Prohibition of Sales Activities by Public Entities Requires Anti-Competitive Effects

Sten Nyberg7075A new provision in the Swedish Competition Law, prohibiting anti-competitive sales activities by public entities, leaves considerable room for interpretation. A recent ruling by the Stockholm District Court indicates that this new part of the Swedish Competition Law is fundamentally effects-based, and that a sound economic analysis is important for the legal assessment, writes CELEC’s chairman Professor Sten Nyberg in this article.

A little more than three years ago the Swedish Competition Law was amended with provisions prohibiting anti-competitive sales activities by public entities, contained in section 3:27 of the The Swedish Competition Act (2008:579). In some respects this new piece of legislation leaves considerable room for interpretation, as does the government bill proposing it.

In particular, it is not entirely clear what qualifies as a behavior that has to its object or effect to distort the conditions for efficient competition on the market, or to impede the presence or development of such competition. Up to now there has been no legal precedents. However, on January 31 2013 the Stockholm District Court handed down its first ruling in such a case.

The case was brought by the Swedish Competition Authority and concerned a municipally controlled rescue service, Räddningstjänsten Dala Mitt (RDM). Alongside its other responsibilities RDM provides education and training where it uses a training ground area rented from the municipality. While RDM has previously rented out the facilities to external actors it chose to deny a privately owned competitor, Niscayah (now Stanley Security Sverige AB) access to the training grounds in connection to a public procurement tender for rescue training in 2009. The Swedish Competition Authority argued that the refusal to deal harmed competition and violated the law.

The Stockholm District Court found for the defendant in this case on the grounds that the Swedish Competition Authority had failed to show the requisite economic effects of the behavior, underscoring the importance of a proper analysis of economic effects also in these cases. In its ruling the Court reasons that the distortion of, or impediment to, competition criterion here is not parallel to those pertaining to Articles 101 and 102 in the TFEU. The legislation targets competition problems arising as a consequence of the specific market position of public entities. The Court notes that the assessment of economic effects should be based on economic analysis and that the effects should be of some significance for a behavior to be prohibited. In the case at hand, the Court notes that there were other training grounds within the area relevant for the procurement and finds that it has not been shown that the refusal to deal has disadvantaged the competitor or lessened its chances of winning the contract, and that such effects would also have to be of some significance.

While it would be premature to read too much into this decision, which may also be appealed, it does seem to indicate that also this new part of the Swedish Competition Law is fundamentally effects based, and that a sound economic analysis is an important and integral part of arguing a case.

Sten Nyberg

Sources:

Case T 7924-11, KKV ./. Räddningstjänsten Dala Mitt

Swedish Competition Authority, Statement of Objections, http://www.kkv.se/upload/Filer/Konkurrens/2011/stamningsansokan/stamningsansokan_10-0304.pdf 

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