Important ruling from the Swedish Court of Appeal in private enforcement case

11 September 2006

Hanna Larsson

This autumn one of the largest Swedish competition law cases is up for trial. The Swedish Competition Authority alleges that two of the largest construction companies in Sweden have participated in a cartel, fixing the prices of asphalt in a number of public procurements initiated by Swedish municipalities. In 2004 and 2005, in parallel with the Competition Authority’s case against the companies, nine of the concerned municipalities brought action against the construction companies for the monetary damages suffered as a consequence of the cartel co-operation. The municipalities’ actions are the first private enforcement cases to be brought before Swedish public court.

The municipalities are represented by Michel Frie, Bodil Ehlers and Hanna Larsson, Bird & Bird.

Should damages be due from all companies participating in a cartel or only from the company winning the procurement?

The municipalities argued that the construction companies should be held jointly and severally liable to pay damages to the municipalities in accordance with section 33 of the Swedish Competition Act in force at that time:

“Any party who, intentionally or negligently, infringes any of the prohibitions contained in Article 6 or Article 19 shall compensate the damage that is caused thereby to another undertaking or party to an agreement.”

One of the construction companies immediately applied for an interim ruling from the District Court that the company should not be held liable for damages vis-à-vis those municipalities whose public procurements the company had not won. According to the construction company, the municipalities should not be regarded as “any party” or “party to an agreement” in relation to the company. Moreover, the construction company argued that the municipalities should not be regarded as “an undertaking” in the meaning of section 33.

In an interim judgment dated 22 November 2004, the District Court of Stockholm ruled that the construction company could, as a matter of principle, be held liable for damages vis-à-vis all the municipalities which are party to the proceedings, including those which have not entered into contract with the company. The District Court held that any company having taken part in a cartel can be held liable for damages and that it is sufficient that the damaged party has entered into contract with any of the participants in the cartel for the “party to an agreement” - requisite to be fulfilled in relation to all participants in the cartel.

The construction company appealed the intermediate judgment to the Svea Court of Appeal. On 5 July 2006 the Court of Appeal handed down its judgment confirming the ruling of the District Court.