A New Competition Act

A new Competition Act came into force on 1 November 2008. Clearer, more effective, and more in line with EC rules, the new Act has the same purpose as the old one: to remove obstacles to efficient competition.

Administrative fine and fine order

• A company in violation of any of the prohibitions of the Competition Act may be liable to pay an administrative fine. An administrative fine is determined by the Stockholm City Court subsequent to action brought by the Competition Authority. 
  
  If the company admits to having infringed the competition rules, the Authority may issue a ‘fine order’. This means the Authority does not have to go to court and claim an administrative fine in cases where the parties are in agreement. Companies are free to accept a fine order, or not. An accepted fine order has the same effect as a court ruling. 
   
• The Competition Authority’s method for calculating the size of administrative fines has also been clarified, which will improve predictability and lead to more consistent application of the law. The aim is to create transparency and make it easier for the parties, and for courts, to identify serious infringements that merit particularly stiff administrative fines. 
   
• The statute of limitations for administrative fines is extended from five to ten years.

Leniency

• Since 2002, companies that disclose their participation in an illegal cartel have been able to be fully or partly exempted from administrative fines. This is known as leniency. 
   
• Only one company may receive full exemption for the same infringement.
   
• A company that has induced others to break the Competition Act’s prohibition on anti-competitive cooperation cannot be exempted from fines. 
   
• To be exempted from fines, a company must cooperate with the Competition Authority during the investigation and during court proceedings. The company may not destroy evidence or otherwise impede the investigation.
  

Disqualification order

• A disqualification order (trading prohibition) is a completely new penalty that may be applied to individuals who have participated in cartels. Price fixing and market sharing are examples of serious infringements of the Competition Act that can lead to a disqualification order. A District Court can issue a disqualification order subsequent to an action brought by the Competition Authority under the Competition Act.

Merger control

• The new Act contains new rules for notification of mergers to the Competition Authority. The Authority is to be notified of a corporate merger when the aggregate annual turnover in Sweden of the companies involved exceeds SEK 1 billion, and where at least two of the companies involved have a turnover in Sweden that exceeds SEK 200 million per company. 
   
• A new merger control test has been introduced in Sweden. The test is used to determine whether a merger is intended to substantially impede efficient competition. It is the same as that used by the European Commission and marks an important harmonisation with EC rules. With this test, EC case law will become more influential.
   
• Processing time for mergers is extended from 25 to 35 working days in cases where the Competition Authority has received a notification from a party in a corporate merger.
  

Other changes

• It will now be possible for courts to simultaneously settle issues involving administrative fines and claims for damages. 
   
• The Competition Authority will be able to combine orders and undertakings with fines in some cases. 
   
• The right of appeal is extended. 
   
• It will now be possible to use information received during Competition Authority interrogations as evidence at trials.
   
• The ’Block exemptions’ are now included in separate laws.

Disqualification orders for anti-competitive cooperation

Under the new Competition Act, individuals who participate in anti-competitive cooperation (collusion) may risk a disqualification order.

Those who may be liable include not only individual business owners, but also individuals in leading positions at certain legal entities, such as the managing directors, deputy managing directors or directors of limited companies.

Those in leading positions exercise the greatest influence over a company’s actions, which is why they are the ones who risk a disqualification order if the company infringes the Competition Act’s prohibition on anti-competitive cooperation.

A District Court can issue a disqualification order subsequent to an action brought by the Competition Authority under the Competition Act.

Criteria for disqualification orders

Various types of anti-competitive cooperation are prohibited under the Competition Act. Competing companies may not conclude agreements on pricing, on limiting or controlling production, or on sharing the market. Such activities are usually called forming a cartel. People whose companies take part in such unlawful activities run the risk of a disqualification order.

The requirements for such an order are:

• that the individual has grossly neglected his or her obligations in the business activity, and
• that the disqualification order is justified from a public viewpoint.

When assessing whether the disqualification is justified from a public viewpoint, the court will consider in particular whether the actions

• were designed to seriously obstruct, limit or distort competition, and
• whether they persisted for a long time.

Leniency and disqualification orders

Companies that admit their participation in a cartel and that assist the Competition Authority in its investigation may be exempted from the administrative fine or have it reduced.

A person who has helped the company obtain exemption from or reduction of an administrative fine may avoid a disqualification order.

Fine orders

A company that infringes the rules of competition may be obliged to pay an administrative fine. From 1 November 2008, the Competition Authority can issue a direct order requiring a company to pay the administrative fine, instead of having to go to court.

Fine orders work on a voluntary basis: it is up to the company whether or not it wishes to accept the order. A company that accepts the Competition Authority’s assessment avoids a trial, which is often a lengthy process.  If the company chooses not to accept the order, the Competition Authority will request the court to impose an administrative fine.

Court proceedings in competition cases are often costly and time-consuming for the Competition Authority, the company and the courts. The fact that the Competition Authority is now empowered to issue fine orders means that long and costly court proceedings can be avoided in cases where the company does not contest the Authority’s action.

Clear-cut cases only

The Competition Authority is only able to issue fine orders where the circumstances are clear-cut. Where this is not the case, or where there are legal issues of relevance for case law, the case should be tried in court. These conditions apply even if the company is prepared to accept the order.

It is up to the Competition Authority to decide whether it is most appropriate to issue a fine order or to initiate court proceedings for the payment of an administrative fine. A fine order however requires the Competition Authority and the company to be in agreement.

How does it work?

Before a fine order can be issued, the Competition Authority must investigate the circumstances surrounding the infringement and the company must be given the opportunity to study the investigation. Where a fine order is appropriated, the Competition Authority will inform the company of this when sending it the Authority’s draft summons application.

This allows the company, after having studied the statement of objections, to decide whether it shares the Competition Authority’s view and is prepared to accept a fine order. The Competition Authority will then issue an order for acceptance by the company. An accepted fine order has the same effect as a court ruling.