In the Spring of 2003, the municipality of Linköping issued proceedings against the two largest construction companies in Sweden in the City Court of Stockholm. The cause of action was that the companies had participated in a tendering cartel in relation to Linköping’s procurement of asphalt paving. This is the first case in Sweden arising out of the private enforcement of EC competition rules.
The competition dispute began with an employment dispute within one of the defendant companies. In early 2000, the company initiated criminal proceedings against six of its former managers for embezzlement. The managers had been responsible for the tendering of asphalt procurement across Sweden including the municipality of Linköping. In their defence, the managers claimed that the monies they were accused of having embezzled were actually, with the knowledge and implied consent of the company, paid to other companies in a bid to prevent them from submitting competitive tenders. The City Court of Stockholm found in favour of the managers and they were cleared of embezzlement.
Naturally, the municipality of Linköping felt compelled to take action and began to investigate the circumstances surrounding the procurement process for asphalt paving in the 1990s. The municipality contacted Bird & Bird Stockholm to lead the investigation and legal proceedings were commenced against the two companies on 8 April 2003.
In Sweden (as in Germany), the private enforcement of competition rules is regulated through a special statute, the Competition Act (1993:20). The Swedish statute was hastily drafted as a part of Sweden’s compliance in the early 1990s with the recently acceded EEA Treaty and until now has never been tested in court. Accordingly, it is unclear exactly how the statute should be interpreted and applied and so far the dispute in the City Court of Stockholm has revolved around issues of interpretation.
In parallel with Bird & Bird’s work, the Swedish Competition Authority is investigating the tendering cartel from a regulatory perspective. The enquiries began by a series of dawn raids against the headquarters of all the major construction companies in Sweden and a wealth of illegal cartels were discovered. The Swedish Competition Authority found that some cartels had been active since the 1960’s and that practically every construction company had been involved in one way or another. On 21 March 2003, the Swedish Authority took action against ten of the construction companies for infringing the Competition Act and sought payment of administrative fines in the sum of €174,560,000. Corresponding investigations have been initiated by the Norwegian and Finnish competition authorities.
More municipalities have followed Linköping’s example of private enforcement and initiated investigations of their own. To date, only one other municipality (also represented by Bird & Bird) has issued proceedings but more actions are expected in the future. The Swedish Association of Local Authorities has commissioned Bird & Bird to investigate and advise eleven more municipalities in relation to possible claims for damages.
What began life as an employment dispute has now grown into a fully fledged reassessment of the Nordic asphalt market and we will keep you abreast of all developments!
Written by Petter Nilsson and Bodil Ehlers.
Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.