The Swedish Competition Authority has Adopted its First Decision on Competition Fines in the “Taxi-Case”

The Swedish Competition Authority (SCA) has on 20 october 2022 adopted it first own decision on competition fines. The SCA has only had the right to issue competition fines since March 2021, and the recent decision is the first where it uses its new powers. Due to the low turnover of the parties and other mitigating circumstances the imposed fines as such are however very low, only 140 000 EUR in total. The decision in full is available in Swedish here.

The infringement in brief

The case regards two taxi companies who cooperated when submitting tenders in a local procurement of mobility service transportation in 2020, conducted by the municipality of Ulriceham. At the time of the procurement, Taxi Ulricehamn had a contract with another taxi company, Edra. Taxi Ulricehamn and Edra were in a dispute, why Taxi Ulricehamn wanted to terminate the contract. Taxi Ulricehamn deemed that if it was to submit a tender without Edra as a subcontractor, it would constitute a breach of contract. To terminate the contract, Taxi Ulricehamn proposed to Väner Taxi that Väner Taxi should submit a tender with Taxi Ulricehamn as a subcontractor, but without Edra. Taxi Ulricehamn was also to submit a tender of its own, with Edra as a subcontractor, according to their contract. However, Taxi Ulricehamn dictated which prices Väner Taxi should offer, deciding that the prices in Väner Taxi’s tender should be set slightly lower than in Taxi Ulricehamn’s tender. As a result, Väner Taxi could win the tender with Taxi Ulricehamn as its subcontractor, while allowing Taxi Ulricehamn to cease its cooperation with Edra.

During its review process, the municipality caught suspicions that the undertakings had collaborated due to clear similarities between the two tenders. Both undertakings described their technical and professional capacities with identical phrases and the same spelling mistakes appeared in both tenders. The municipality therefore contacted the SCA. The procurement was later cancelled as two of the three tenders did not meet the formal criteria.

The SCA undertook a dawn raid which was the first one carried out during the pandemic. In its decision, the SCA deemed the cooperation to constitute a restriction of competition by object. The undertakings must have realised that their conduct restricted the competition in the procurement process. The undertakings exchanged commercially sensitive information, changing their behaviour both in the procurement process at hand, but also allowing them to adapt their competitive behaviour thereafter.

The assessment of the fines

The SCA chose to use the contract value to determine the gravity of the infringement, and to not separately consider the duration. The value of the contract was estimated according to the lowest bid, which was Väner Taxi’s of approximately 9 MSEK (approximately 840 000 EUR). As the longest possible duration of the contract was six years, the total value was 55 MSEK (approximately 5 MEUR).

In its assessment, the SCA accounted for the fact that price fixing is a serious infringement and that it took place in connection to public procurement, suggesting a higher fine (it may be noted that the SCA is also the supervisory authority for public procurements). The fact that the infringement concerned a limited geographical area suggested a lower fine. The fact that the procurement was cancelled was not taken into consideration, as there was a real risk that Väner Taxi’s tender could have won at the time of the infringement.

Lastly, the SCA compared the resulting fine with the amount that would have been set, should the SCA have used the method of basing the gravity of the infringement on the undertaking’s turnover. As that method would have resulted in a lower fine, the SCA adjusted the fine downwards.

In the second part of the assessment, the SCA did not find any aggravating factors. It did however take mitigating factors in consideration. As both undertakings found themselves in a weak financial situation, their continued existence was deemed to be jeopardized if the fines were set at a too high amount. Part of the reason for this was the effects that the covid-19 pandemic has had on their operations, as well as rising fuel prices.

The fines were therefore finally set to 300 000 SEK for Taxi Ulricehamn and 1 250 000 SEK for Väner Taxi, i.e. (approximately 28 000 EUR and 116 000 EUR respectively).
This decision is the first step in the SCA’s process of crystallising its own process in how it evaluates and sets competition fines. It gives us some clues as to how the authority will assess infringements in the future. While some questions remain, we can expect further guidance in upcoming decisions.