In the aftermath of the Swedish Competition Authority initiating legal proceedings against a number of construction companies for alleged cartel practices in connection with public procurement of asphalt, two municipalities filed suits in 2003 for civil damages against some of these companies. These were the first cases in Sweden arising out of the private enforcement of competition rules. Seven other municipalities later also filed suits for civil damages against the construction companies.
The Swedish Competition Act has a separate provision that regulates private enforcement. Section 33 reads:
“Any party who, intentionally or negligently, infringes any of the prohibitions contained in Section 6 or Section 19 shall compensate the damage that is caused thereby to another undertaking or party to an agreement.”
In the initial two legal proceedings there are two respondents, Skanska and NCC (the two largest construction companies in Sweden). In these proceedings, Skanska argued that it could not, as a matter of principle, be liable for damages under Section 33 of the Act for breach of Section 6 of Act (corresponding to Article 81 of the EC treaty).
The parties agreed that this question should be determined by an interim judgment.
The arguments brought before the court
Skanska argued (i) that the municipalities, when procuring asphalt, were not undertakings within the meaning of the Act and (ii) that the municipalities were not party to an agreement with Skanska. According to Skanska it was only NCC (which had won the contracts), that could be liable for damages as the only agreement that existed was between the municipalities and NCC.
The municipalities and NCC argued (i) that the municipalities when procuring asphalt were undertakings within the meaning of Section 33, and (ii) that Section 33 should not be interpreted in the strict verbatim sense as Skanska claimed. Skanska’s interpretation of Section 33, meaning that a municipality which has suffered damage due to an illegal cartel could only be entitled to damages from the party who won the contract, would be contradictory to what the legislator had intended. The preparatory works of the Act state that general principles of the law of torts shall apply, including the principle of joint liability for those who have participated in causing damage.
The judgment of the Stockholm City Court
On 22 November 2004 the Stockholm City Court ruled in favour of the municipalities and held that no one who has participated in a forbidden cartel should, as a matter of principle, be excluded from liability. The court held that it must suffice that the municipalities had entered into an agreement with one of the participants of the cartel for it to be considered as a party to an agreement in relation to all the members of the cartel, including Skanska. The court, therefore, ruled that the municipalities should be entitled to claim damages from Skanska, should it later be shown that Skanska had participated in the cartel in the alleged way.
As the court found that the municipalities were parties to an agreement with Skanska, the question whether the municipalities, when procuring asphalt, were to be considered as an undertaking according to Section 33 of the Act was not addressed. The existing Swedish competition law cases concerning the word “undertaking” have dealt with the question of who should be liable for damages and not who should be entitled to damages. It would, therefore, have been of great importance and interest to see the court’s determination of this issue and if the court would have: a) used the classical arguments and existing manifest case law on the word “undertaking” in the sense of who should be responsible for damages; or b) made its own interpretation in light of the fact that in this particular case the issue was who should be entitled to damages. The interim judgment has been appealed to the Court of Appeal by Skanska, and this issue might, therefore, still be addressed.
To read our previous article on this topic, please click here.