Stockholm District Court Volvo retailers cooperation concerted

28 July 2006

Henrik Nilsson, Anders Hellström

June 2006

The Stockholm District Court issued a judgment on 7 June 2006 concerning an alleged breach of section 6 of the Swedish Competition Act as well as of Article 81 of the EC treaty. The court found that no breach could be proven and thus the Competition Authority’s claim was rejected.

On 10 December 2002, the Swedish Competition Authority conducted a so-called dawn raid on the premises of eight authorised Volvo and Renault retailers in southern Sweden. The retailers had an established cooperation within the framework of their relationship with the Volvo general agent.

Based on the findings of that raid, the authority filed a lawsuit against the companies, claiming that between the years 1998 and 2002 they had engaged in concerted practices regarding the price of both new and used Volvo cars and had thus hindered free competition on the market of southern Sweden. The concerned companies denied the Competition Authority’s claims, saying that even if they had been exchanging information, there had been no anti-competitive aim of that cooperation and that the infringement would have been minor.

The court initially stated that in cases of this kind, the burden of proof rests on the Competition Authority and that the level of evidence required was relatively high.

Regarding the cooperation itself, concerning both new and second-hand cars, the court found that although it was proven that the companies had entered into agreements concerning the fixing of prices and discounts on cars and that this practice had been continuous; the companies had not divided the new car market between themselves. Thus, regarding the new cars, this alone meant that the Competition Authority’s claims could not meet with approval.

Furthermore, the court stated that, whereas the competition on the car market mainly takes place between car brands, not within one brand, and the cooperation took place under the guidelines of the Volvo general agent, it could not be said that the practice was restricting competition solely on the grounds that the companies were competitors cooperating horizontally. However the fact that they had agreed to fix prices and discounts, regarding new as well as used cars, meant that the purpose of cooperation between the dealers under the present circumstances was objectively to be deemed as being restrictive of competition. This type of concerted practice is according to the court generally to be seen as a particularly serious infringement on competition.

The court found that there were two relevant product markets, one for new and almost new cars and one for used cars. The geographical market was judged to be considerably larger than southern Sweden, where the companies were conducting business, although it did not extend to the whole country. The nature of the cooperation was such that it should normally be seen as an especially serious kind of anti-competitive behaviour, but, considering that the companies’ behaviour was rigidly controlled by the general agent, it could not be proven that the aim had been to impede competition to an appreciable extent. In the light of the aforementioned, the anti-competitive effect was not to be considered appreciable.

Finally, the court found that the cooperation only took place within one member state and that it was not self-evident that it was affecting trade between the member states. This being considered, it could not be decided with enough certainty that there was any direct or indirect, factual or potential, effect on the trade between member states.

In conclusion, the companies were found to have engaged in concerted practices, but considering that they were to a large extent controlled by the general agent meant that their chances of affecting prices were quite small. The Competition Authority had thus not proven that the restrictive impact on competition was substantial enough to fall under the prohibition in the Swedish law and, whereas the trade between member states was not affected, the practice had not meant any breach of Article 81 of the EC treaty.

Source: The Stockholm District Court Judgement, case T 4231-04 and Competition Authority press release http://www.kkv.se/ovr/volvo.shtm(Swedish only)