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Print articleRetailers Guilty of Price-Fixing in Volvo Cartel
October, 2008 - Elisabeth Legnerfält, competition law expert
In its decision of 10 September 2008, the Market Court held that eight retailers of Volvo and Renault cars in southern Sweden were guilty of fixing sales prices and discounts on new cars, dividing the market for new car sales and fixing acquisition and sales prices on used cars. This behaviour was deemed to constitute such a limitation of competition as is prohibited under Section 6 of the Competition Act and Article 81 of the EC Treaty. The companies were ordered to pay fines totalling SEK 21 million. The individual companies have to pay between SEK 500 000 and SEK 6 million each in fines. (MD 2008:8, the Competition Authority v Aktiebolaget Bil-B., Bil-M. i Skåne Aktiebolag, Göinge Bil Aktiebolag, J. A. Bil AB, Kristianstads Automobil Aktiebolag, Skånebil Personbilar AB, Bilia Personbilar AB and Bildeve Aktiebolag.)
The cartel was revealed after an e-mail intended for a competitor, and sent by one of the retailers, went astray and was published in the leading Swedish financial newspaper, Dagens Industry. The e-mail stated, “ Hi friends! What are we going to do with the new Volvo campaign. Are we going to add SEK 3000 to their prices as usual, and what net prices are we going with – what do you others think?”
The Competition Authority then carried out a dawn raid and subsequently brought action against the companies at the district court of Stockholm claiming fines totalling SEK 71.3 million. The companies were acquitted by the district court on the basis that it had not been shown that the collaboration was intended to limit competition in an appreciable way. The Competition Authority lodged an appeal with the Market Court which has now found in favour of the Authority. However, the Market Court only imposed one third of the fines claimed.
In the Market Court, the companies tried to claim that the collaboration between the retailers was intended only to obtain better margins in respect of the supplier, i.e. Volvo, and to sell more cars. They also alleged that there was no intent to restrain competition. On the contrary, they suggested that competition between car brands increases, which in turn benefits consumers.
However, the Market Court found that the companies had fixed prices for both new and used cars and that the agreements had had a restraining effect on competition. When the intent to restrain competition is shown, no competition-restraining effect needs to be proved. The Market Court also found that the companies, in reaching agreement on various discounts in the district and beyond, had divided the market between them. To contravene Article 81 of the EC Treaty and Section 6 of the Competition Act, the agreement in question must also have an appreciable effect. In conjunction with the serious nature of what had been agreed between the retailers, this means that the collaboration constituted an appriciable contravention of the competition rules.
The Market Court is the highest instance and, as such, the judgment cannot be appealed.
The ruling of the Market Court shows that actions between competitors which constrain competition in respect of price and division of markets constitute serious limitations of competition regardless of whether it relates to collaboration between competitors which are suppliers or retailers.
The cartel was revealed after an e-mail intended for a competitor, and sent by one of the retailers, went astray and was published in the leading Swedish financial newspaper, Dagens Industry. The e-mail stated, “ Hi friends! What are we going to do with the new Volvo campaign. Are we going to add SEK 3000 to their prices as usual, and what net prices are we going with – what do you others think?”
The Competition Authority then carried out a dawn raid and subsequently brought action against the companies at the district court of Stockholm claiming fines totalling SEK 71.3 million. The companies were acquitted by the district court on the basis that it had not been shown that the collaboration was intended to limit competition in an appreciable way. The Competition Authority lodged an appeal with the Market Court which has now found in favour of the Authority. However, the Market Court only imposed one third of the fines claimed.
In the Market Court, the companies tried to claim that the collaboration between the retailers was intended only to obtain better margins in respect of the supplier, i.e. Volvo, and to sell more cars. They also alleged that there was no intent to restrain competition. On the contrary, they suggested that competition between car brands increases, which in turn benefits consumers.
However, the Market Court found that the companies had fixed prices for both new and used cars and that the agreements had had a restraining effect on competition. When the intent to restrain competition is shown, no competition-restraining effect needs to be proved. The Market Court also found that the companies, in reaching agreement on various discounts in the district and beyond, had divided the market between them. To contravene Article 81 of the EC Treaty and Section 6 of the Competition Act, the agreement in question must also have an appreciable effect. In conjunction with the serious nature of what had been agreed between the retailers, this means that the collaboration constituted an appriciable contravention of the competition rules.
The Market Court is the highest instance and, as such, the judgment cannot be appealed.
The ruling of the Market Court shows that actions between competitors which constrain competition in respect of price and division of markets constitute serious limitations of competition regardless of whether it relates to collaboration between competitors which are suppliers or retailers.
