness and a continuous discussion about how we work we can be even more efficient, and further reinforce confidence in the Authority.