13 takeaways from 2019: Your definitive summary of the past year in Swedish competition law

Last year was an eventful and exciting year, not only for me personally, but also for Swedish competition law. In this post I summarise what you need to know from Swedish competition law 2019 in 13 points, covering the stats, key cases, trends and takeaways. All in one place.

Table of contents

Merger control 2019

1. Swedish merger control 2019 in numbers*

0
Transactions cleared in phase I

0
Transactions cleared in phase II

1
Transaction blocked by the SCA

The 2019 numbers are not dramatically different from the 2018 numbers. The overall number of merger control decisions was a bit higher in 2019 compared to 2018 (79 vs 71) and so was the average review time for phase I decisions (around 15 working days vs 13 working days).

Of course, these numbers include cases before the Swedish Competition Authority (“SCA”) only. In addition to these cases before the SCA, a number of noteworthy Swedish transactions have been reviewed by foreign competition authorities during 2019. For example Telia/Bonnier Broadcasting that was cleared conditionally by the European Commission following a phase II investigation and PayPal/iZettle that was cleared by the CMA in the UK following a phase II investigation.

2. Don’t forget the risk of post-closing filing obligations in Sweden

In July 2019, the mobile parking ticket company EasyPark announced its acquisition of the parking ticket company SMS Park. The transaction did not meet the threshold for mandatory filing in Sweden. However, the transaction did meet the soft threshold that enables the SCA to request a notification (for a reminder on the Swedish merger filing thresholds, see the information box).

In October, three months after the transaction was announced, the SCA decided to request a notification from EasyPark. EasyPark filed a notification in November 2019 and in December 2019, the SCA decided to refer the transaction to a phase II investigation that is still ongoing. 

Swedish merger control thresholds**

Notification in Sweden is mandatory if:

(i) the undertakings concerned during the preceding year had a combined Swedish turnover exceeding 1 billion SEK; and
(ii) at least two of the undertakings concerned during the preceding year each had a Swedish turnover exceeding 200 million SEK.

Note: If (i), but not (ii) is met, the merging parties are able to voluntary notify, and the SCA is able to request a notification, also post-closing, where particular grounds exist.

These soft Swedish thresholds are quite rare from an international perspective and can lead to some tricky issues to consider. When a transaction meets the soft threshold, but not the mandatory threshold, merging parties are faced with three options:

In its decision to request a notification for EasyPark/SMS Park, the SCA noted that it was made aware of that transaction through media reports. This indicates that the merging parties in that transaction elected for Option 1. This also illustrates that the SCA sometimes actively pursues transactions meeting the soft threshold. This does not mean however that Option 1 is never advisable. Here’s why.

As to Option 2 (initiating an informal meeting with the SCA), the SCA is under no obligation to give any indication whatsoever during informal meetings on whether or not they would request a filing. Not seldom the SCA will during such meetings only revert to its default position that they would be happy to review a voluntary filing but leave it to the parties to make that assessment for themselves, without prejudice as to whether they would request a filing after signing. In other words, Option 2 could be a waste of time that only serves to preclude Option 1 by ensuring that the SCA is made aware of the transaction.

It is also critical to consider how the transactional agreements need to be adjusted to protect the client from the risks associated a potential post-closing notification request

Furthermore, as to Option 3 (voluntary notifying at the outset), it must be recalled that also transactions involving very small target companies can meet the soft threshold. For such small transactions, it can be difficult to justify the relatively high costs of voluntarily notifying. Especially if it is uncertain whether the SCA would take note of the transaction or would want to review it. This means that Option 1 may remain as the best option for merging parties in some cases.

The most important takeaway from all of this is that it is crucial to involve competition law expertise early on to carefully weigh these alternatives when contemplating a transaction that meets the soft thresholds in Sweden. It is also critical to consider how the transactional agreements need to be adjusted to protect the client from the risks associated with a potential post-closing notification request. 

3. Phase I remedies is really a thing in Sweden

During 2018, the SCA approved Metso/P.J. Jonsson och Söner in phase I subject to behavioural remedies. That marked the first time in many years that the SCA conditionally cleared a transaction in phase I. In 2019, the SCA did it again when they approved Karo’s acquisition of Trimb in phase I, subject to Karo divesting Trimb’s cortisone trademarks. This seems to confirm that if merging parties want to discuss structural or behavioural remedies already in phase I, the SCA is ready to play ball.

if merging parties want to discuss structural or behavioural remedies already in phase I, the SCA is ready to play ball

4. Has the SCA become trigger happy with its procedural tools?

One of my go-to icebreakers during awkward coffee break discussions at international competition law conferences is to ask foreign competition lawyers how formalistic the competition authority in their jurisdiction is. This invariably leads to entertaining and frightening war stories. The takeaway from those discussions as well as from my own experiences working on cross-border transactions is that the Swedish Competition Authority must rank among the least formalistic in the world.

However, some claim that developments during the last few years may make it necessary to adjust that assessment. One such development is that the SCA since a few years back has the right to legally stop the clock of merger reviews. The possibility to stop the clock has been used sparingly but was for example used by the SCA in the 2018 phase II merger Nokas/Avarn. In 2019 the clock was stopped in Unilabs/Praktikertjänst and in Karo/Trimb, albeit at the request of the merging parties and not the SCA. 

the SCA is no procedural dove and will use its procedural tools when warranted

Another development is that some consider the SCA more likely today to declare notifications incomplete. As an example, the SCA declared the original notification incomplete in the review of the subsequently blocked Dairies/Cheese trademarks transaction. In the pending appeal of the blocking decision, it is a hotly contested issue whether the SCA did so legally.

These developments notwithstanding, I believe the SCA is and will continue to be one of the least formalistic competition authorities in the European Union. But these developments can serve as a reminder that the SCA is no procedural dove and will use its procedural tools when warranted. 

Lastly, an interesting discussion that I will save for another day is the age old conflict between flexibility and formalism, and whether the SCA’s flexible and non-formalistic approach comes with drawbacks in the form of reduced predictability.

In 2019 the SCA vacated its costly premises in downtown Stockholm and moved to Södermalm

5. First ever SCA blocking decision

In spring 2019, the SCA blocked the dairy companies Arla, Falköping and Norrmejerier’s acquisition of joint control of the three coveted Swedish cheese brands Präst, Herrgård and Grevé.  The SCA’s decision to block this cheese transaction marks the first time in history that the SCA blocks a merger without having to go to court.  Blocking transactions on its own, without the help of a court, is something the Swedish Competition Act has allowed the SCA to do since the beginning of 2018. The SCA has not used that ability until now.

The court will still get to have its say on the transaction though. Arla, Falköping and Norrmejerier have appealed SCA’s decision to the Patent and Market Court, arguing that the SCA’s decision must be overturned. The dairy companies claim that the SCA is wildly off the mark in its competition law assessment and that the SCA screwed up during the initial review of the transaction by erroneously declaring the original notification incomplete.
The Patent and Market Court’s deadline for rendering a decision in this appeal has been postponed and is now set to 17 January 2019. Rest assured that I will discuss the outcome of that case on this blog.

Grevé, one of the cheese brands acquired in the blocked transaction, happens to be one of my personal favourites

6. Have we entered an era of lenient Swedish merger control?

I understand that this question may seem odd coming directly after noting that the SCA blocked the Dairy Company/Cheese trademark transaction and after a discussion on whether the SCA recently has been increasing the use of its procedural tools. However, I still believe that two clearance decisions adopted by the SCA during 2019, in Coop/Netto and in NEP/HDR, forces us to think about the overall state of Swedish merger control. I wrote a post discussing this at length earlier this year: 4 critical questions Swedish competition lawyers should be discussing on the state of Swedish merger control.

Encourage this type of content by joining my free mailing list

Agreements, cartels and beyond 2019

7. The shape of Swedish fitness aggregation

A rapidly emerging market in Sweden, as in other countries, is the market for fitness aggregation. Fitness aggregators offer dual-sided platforms that connects individuals users of fitness studios (e.g. martial arts and dance studios) with a variety of connected independent fitness studios.

During 2019, the SCA announced that it had opened an investigation into one of the Swedish fitness aggregators, Bruce, and its use of exclusivity clauses in its agreements with fitness studios. The investigation was later expanded to encompass also exclusivity clauses used by the competing fitness aggregators Swiftr (the company that lodged the original complaint about Bruce to the SCA) and Fitnesscollection/Classpass.

As the SCA describes it, the exclusivity clauses under review restrict the fitness studios from entering into agreements with competing fitness aggregators. The theory of harm related to the exclusivities would according to the SCA be that foreclosure of important suppliers could harm competing fitness aggregators and create lasting negative consequences for the emerging fitness aggregation market. In other words, the SCA fears that exclusivity clauses plus network effects could create a winner-takes-it-all situation for Swedish fitness aggregators.

This investigation is interesting for a number of reasons, three of them being the following:

Interim measures are rare

In December, the SCA turned up the investigation’s heat by imposing interim measures forcing Bruce to cease applying the exclusivity clauses, under a penalty of a 5 million SEK fine, until the investigation has been concluded. Bruce has appealed the interim measures (PMÄ 17901-19).
Interim measures are very rare in Sweden, and the fact that the SCA imposed interim measures illustrates the SCA’s confidence and priority on this case. The imposition of interim measures in this case also mirrors developments in EU competition law during 2019. In October of 2019, the European Commission imposed interim measures on Broadcom. That marked the first time in almost 20 years that the European Commission imposed interim measures under Article 8(1) of Council Regulation 1/2003.

Cases on vertical restrictions are rare

The SCA has made clear that this investigation concerns both the prohibition against anticompetitive agreements and the prohibition against abuse of dominance (i.e. both 2:1 and 2:7 of the Swedish Competition Act, corresponding to Article 101 and 102 of the FEUF). However, the interim decision adopted in December revolves around only the prohibition of anticompetitive agreements, i.e. a vertical restriction.

Swedish cases on vertical restrictions are fairly rare. Irrespective of the outcome of this case, guidance on how the Swedish enforcer views vertical restrictions, especially in the digital space, is welcome.

Digital platform companies have been put on notice

The SCA seems to have been ready to move very swiftly when Swiftr’s complaint landed on the SCA’s desk in late September 2019. This is not surprising, given that the SCA for a long time has been vigilant in relation to digital platform markets and by now must have considerable experience from investigating similar markets.

As an example, the fitness aggregator case bears much resemblance with the SCA’s 2016 investigation into the online food delivery platform Onlinepizza’s agreements with supplier restaurants. The SCA ultimately terminated that investigation after Onlinepizza voluntarily clarified its agreements and the SCA concluded that there existed no exclusivities between the restaurants and the food delivery platform. Other recent SCA investigations involving digital platforms include the SCA’s iteration of the Booking saga (travel agency platform, see more about that below) and the SCA’s in-depth merger review of the subsequently abandoned Blocket/Hemnet merger (real estate ad platform). Another example is the post-closing notification request issued by the SCA for the above discussed EasyPark/Interlon transaction (parking ticket platform).

In other words, digital platform companies have been put on notice, the SCA is watching. Accordingly, digital platform companies must carefully review its compliance with competition law, but also consider how to use competition law proactively.

“digital platform companies must carefully review its compliance with competition law, but also consider how to use competition law proactively”

8. Sector inquiry looks into digital platforms

During 2019, the SCA did not only launch the above discussed investigation into the digital platform market for fitness aggregators. The SCA also launched a sector inquiry with the purpose of looking into competitive conditions for digital platforms in Sweden. The inquiry gathered comments during November of 2019 and will publish its conclusions during the summer of 2020.

9. Information exchange in the asphalt industry

In November 2019, the SCA closed an investigation into an alleged illegal information exchange after the companies under investigation (NCC, Peab and Skanska) voluntarily committed to discontinue the information exchange. The investigated information exchange started 2007, continued biannually and concerned both projected and actual production volumes of asphalt in certain regions of Sweden.

“companies should always refrain from exchanging information with competitors unless first cleared by competition law counsel”

The SCA’s decision does not elaborate on its reasons for accepting the commitments and closing the investigation. However, the fact that the SCA let the companies off the hook in this case serves as a reminder that the legality of information exchange always must be analysed in light of the specific context of the relevant markets. When taking into account the specifics of the market, information exchange can be revealed to be much less harmful than it seems at first glance. Conversely, a careless analysis that does not take into account the specifics of the markets may lead to the erroneous conclusion that information exchange is less risky than it actually is. In other words, companies should always refrain from exchanging information with competitors unless first cleared by competition law counsel.

10. Booking.com’s comeback victory against Visita

In 2015, the competition authorities in Sweden, France and Italy concluded coordinated investigations into Booking.com’s use of price parity clauses in its agreements with hotels. At the time of that investigation, Booking.com used two types of price parity clauses:

  1. Wide price parity clauses (also referred to as horizontal): Through which Booking.com restricted the hotels from offering lower hotel prices (or better terms) when selling through competing online platforms; and
  2. Narrow (or vertical) price parity clauses:  Through which Booking.com restricted the hotels from offering lower hotel prices (or better terms) when selling through their own webpages. 

The investigations found that Booking.com’s wide price parity clauses infringed competition law and the investigation could be closed only after Booking.com had committed to stop using wide parity clauses. The investigations did not find that Booking.com’s narrow parity clauses infringed competition law and did not require any commitments for these.

Visita, the Swedish trade organisation for hotels, found fault with the SCA’s conclusion and brought action against Booking.com under the subsidiary standing granted by the Swedish Competition Act. Through the court action, Visita sought to strike down also on Booking.com’s use of narrow price parity clauses.

Relying heavily on economic evidence presented by Visita, the Patent and Market Court handed down an interesting decision in 2018 finding that Booking.com’s use of narrow price parity clauses did infringe competition law by effect. However, in 2019, the Patent and Market Court of Appeal reversed this decision. Unlike the Patent and Market Court, the court of appeal did not find Visita’s evidence robust enough to demonstrate an anticompetitive effect from the price parity clauses.

By “green lighting” Booking.com’s narrow price parity clauses in this case, the Patent and Market Court of Appeal aligned the Swedish approach to how narrow price parity clauses are interpreted in some other European jurisdictions. For example Germany, where a regional court during the summer of 2019 reversed a lower court decision prohibiting narrow price parity clauses. In other jurisdictions, both wide and narrow price parity clauses have been banned through national legislation.

The narrow price parity clauses restrict the hotels from having lower prices on their own websites

It is probably safe to assume that even if the long running Booking.com case is over for now (at least as concerns Sweden), the discussions on the legality of narrow price parity clauses is not completely closed. When the coordinated investigations by the Swedish, French and Italian competition authorities were launched in 2014, the European Commission had the option under Article 11(6) of Council Regulation 1/2003 to relieve the national competition authorities of their competence in this case and consolidate the investigations into one single EU wide investigation. However, the European Commission did not trigger Article 11(6).

In hindsight, given the subsequent litigation and inconsistent approach that has developed across the EU, it would probably have been better if the European Commission had taken on this issue from the outset. However, the European Commission has a good opportunity to address this issue within the scope of its ongoing review of the vertical block exemption regulation.

Abuse of dominance 2019

11. The online betting industry lawyered up

On 1 January 2019, a significant deregulation of the Swedish betting market took place. Later that same year, the private Swedish online betting industry, through its trade association BOS, lawyered up to take on the incumbents on this deregulated market. In the spring of 2019, BOS lodged two competition law complaints.*** One complaint against the state owned company and former monopolist Svenska Spel and one against the horse racing company ATG.

In BOS’s still ongoing case against Svenska Spel (dnr. 128/2019), BOS claims that Svenska Spel is leveraging its dominant position in markets that are still regulated (landbased casinos and games of chance) towards markets that are now deregulated (online casinos and sports betting). This is an interesting case in which the SCA probably will get to explore some of the theories developed by the European Commission in the famous Google Shopping case.

In BOS’s case against horse racing company ATG, BOS claimed that ATG’s refusal to let BOS members Kindred and Betsson access ATG’s popular horse racing betting pools constituted abuse of dominance on two grounds: (i) discrimination, since allegedly ATG allowed foreign companies access to the pool and (ii) refusal to supply an essential input.

In the summer of 2019, the SCA dismissed the complaint against ATG. As to discrimination, the SCA found that ATG had not entered into any transactions that would be similar enough to a potential transaction with Kindred or Betsson for it to be possible to find any instances of discrimination. As to refusal to supply, the SCA noted that some companies already had launched their own horse racing betting pools after the 1 January 2019 deregulation, and that granting access to ATG’s betting pools would risk reducing Kindred’s and Betsson’s incentives to launch similar services.

The gambling industry indeed seems to believe that the deck has been stacked in favour of the incumbents, and in 2019, the gambling industry flaunted its litigation war chest in response. So far, the gambling industry has not hit the jackpot in these deregulation by litigation efforts. But bear in mind that the gambling industry could have another ace up its sleeve. If and after the SCA formally decides not to pursue alleged infringements (like in the ATG case), the Swedish Competition Act grants complainants a subsidiary standing, giving complainants the option to roll the dice and seek the imposition of fines on their own.

12. The final chapter of the GothNet saga concluded

For almost 10 years now the circumstances surrounding a 2009 procurement of fixed data communication services conducted by the city of Gothenburg has been discussed in various courts of law.

First the SCA alleged that two of the bidders in the procurement, Telia and GothNet, had conspired to fix the procurement by coordinating their respective bids. In 2014 the SCA brought action against Telia and GothNet and in 2016 the Patent and Market Court ruled in favour of the SCA and imposed fines on both Telia and GothNet. Telia, but not GothNet, appealed this lower court decision. In 2018, the Patent and Market Court of Appeal ruled in favour of the appellant, Telia, and dismissed the SCA’s case against Telia.

It all started with a 2009 procurement of fixed data communication services

Because GothNet had not appealed, the appeal court ruling did not cover the fines imposed on GothNet by the lower court. Encouraged by Telia’s success, GothNet nevertheless filed a post-trial motion (Sw: “resning”) seeking to lift the fines imposed on GothNet or alternatively a trial de novo. In 2019, this post-trial motion was dismissed by the Patent and Market Court of Appeal. GothNet appealed to the Supreme Court of Sweden that did not grant leave to appeal, thereby concluding this thread of the GothNet saga.

In a parallel private enforcement procedure, another bidder in the procurement, Net at Once, alleged that GothNet was a dominant company that had been awarded a contract in the 2009 procurement by abusive means. More specifically, Net at Once, claimed that GothNet’s pricing practices in the procurement were discriminatory and constituted margin squeeze. In 2019, this dominance case came to a close as the Patent and Market Court of Appeal dismissed Net at Once’s damage claims, thereby concluding also this second thread of the GothNet saga. For more information about this private enforcement abuse of dominance case, I recommend Eric Ericsson’s blogpost.

13. A resounding victory for Nasdaq

Following the EU imposed deregulation of stock exchange monopolies in 2007 the Stockholm based trading platform Burgundy tried to establish a Swedish trading platform to compete with Nasdaq. In order to compete effectively on the market, Burgundy wanted to set up its technical trading infrastructure in Verizon’s data hall where both Nasdaq and many high frequency traders collocated. However, due to pressure from Nasdaq, Verizon refused to let Burgundy establish its infrastructure in the same premises.

Burgundy filed a complaint with the SCA, claiming that Nasdaq had abused its dominant position by ensuring  that Burgundy could not establish its technical trading infrastructure in close proximity to Nasdaq and the high frequency traders. By being denied this proximity, Burgundy’s own services would suffer from a higher latency, making it difficult to attract customers. The SCA agreed that Burgundy had a case and brought action in court to impose fines on Nasdaq.

In 2018, the Patent and Market Court dismissed the SCA’s action and in 2019, the Patent and Market Court of Appeal confirmed: Nasdaq had not abused a dominant position. The court of appeal found that Burgundy’s inability to establish its infrastructure in proximity to Verizon’s data hall had not, at that time, affected competition between Burgundy and Nasdaq, because Burgundy was not at that time an as efficient competitor.****

“the Patent and Market Court of Appeal continues to be defendant-friendly”

An interesting conclusion from this case, as well as from the GothNet cases and the Visita/Booking.com case mentioned above, is that the Patent and Market Court of Appeal continues to be defendant-friendly. As far as I am aware, not a single claimant has won a competition law case in the Patent and Market Court of Appeal since the latest court reform was implemented in 2016.

I had a lot of fun writing this summary and would love to hear your thoughts and comments.  Please reach out to me on andres@acevedolaw.eu. Also, if you like this content, consider subscribing to my newsletter to get periodic roundups of new content to your inbox.

* Rough calculations made on basis of the SCA’s public register. The numbers are presented for discussion purposes only and I cannot attest to its accuracy.

** This is a simplified description. For the full context, see chapter 4 of the Swedish Competition Act (2008:579).

*** BOS also lodged a complaint against Svenska Spel with the Swedish Consumer Ombudsman.

**** The ruling had two interesting dissenting opinions. One dissenter wanted to dismiss the case already because the SCA had not proven to the requisite standard that Nasdaq was dominant. Another dissenter wanted to dismiss the claims already because a denial to get access to Verizon’s server hall could constitute abuse only if the server hall was an essential facility, which the SCA had not even claimed.

One Response

  1. Pingback: Competition law complaints in the re-regulated Swedish gambling industry

Leave a Reply

Your email address will not be published. Required fields are marked *