I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
On 27 December 2016, a new act on antitrust damages, the Competition Damages Act (2016:964) entered into force in Sweden. The new act governs actions for damages for infringements of competition law provisions and implements the EU Damages Directive (2014/104/EU).
The purpose of the new legislation is to facilitate companies’ and consumers’ ability to claim compensation for competition damages. It amends the Swedish Class Actions Act (2002:599), the Swedish Competition Act (1993:20) and the Patent and Market Courts Act (2016:188). The new legislation changes and clarifies liability, limitation periods, compensation, right of recourse, the passing-on defence, disclosure and other procedural issues.
In March and May 2016, the Stockholm District Court also delivered judgments in two follow-on damages cases brought against the telecommunications incumbent Telia (formerly TeliaSonera), which in 2013 was found to have abused its dominant position through margin squeeze. In both cases, the Court found Telia liable for damages to Yarps (damages totalling 65 million kronor) and Tele2 (damages totalling 240 million kronor). Both plaintiffs have appealed the judgments to the Svea Court of Appeal (as damages were not awarded in the full amount of their claims).
II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
The basic antitrust prohibitions in Swedish competition law mirror the prohibitions in Articles 101 and 102 of the Treaty of Functioning of the European Union (TEFU) and include prohibitions against:
- a agreements between undertakings that restrict competition (Chapter 2, Section 1 of the Competition Act); and
- b abuse of a dominant position (Chapter 2, Section 7 of the Competition Act).
Agreements and clauses that infringe the competition prohibitions are void, where anticompetitive cooperation is statutorily void, and abuse of a dominant position is void according to established court practice.
Chapter 3, Section 25 of the current Competition Act establishes a right to damages for parties injured because of infringements of Chapter 2, Sections 1 or 7 of the Competition Act or Articles 101 or 102 TFEU. A private action for claims for damages on the basis that an agreement or provision is in violation of the Swedish or EU competition rules may be brought in Sweden, either as a standard private action under the general procedural rules or as a class action under the rules of the Class Action Act.
Since September 2016, the new Patent and Market Court has jurisdiction over competition damages actions as well as competition cases brought by the Swedish Competition Authority. A new Patent and Market Court of Appeal has also been established as a court of second, and final, instance in such cases. Thus, any action for competition damages in Sweden should be filed with the new Patent and Market Court.
A finding of infringement by a competition authority is not required before a private antitrust action is initiated. A claimant can provide other evidence that the defendant is in breach of the provisions of the Competition Act as basis for its damages claim by the defendant. However, the new Competition Damages Act stipulates that a finding of a breach of the provisions in the Competition Act in a final ruling may not be re-examined in a subsequent action for damages even if the claimant is not explicitly mentioned in the decision. This is a change from the earlier Swedish legal tradition, which considered judgments as only binding between the parties and an evidentiary fact (which can be rebutted) in all other cases.
The rules on statutory limitation have also been changed. Previously, the right to damages for breach of the Competition Act or Articles 101 or 102 TFEU lapsed if no claim was brought within 10 years from the date on which the injury was sustained (i.e., when the infringement occured). In practice, with the long handling times of the authorities and courts, this meant that the right to damages often had lapsed. Therefore, the new Competition Damages Act stipulates a limitation period of five years from when the infringement ceased and the claimant became aware of, or would reasonably have been aware of, the anticompetitive behaviour, that this behaviour caused damages, and the identity of the infringer. Previously, there were also no rules on a standstill or interruption of the limitation period during the time that a competition authority investigated the issue or legal proceedings were conducted. Such rules have now been included in the Competition Damages Act, stipulating that a limitation period is suspended while a competition authority takes actions in case of the infringement to which the claim relates. A new limitation period commences from the day when there is a legally binding decision on the infringement or if the authority concludes its investigation in another manner.
As a general rule, if there is more than one infringer, the infringers are jointly and severally liable for damages caused by their infringement. However, the new Competition Damages Act includes certain limitations on the joint and several liability, such as when the infringer’s market share, at any point in time during the infringement, is below 5 per cent or where the infringer has been part of a leniency programme.
In proceedings for damages under Chapter 3, Section 25 of the Competition Act, the main rule is that the plaintiff has the burden of proof in relation to the infringement, intent or negligence, the injury suffered, and the causal link between the infringement and the injury. However, in cartel infringements, there is a presumption that the cartel infringement caused the damage. The claimant can in those cases, therefore, concentrate on the question of proving the size of its loss. As regards the passing on-defence, the burden of proof lies with the defendant. Under general principles of procedural law, once a party has discharged its burden of proof in a given respect, the burden then shifts to the other party.
Under the Arbitration Act (1999:116), Section 1, the civil law consequences of competition law breaches may be the subject of arbitration. The main civil law consequences of competition law are that any agreement that is prohibited pursuant to the rules on anticompetitive agreements between undertakings is automatically void, and the right to damages for competition infringements.
Infringements of competition laws may cause damages in several jurisdictions. The EU Damages Directive does not regulate these jurisdictional issues. In Sweden, it will be the Brussel I Regulation and the Lugano Convention that regulate whether a Swedish court has jurisdiction in a private competition case involving EEA members. In cases involving non-EU states, there is no general rule determining whether Sweden has jurisdiction or not, so cases are evaluated on a case-by-case basis but, basically, Swedish forum rules follow the general principle that actions should be brought in the state where the defendant resides or has its seat. Alternatively, Swedish courts also have jurisdiction if the infringement took place or if the damage occurred in Sweden. Swedish courts do also recognise prolongation agreements, where the parties – if at least one of them is domiciled in a Member State – have agreed that Swedish courts should have jurisdiction to try a claim for antitrust damages.
As long as Swedish courts have jurisdiction, private actions may also be brought against foreign corporations or individuals and by foreign corporations or individuals. However, it should be noted that foreign (non-EEA domiciled) claimants may, if the defendant requests it, be required to provide security, usually in the form of a bank guarantee, covering all legal costs that may be awarded to the defendants.
As regards the choice of law, in cases involving companies from within the EU, Swedish courts will apply the Rome I Regulation Articles 4–8 to cases where the parties have a contractual relationship and the Rome II Regulation where the claim regards indirect damages, that is, Article 4.1 (the law of the country where the damages arose), Article 6.3 (where markets have been affected or are likely to be affected) or where competition in several countries have been or are likely to have been affected, Swedish law, if a market in Sweden has been directly and substantially affected.
Anyone who has suffered damage caused by anticompetitive behaviour may file for damages. Standing is not limited to those directly affected by the anticompetitive behaviour – indirect purchasers may also bring claims. As mentioned above, corporations and individuals from other jurisdictions may also bring claims before a Swedish court, provided that they are considered undertakings within the meaning of the Competition Act (i.e., a natural or legal person engaged in activities of an economic or commercial nature).
The defendant in the proceedings is the corporation who has been found to infringe a competition provision. In other words, an action for damages cannot be brought against an employee or director of an infringing corporation.
V THE PROCESS OF DISCOVERY
The Swedish legal system does not provide for discovery in the true sense of the term. Under the Swedish system, exchanges of documents pretrial may, generally, only be made on a voluntary basis. However, within the framework of a court proceeding (i.e., shortly before or during the proceeding), there is a general obligation on a person (natural or legal) in possession of a document that may have evidentiary value to disclose the document (so-called ‘procedural duty of disclosure’). The rules on disclosure of evidence are found in Chapter 38 of the Code of Judicial Procedure and require that a party seeking an order to produce evidence should identify the document and explain what information is included in the document.
As a general principle, documents received or prepared by a public authority are public. This principle is, however, subject to a number of exceptions in the Public Access to Information and Secrecy Act (2009:400) involving that the Competition Authority’s file, information on an undertaking’s business operations, inventions and research results are treated as confidential if the undertaking may be expected to suffer injury if the information is disclosed. Furthermore, such documents that a competition authority holds and which contain declarations within a leniency programme, settlement briefs, written responses and other information that have been submitted to the Competition Authority, and information provided by the Competition Authority to the parties (such as a draft statement of objection, or draft settlement decision) and settlement briefs that have been recalled, may not be the subject of a production order as long as the Competition Authority is still handling the case. The three latter categories may be subject to a production order once the Competition Authority has closed its proceeding. The new Competition Damages Act also stipulates that declarations made within a leniency programme and settlement briefs are not to be produced as evidence. Certain other categories of documents may also only be produced by the party who has obtained them from the Competition Authority, or a person who has acquired their rights. This is a limitation of the fundamental procedural rules in Sweden on free trial of evidence and free provision of evidence.
Typically, confidentiality is only maintained as regards third parties and not as regards a party to the proceedings. However, legislative initiatives have recently been taken by the Swedish government to provide courts with the authority to, under criminal responsibility, prohibit counsel, management or parties from providing certain documents received during the court proceedings relating to competition damages to third parties in order to prevent a ‘trade with documents’. The new legislation is expected to enter into force during the first half of 2017.
VI USE OF EXPERTS
Cases before the Swedish Patent and Market Court shall be heard by two legally trained judges and two economists. Swedish courts may also, at the request of one of the parties, appoint experts and economists to establish violations and prove damages. The courts may also, at the request of a party, request that the Swedish Competition Authority calculate the damage, but the Competition Authority has a right to refuse to provide such assistance. Finally, the parties may also use their own economic experts. If the other party requests so, the expert must provide a written opinion to the court. If more than one party introduces expert witnesses, they are either heard on their own or jointly, the latter a process known as hot tubbing.
VII CLASS ACTIONS
The new Competition Damages Act, Section 2, mandates class actions. Such class actions shall be brought in accordance with the Class Action Act (2002:599), which already previously mandated class actions for competition damages; no antitrust class proceedings have thus far been brought in Sweden.
There are three forms of class actions:
- a A private class action may be initiated by any person or entity, provided that such person or entity has a claim of its own and is a member of the class.
- b An organisation class action may be brought by certain organisations without them having claims of their own. Such actions may be initiated by consumer and labour organisations and must, as a general rule, concern disputes between consumers and providers of goods or services.
- c A public class action may be initiated by an authority authorised by the government to act as plaintiff and litigate on behalf of a group of class members. This form of action is intended to allow authorities to pursue claims where the public interest, in a broad sense, suggests that action should be taken.
Bringing a class action requires that the questions of fact must be common or similar to the entire class. Further, the group of claimants must be ‘suitable’ with regard to size and character and be well defined to enable individuals to establish whether they are covered by the class action.
Claimants in private class actions and organisation class actions must, in general terms, be represented by a member of the Swedish Bar Association.
Note that collective settlements require judicial authorisation – the court must approve any settlement entered into by the plaintiff on behalf of the group members. Such approval will be given unless the terms of the settlement are unreasonable or discriminatory.
In practice, the procedural questions regarding whether or not the class actions will be approved take considerable time to decide, and in one case had to be finally settled by the Supreme Court several years later. The practical obstacles have, therefore, meant that there have been only a few class actions. For the first 10 years since the law was enacted we are aware of only approximately 10 cases in total.
The main benefits of class actions are the cost-sharing aspect and that in some cases, the initiation of preparatory acts to gather members for a class action have proved to have a definite effect on the defendant’s will to enter into settlement negotiations.
VIII CALCULATING DAMAGES
A prerequisite for receiving compensation is that the competition prohibitions were infringed wilfully or by neglect.
Compensation for damages caused by the infringement include compensation for factual loss (financial loss or loss of, or, damage to, property) (damnum emergens) and loss of income (including loss of interest) (lucrum cessans). The objective of damages awards for infringement of competition law is to restore the claimant’s financial situation to that which it would have been had the infringement never occurred. Therefore, when setting the damages, the courts will compare the claimant’s actual financial situation with the hypothetical financial situation absent the infringement. Compensation will also reflect other detrimental effects on the plaintiff’s business, even of a more long-term and/or difficult-to-quantify nature (such as loss of goodwill or detrimental impact on an intellectual property right).
The burden of proof lies with the claimant. However, the Code of Procedure allows the court to, on the basis of the evidence provided in the case, estimate the damages based on generally accepted principles of experience and reasonability. However, a claimant cannot rely totally on this rule, and is still required to provide some evidence on the extent of its damage to allow the court to base its finding on some ground.
Sweden does not recognise punitive damages.
The amount of the damages can be reduced if the plaintiff has contributed, by fault or negligence, to the injury sustained. If the plaintiff has benefited from the infringement, this too would have an impact on the amount of damages awarded. Compensation will also be adjusted for any settlement or agreement between the parties. Fines imposed by competition authorities, however, are not taken into account when determining damages.
The new act stipulates that interest will accrue on the compensation amount, due from the time the damage occured. The interest rate is 2 per cent above the reference rate of the Central Bank from the time the damage was caused until legal proceedings to claim compensation were initiated. Thereafter, the interest rate is 8 per cent above the reference rate.
In general, the losing party bears the legal costs. The winning party can thus recover all reasonable litigation costs from the losing party. The costs may also be apportioned between the parties depending on the degree of success of each party.
In the case of class actions, where the defendant is liable for the claimant’s litigation costs but is unable to pay, group members have a duty to use the received compensation to pay for the claimant’s litigation costs.
As mentioned in Section III, supra, under Swedish law, a non-EEA resident bringing an action before a Swedish court against a Swedish national or legal person must, at the defendant’s request, furnish security to guarantee payment of the costs for the judicial proceedings, in the event that such person or company is ordered to reimburse the costs.
IX PASS-ON DEFENCES
When quantifying damages, the passing-on defence is available in principle. Swedish law only recognises a right to compensation for actual damage. Thus, the compensation should be reduced by an amount equivalent to (1) any overcharge the injured party has passed on to its buyers, or (2) any undercharge the injured party has passed on to its suppliers. It is the defendant who has the burden of proof to show that the overcharge has been passed on. An earlier judgment addressing the passing on-question will be given evidentiary effect in a case before a Swedish court.
In relation to indirect buyers or suppliers, Sweden has in the new Competition Damages Act introduced a rule corresponding to Article 14 of the Damages Directive, stating that when calculating the compensation, an overcharge (or a surcharge) will, unless otherwise proven, be considered to have been passed on to an indirect buyer (or supplier) if the infringement caused an overcharge (surcharge) for the direct buyer (or supplier). Thus, an indirect buyer is only required to prove that (1) the defendant has infringed competition law provisions, (2) the infringement has led to an overcharge, and (3) the indirect buyer has purchased the goods or services covered by the infringement or that include goods and services covered by the infringement.
X FOLLOW-ON LITIGATION
Competition law infringement is not a criminal offence under Swedish law. There is therefore no specific provision covering the situation where criminal proceedings precede the damages case. In Sweden, corporations, with the exception of corporate fines, cannot be subject to criminal proceedings: only natural persons can be guilty of a criminal offence. On the other hand, as noted in Section IV, supra, natural persons cannot be subject to a claim for compensation.
As regards corporations that have been part of a leniency programme, there are limitations concerning what evidence can be invoked against them. Their joint and several liability is also limited. Under Swedish law, the term ‘joint and several liability’ means that if several parties are liable for damage caused by them, then a claim can be brought against any of them for the same amount as if that party alone had been liable for the damage (i.e., the whole amount). But in relation to a corporation that has been part of a leniency programme, the obligation to pay compensation is limited to the loss that it has caused its direct and indirect buyers and suppliers. As regards damage caused to other parties than that undertaking’s direct or indirect buyers or suppliers, its responsibility is limited to an amount corresponding to its share of the damage.
Written correspondence to and from external lawyers, held by the lawyer, or by the client, is protected by legal privilege and may not be subject to a court order to produce such document. External lawyers are also prevented from giving evidence on matters confided to them in their practice. Advice from in-house lawyers is not legally privileged in Sweden (essentially due to the fact that an in-house lawyer cannot be a member of the Swedish Bar Association).
As mentioned in Section V, supra, documents submitted to a public authority are public and only information on an undertaking’s business operations, inventions and research results (i.e., trade secrets) is treated as confidential.
XII SETTLEMENT PROCEDURES
As regards settlements with the Swedish Competition Authority, the Competition Authority may decide on an administrative fine if the infringement is established and all parties agree. A fine order that has been accepted is regarded to be a legally binding judgment.
It is up to the undertaking to approve or reject the suggested administrative fine. In those cases where the undertaking does not approve the suggested fine, the Competition Authority will take legal action and request the court to order the undertaking to pay the fine. The Competition Authority is in such cases bound by its earlier request and cannot claim a higher fine than it had offered to the undertaking.
As indicated above, a settlement requires that the infringement is established. This means that the Competition Authority will not accept a settlement where there are uncertainties regarding the course of events, or where the case involves legal issues that can be of importance for the determination of similar cases. If the Competition Authority believes that the case is suitable for settlement, it will inform the undertaking of this in connection with its draft statement of objection.
Under the Arbitration Act (1999:116), Section 1, the civil law consequences of competition law may be the subject of arbitration. Arbitration requires an agreement between the parties to settle an issue by arbitration. A party must also invoke an arbitration agreement on the first occasion that a party pleads its case on the merits in the court. The invocation of an arbitration agreement raised on a later occasion will have no effect unless the party had a legal excuse and invoked such as soon as the excuse ceased to exist. A party will forfeit its right to invoke the arbitration agreement as a bar to court proceedings where the party has opposed a request for arbitration, failed to appoint an arbitrator in due time, or fails, within due time, to provide its share of the requested security for compensation to the arbitrators.
During the pendency of a dispute before arbitrators or prior thereto, a court may, irrespective of the arbitration agreement, issue such decisions in respect of security measures as the court has jurisdiction to issue.
XIV INDEMNIFICATION AND CONTRIBUTION
Litigation may be funded by third parties. There is nothing hindering claimants or defendants from deciding to share the cost between themselves, although they are as a rule held jointly and severally liable for the legal costs of the counterparty.
The Swedish Bar Association does not accept contingency fees, with one exception. Within a class action framework, a claimant may agree with his or her counsel (who must be a member of the Swedish Bar Association) that a fee should depend of the outcome of the case. Such an agreement will, however, require the approval of the court.
Note that in the case of class actions, where the defendant is liable for the claimant’s litigation costs but is unable to pay, group members have a duty to use the received compensation to pay for the claimant’s litigation costs.
XV FUTURE DEVELOPMENTS AND OUTLOOK
A public investigation, assigned by the government, has recently submitted a report (SOU 2016:49) wherein it suggests that the Swedish Competition Authority should be given powers to, as the first instance, take decisions in matters concerning competition infringements and prohibition or orders concerning mergers. Financial penalties for competition infringements are to be paid when the Swedish Competition Authority’s decision is final. Processing of appeals of Swedish Competition Authority decisions should be done in accordance with the rules of the Court Matters Act, in compliance with the procedure provided for by the Patent and Market Court Act (2016:188).
Currently the Swedish Competition Authority investigates matters but lacks decision-making powers regarding sanctions against infringements, and prohibitions against and obligations on mergers. The Authority must bring an action in the Patent and Market Court (and the Patent and Market Court of Appeal) and it is the court that has the authority to render decisions in these matters. The total time required for processing the competition law matters in the authority and the courts today is at least three-and-a-half years from the launch of a case until the decision in the first instance. The time for final decisions to be examined at the next level is currently estimated to be five to seven years. The recently adopted judicial reform – with the introduction of specialised courts for cases under competition law – should lead to reduced turnaround time in court, but the investigation considers that there is a need to enhance the powers of the Swedish Competition Authority as well in order to increase efficiency in the infringement and merger proceedings but also for the leniency programme.
The Swedish government is currently also investigating the possibility of providing courts with the authority to, under threat of criminal sanctions, ban counsel, management or parties from revealing certain documents or information received during court proceedings relating to competition damages to third parties in order to prevent a ‘trade with documents’. The new legislation is expected to enter into force during the first half of 2017.
1 Elsa Arbrandt is a senior associate and Fredrik Lindblom is a partner at Advokatfirman Cederquist KB.