Merger Control 2020

Last Updated July 13, 2020

Sweden

Law and Practice

Authors



Advokatfirman Cederquist KB is a top-ranked business law firm, regarded as one of the leading law firms on the Swedish market. Cederquist offers full services from its office in Stockholm and provides clients with specialist expertise. The firm consists of approximately 100 lawyers. The EU, Competition & Public Procurement group consists of six lawyers. The group draws on a profound international network for support in other jurisdictions. The firm's lawyers are fluent in Swedish, English and French. Major international deals and transactions handled by the firm include acting as legal adviser in a number of corporate acquisitions of Swedish companies on behalf of foreign corporations, investment banks and law firms, as well as acquisitions of companies outside Sweden. The firm acts as legal adviser on behalf of foreign corporations, entities, organisations, funds, investment banks and law firms in all practice areas in Sweden.

The Swedish rules on merger control are found in the Swedish Competition Act (2008:579) (the Act), primarily in Chapter 4.

The Swedish Competition Authority (the SCA) has issued two guidance documents on the application of the rules:

  • The Swedish Competition Authority’s Regulations on the Notification of Concentrations between Undertakings under the Swedish Competition Act; this document contains instructions as well as the notification form itself; and
  • Guidance from the Swedish Competition Authority for the notification and examination of concentrations between undertakings – this document provides guidance on the SCA’s handling of merger cases, mainly regarding procedural issues.

The first document is available in English on the SCA’s website.

As is the case for all EU Member States, EU Merger control rules could be of relevance. First, if the thresholds for filing under the EU Merger Regulation (EUMR) are met, a filing under Swedish merger control rules is not necessary even though the thresholds for filing in Sweden are met. Further, jurisdiction could be transferred between Sweden and the European Commission under the EUMR referral rules.

As a general comment, it can further be mentioned that the SCA relies considerably on EU precedents and analysis.

There is no other relevant legislation for foreign transactions or investments in Sweden as far as merger control is concerned.

The SCA is the authority responsible for enforcing the Act. There is no other authority involved in merger review (although the SCA could, and does, consult with other authorities if those authorities could provide input to an investigation, such as the Swedish Post and Telecom Authority in mergers involving the postal or telecom sectors).

If the thresholds for compulsory filing are met, notification is necessary and there are no exceptions. It can be noted that the Act does not contain the exceptions listed in Article 3(5) of the EUMR (trading in securities, etc). However, those situations should not be considered concentrations under Swedish merger control law either.

As will be further explained in 2.5 Jurisdictional Thresholds, there is an "alternative threshold", which if triggered allows for voluntary filing or a right for the SCA to request a filing. The reason for submitting a voluntary filing in these circumstances would be to pre-empt a request for a filing by the SCA, which it may only issue if the transaction raises potential competition concerns.

There are no penalties, administrative or criminal, for failing to notify. The SCA can request that a filing be made, subject to a fine. If a notification is made pursuant to such a request, however, no fine is due. No such fines have to date been imposed.

The Swedish merger control rules catch transactions whereby control over an undertaking changes on a lasting basis by way of a merger, an acquisition or the creation of a full-function joint venture. Such transactions constitute "concentrations". Internal reorganisations are not caught (as there is no ultimate change of control).

Normally, concentrations arise by way of share or asset transfers; however, other agreements/events could also trigger a need to notify – eg, shareholders’ agreements conferring control (the right to appoint a certain number of directors on the board, veto rights, etc), or de facto control established on the basis of attendance rates at annual general meetings in companies with dispersed shareholder structures (typically listed companies). Essentially, Sweden follows the EU definition of a concentration and guidance can be found in the European Commission’s Consolidated Jurisdictional Notice, to which express reference is made in the SCA’s guidelines referred to above.

Only transactions giving rise to a change of control on a lasting basis are caught. "Control" is defined as having the possibility to exert decisive influence over an undertaking. The term should be considered to have the same meaning as under EU merger control law, and guidance can be found in the European Commission’s Consolidated Jurisdictional Notice.

The Swedish merger control thresholds are met if:

  • the combined aggregate turnover in Sweden of all undertakings concerned in the preceding financial year exceeded SEK1 billion; and
  • at least two of the undertakings concerned each had turnover in Sweden the preceding financial year exceeding SEK200 million.

This threshold will be referred to as the "compulsory threshold".

There is also an "alternative threshold": if the SEK1 billion requirement is met, but the SEK200 million requirement is not, the SCA may, “where particular grounds exist” request a party to notify the concentration. In these cases, it is also possible for the parties to submit a notification voluntarily.

If several transactions take place between the same parties during a two-year period, the transactions (and the turnover involved) should be considered as one concentration (so that it is not possible to avoid a notification by splitting up one transaction into several smaller).

The term "turnover" means net sales of all goods and services within an undertaking’s ordinary course of business. If possible, audited annual accounts should be used to determine turnover. The Swedish definition of turnover is the same as under EU merger control, and guidance can be found in the European Commission’s Consolidated Jurisdictional Notice. Foreign currency should be converted to SEK using either the Swedish Central Bank or the European Central Bank’s average annual exchange rates.

On the buyer side, turnover of the entire corporate group should be included. All entities ultimately controlled by the same parent company are considered to belong to the same group (subsidiaries, sub-subsidiaries, sister companies, etc). In joint control scenarios, all undertakings (including their corporate groups) acquiring control should be taken into account.

On the seller side, only the target’s (whether incorporated or organised as a branch, division, etc) turnover should be taken into account (including any subsidiaries).

Turnover Thresholds

As a main rule, the turnover thresholds are based on the preceding financial year’s audited annual accounts. If there have been any structural changes since the last audited financial year – eg, acquisitions or divestments – account should be taken for such changes (on a full-year basis). 

The Swedish rules on calculation of turnover and undertakings whose turnover should be taken into account are the same as under EU merger control law, and guidance can be found in the European Commission’s Consolidated Jurisdictional Notice.

Foreign-to-foreign transactions are subject to Swedish merger control if the turnover thresholds are met. There is no local effects test or similar for the compulsory threshold. However, the alternative threshold could be viewed as having a local effects test component. Under this threshold, the SCA can request a notification as long as the parties’ combined turnover in Sweden exceeds SEK1 billion (can be fulfilled by one party only), but only if “particular grounds exist”. This requirement should be interpreted as meaning “if the concentration could give rise to competition concerns” and, for competition concerns to arise, it typically requires that there must be an overlap in Sweden/local effect.       

The Swedish thresholds are based solely on turnover, meaning that market shares are not relevant for establishing jurisdiction. Again, however, a potential exception to this rule would be the alternative threshold, under which the SCA can request a notification if the parties’ combined turnover exceeded SEK1 billion in Sweden and “particular grounds exist”.

For the latter requirement to be met, it would seem necessary that the combined market share is substantial. However, there is no set market share threshold under the alternative threshold.

The creation of a "full-function" joint venture – ie, one which “on a lasting basis fulfils all the functions of an autonomous economic entity” – constitutes a concentration and is therefore subject to Swedish merger control and must be notified if the compulsory threshold, see 2.5 Jurisdictional Thresholds, is met. The procedure under the alternative threshold may be applied to full-function joint ventures as well. Other joint ventures are considered co-operative JVs and fall under the regular competition rules, in particular the prohibition on anti-competitive agreements (Article 101 TFEU and/or the Swedish equivalent).

The full-function test is the same as under EU law, meaning that the JV, in order to be full-function, should have an independent market presence, sufficient resources and financing, day-to-day management, and it should not merely be an extension of the parent companies’ business (eg, a sales agency) and not conduct business predominantly with the parent companies

If none of the turnover thresholds is met, the SCA does not have the power to investigate the transaction. The Act contains a general statute of limitation stating that a concentration cannot be blocked more than two years after it has occurred (which typically should be in connection with signing). As it takes the SCA four to five months to arrive at a prohibition (Phase 1 and Phase 2), the effective statute of limitation is shorter, around 18 to 20 months from when the concentration occurred.

This assessment is based on the assumption that the SCA would not request a notification and start investigating a concentration if that concentration would risk being time-barred before the authority could act against it.

The Swedish merger control regime is suspensory; a notified transaction may not be implemented before approval from the SCA has been obtained. This standstill obligation is automatic.

There are no sanctions for closing prior to clearance; however, if necessary to uphold the standstill, the SCA can order the parties not to take any implementing measures, and make such order subject to a fine. Such order can also contain hold-separate measures. No fines have been imposed on foreign-to-foreign transactions.

The SCA has mentioned the possibility to use the rule on prohibition of anti-competitive agreements (Article 101 TFEU and/or the Swedish equivalent) to be able to uphold and sanction the standstill obligation.

There is no general exception to the standstill obligation; unlike the EUMR, for example, the Act does not include an exception for public bids. However, the Act contains a general possibility for the SCA to grant derogation from the standstill obligation.

The legislator has mentioned that a ground for such derogation could be to avoid unnecessary financial harm. It should, for example, be possible to receive a derogation in order to save a failing firm or to complete a public bid if special circumstances can be demonstrated.

There are no circumstances where the SCA would permit closing before clearance aside from the possibility to grant a derogation from the standstill obligation. The Act does not set out any explicit possibilities to carve out a local competition concern in order to implement global closing. However, it is believed it would be possible under the general derogation provision to arrange for such a solution.

There is no deadline for filing, meaning that a filing can be submitted at any time as long as it is done before implementation. As set out in 2.2 Failure to Notify, there are no penalties for failure to notify.

Normally, a filing is made on the basis of a binding agreement; however, "good faith intention" filings are possible. Typically, as long as the parties can show their intention to carry out the transaction, a filing can be made earlier (eg, at the stage of a letter of intent or memorandum of understanding signed by the parties). The SCA is likely to require that the plan for the proposed transaction is set out in writing.

There is no filing fee.

The party or parties acquiring control is/are responsible for making the notification and is/are the notifying party/parties in the procedure. In the case of a true merger, the merging parties are notifying parties. The target undertaking or seller is not a notifying party.

The notification should follow the format provided by the SCA (similar to the Form CO in EU merger control). Aside from the notification itself, the filing should include, for example, annual reports and transaction documents. The level of detail depends on the concentration.

Concentration

If the concentration gives rise to "affected markets" (above 20% market share in the case of horizontal overlaps and 30% in the case of vertical links), the parties are also obliged to submit internal documents prepared for the purposes of the transaction (market studies, report to the board, etc). If the concentration does not give rise to any competition concerns it is possible to receive permission from the SCA to exclude or only submit limited data regarding certain information (eg, market shares in upstream or downstream markets).

Filing

The main notification document must be in Swedish. However, annexes and subsequent submissions (eg, reports, market studies, etc) may be accepted in English.

The filing process is generally speaking not formalistic. Submissions, including the notification itself, are normally made via email. Certifications, notarisations, etc, are not required.

If the notification is deemed incomplete, the formal investigation and the legal time limits will not start running.

If incomplete or misleading information is supplied, the SCA can "stop the clock", which prolongs the investigation. The possibility to stop the clock was introduced in 2014 and has not been frequently used in practice, although it is occasionally used. Otherwise, there is no specific provision penalising incorrect or misleading information although as a general principle the approval decision could be declared null and void in a separate court proceeding under general principles.

The Swedish merger control review process is divided into two phases: an initial phase (known as Phase 1) and an in-depth phase (Phase 2). Phase 1 is 25 working days and Phase 2 is three (additional) months. If remedies are offered in Phase 1, the phase is extended by ten working days.

Phase 2 can be extended by one month at a time following consent from the parties, or in special circumstances the SCA can make a unilateral decision to extend the deadline. Such extension decisions could be prompted, for example, by a remedy proposal. However, this is by no means an automatic, customary or often applied extension possibility for the SCA.

The actual time before a clearance decision is rendered can be longer if the notifying party engages in pre-notification contacts with the authority, which is recommended by the SCA and common practice unless the concentration is wholly unproblematic. Pre-notification contacts are treated confidentially, are flexible and do not follow a prescribed format. Among other things, during such discussions the notifying party can request waivers from information requirements in the notification form.

Formal requests for information have become more common as the SCA has decided to be increasingly formalistic and use the possibility more often. However, it is not uncommon that the case handler requests confirmation or information via an informal phone call. Requests for information from the SCA do not tend to be burdensome, but it will naturally depend on the relevant case.

If the parties do not respond to requests for information in time and/or submit incomplete or misleading information, the SCA can stop the clock, which prolongs the investigation. This relatively new possibility for the SCA (introduced in 2014) has to our knowledge not been frequently applied in practice.

There is no formalised fast-track procedure; however, in unproblematic cases (eg, private equity transactions with no overlaps) the SCA will in many cases deliver a decision considerably faster than 25 working days, sometimes within ten working days. In 2019, the average turnaround time for a Phase 1 decision was 15 working days.

The SCA employs the SIEC (Significant Impediment to Effective Competition) test, which is in line with the EUMR and most other competition regimes in the EU. Under this test, a concentration will be prohibited if it threatens to impede significantly effective competition within Sweden as a whole or a substantial part thereof.

The SCA first takes into account the markets as defined by the parties and ensures that they are in line with previous case law as well as consistent with segmentations in the industry concerned. There is no communicated de minimis level below which competition concerns are deemed unlikely. However, the thresholds for when a simplified notification can be made (below 20% market share for horizontal mergers and below 30% for vertical mergers) are, however, indications for when concentrations are deemed unproblematic.

Moreover, there is a presumption in the EUMR that concentrations where the parties’ market share does not exceed 25% are unproblematic, which arguably is applicable also in Swedish merger control.

The SCA aims to apply the rules in consistency with EU merger control law, and guidance on the substantive assessment can be found in the European Commission’s horizontal and non-horizontal guidance documents. The SCA may also rely on case law from other Nordic competition authorities due to the similarities in market structures.

During its review, the SCA will investigate whether the concentration gives rise to problematic market share levels (including HHI index analysis), unilateral effects, co-ordinated effects; in vertical and conglomerate mergers it will primarily investigate whether the concentration gives rise to anti-competitive foreclosure. The SCA will also consider factors such as countervailing buyer power, potential market entry and failing firm defence/counterfactual analysis.

The SCA will take efficiencies into consideration as long as they are transaction-specific, are verifiable and will ultimately benefit consumers. The authority urges parties to bring forward efficiency arguments as early as possible in the process in order to allow the SCA to be fully able to analyse and take them into account.

The SCA is required to take one non-competition issue into consideration: a concentration can only be prohibited as long as “no significant national security or supply interests are set aside”. This provision has never been applied by the authority and otherwise only competition issues are taken into account.

In investigations into full-function joint ventures, the SCA will consider horizontal overlaps, vertical links, as well as any spill-over effects between the parent companies – ie, whether their ownership of the joint venture could lead to anti-competitive co-ordination.

Since January 2018, the SCA has the power to, as first instance, prohibit concentrations. In order to prohibit a concentration, the SCA must prove that the concentration “significantly restrains the occurrence or the development of effective competition within the country as a whole, or a substantial part thereof”.

If the SCA identifies competition concerns during its investigation, the parties will be informed accordingly. The parties are then able to propose, discuss and negotiate remedies. There are no set time limits for when remedies must be offered, but the SCA strives to hold a state-of-play meeting after 15-20 working days into Phase 1, where Phase 1 remedies can be discussed.

In Phase 2, the SCA asks that remedies are offered at the latest three weeks prior to the end date. If remedies are offered later than that, the authority asks that the parties' consent to a one-month extension of Phase 2. It should be noted that the courts, on appeal, may also impose remedies (ie, approve a concentration subject to remedies).

There are no explicit legal standards for remedies set out in the Act. However, the remedies offered must eliminate the competition concerns identified and the SCA applies the European Commission’s guidance on remedies.

Like most other competition authorities, the SCA has a strong preference for divestiture remedies – ie, structural remedies that fully remove an overlap/competition concern, ideally without the need for detailed and lengthy monitoring post-merger. Remedies only have to address competition concerns.

Parties can begin negotiating remedies as soon as they are informed about the identified competition concern. If a certain competition concern is "obvious" and/or acknowledged by the parties, and the parties wish to secure Phase 1 clearance, it is possible to discuss and prepare remedies in advance during pre-notification contacts.

The SCA cannot propose or demand remedies on its own motion, although the authority can, of course, make its view known to the parties and indicate what is likely to be necessary in order to secure clearance. As such, the SCA cannot impose remedies that have not been agreed by the parties.

It is possible to offer remedies even in Phase 1, in which case the phase is extended by ten working days (ie, 35 working days in total). In Phase 2, remedies do not automatically prolong the investigation, but if necessary the phase can be extended by one month at a time.

Once remedies are offered, the SCA will analyse them and conduct a market test (eg, interview third parties as to whether the proposed remedies can solve the identified competition concern and conduct market surveys, etc). The parties may negotiate and adjust the remedies in order to reach a solution that is acceptable to the SCA. If a solution is reached, the SCA will approve the merger subject to compliance with the remedies.

Typically, the notifying party will commit to implementing the remedy package post-closing – ie, the transaction is approved and the implementation of the remedy follows after. In divestiture remedies, the notifying party will typically have a number of months in which to implement the remedy, and if it does not succeed then the mandate to divest will pass to a trustee. The obligation to implement a remedy will typically be subject to penalty payment – ie, a pre-set penalty payment which will be enforced if the remedy is not complied with.

However, there is no specific sanction for breach of a remedy (unlike, for example, the EUMR, under which the parties can be fined by up to 10% of turnover for breach of a remedy).

The SCA’s decision to approve a concentration is issued to the parties (normally only to the notifying party). The decision is made public on the SCA’s website (with appropriate confidentiality for business secrets). If the SCA decides to prohibit a concentration, it will also publish the decision on its website.

The SCA issued its first prohibition decision under the new rules in April 2019. The transaction concerned a joint venture co-operation amongst three out of four producers of the three most popular cheeses in Sweden. The SCA’s decision was appealed to the Patent and Market Court for review. Before the Patent and Market Court rendered its judgment, an arbitration award hindered the completion of the concentration why the Patent and Market Court found that a substantial review would only relate to a hypothetic situation and therefore annulled the SCA's decision and dismissed the case.

Previously, the SCA had to file a summons application with the courts. In many cases, the decision to go to court was in practice tantamount to a prohibition as merging parties tended then to withdraw their notification. In recent years, the SCA has blocked a number of mergers this way – eg, in 2016 Schibstedt’s acquisition of property listing website Hemnet (following lengthy remedy negotiations which apparently did not convince the SCA), Kronfågel/Lagerberg (chicken breeding) and Visma’s public bid for Fortnox (enterprise application software).

There have also been two court proceedings in recent years: Swedbank’s acquisition of Svensk Fastighetsförmedling (real estate agency services) was prohibited by the District Court (now Patent and Market Court) in 2014, and before the appeal court rendered its judgment Swedbank abandoned the concentration. In 2016, the Patent and Market Court of Appeal cleared Logstor’s acquisition of Powerpipe (district heating pipes) after the SCA sought to block the merger.

There are also examples of decisions approved subject to remedies, most recently (in 2019) Karo Pharma's acquisition of Trimb (divestment of a hydrocortisone product line). In 2015, the SCA sought to prohibit Orkla's acquisition of Cederroth. After the summons application had been filed, the parties offered remedies to divest a meal replacement brand. This remedy was then imposed by the court after having been approved by the SCA.

The SCA has not yet acted against any purely foreign-to-foreign transactions, although several transactions that have been blocked or required remedies have involved foreign companies/corporate groups.       

A clearance decision covers ancillary restraints as long as the restraints are directly related and necessary to the implementation of the transaction. This follows directly from the Act.

Third parties are involved in the review process, typically by being interviewed by the SCA and/or by responding to questionnaires. Particular weight is given to the views of customers of the merging parties.

Third parties do not have any particular rights and do not have status as party to the proceedings. They can request access to the SCA’s file, but this is a right that stems from the Swedish constitution and is not specific to merger control proceedings.

The SCA typically contacts third parties as part of the review process. Such contacts usually take the form of telephone interviews but can also include written questionnaires. The SCA will also market test remedies offered by the parties.

Once a notification has been made, it becomes public and visible in the SCA’s registry. According to the principle of access to public records, anyone (competitors, media, citizens, etc) can request a copy of the notification and other documents in the SCA’s file. However, the parties can claim confidentiality for business secrets, typically by annexing a non-confidential version of the notification and subsequent submissions.

The SCA normally respects sound confidentiality claims.

The SCA co-operates with other competition authorities, in particular those within the ECN (European Competition Network) – ie, the European Commission and the national competition authorities of the EU. The SCA is also active in, for example, the ICN and the OECD. In addition, there is an agreement between the Nordic competition authorities regarding the exchange of confidential information in competition cases. 

Within the ECN, the SCA co-operates and (seeks to) share information according to the "Best Practices on Co-operation between EU National Competition Authorities in Merger Review" (adopted by the EU Merger Working Group, 8 November 2011), available on the SCA’s website. The ECN authorities exchange the existence of a notification and certain non-confidential information within its network. If it is beneficial for the handling of multi-jurisdictional cases, the parties are also urged to grant waivers regarding confidential information.

The SCA’s decision to block a concentration can be appealed to the Patent and Market Court, whose judgement may be appealed to the Patent and Market Court of Appeal.

If a decision is appealed to the Patent and Market Court, the court has six months to render a judgment from the date the case was lodged with the court. If the judgment from the Patent and Market Court is appealed to the Patent and Market Court of Appeal, that court has another three months to render a judgment calculated from the last day to appeal the judgment of the Patent and Market Court.

Third parties cannot appeal a clearance decision.

In 2014, "stop the clock" was introduced in the Act. Accordingly, the SCA can now (like many other competition authorities) stop the legal time limits in the event that the parties do not provide a timely response to requests for information and/or to provide incorrect information.

In the autumn of 2016, the court system was amended so that the competent courts for competition cases, including mergers, are the Patent and Market Court and the Patent and Market Appeal Court. However, this is not a major change in practice for merger parties.

In 2018, the SCA was given authority to prohibit concentrations as first instance, which on appeal is subject to judicial review by the courts. The Swedish system has thereby been further aligned with the EU system and most other competition regimes in the EU.

The SCA has received around 60 to 80 notifications per year in recent years. In 2015-2019, it opened up 15 Phase 2 investigations. In the last five years, there have been two judgments by the court of first instance and two cases have been dismissed as the parties decided not to complete the concentrations. In 2016, one concentration was ultimately cleared by the Patent and Market Court of Appeal.

In 2019, the SCA’s first prohibition decision under the new regime was appealed to the Patent and Market Court although the case was dismissed, see 5.8 Prohibitions and Remedies for Foreign-to-Foreign Transactions.

The SCA has not communicated any particular concerns with respect to merger control, but it should be mentioned that it has publicly encouraged companies to file "below the thresholds" – ie, when the alternative (but not the compulsory) threshold is met. The most high-profile case in recent years, Swedbank/Svensk Fastighetsförmedling, was below the thresholds, and the SCA took actions to prohibit the merger. The parties withdrew the transaction during the proceedings in the appellate court.

In order to avoid a request for a filing in those cases, which typically would be prompted by complaints from third parties or press coverage, the parties can choose to file voluntarily.

The SCA has not issued any public statements nor adopted any special measures in relation to the merger control procedure due to the COVID-19 crisis. However, based on information in the public register, the SCA has, to a larger extent than usual, made use of more business days in relation to its assessment of concentrations while still issuing decisions within the legal deadline. Nevertheless, it cannot be excluded that the SCA, after discussions with notifying parties, could make an increased use of the stop-the-clock possibility if extra time is needed to carry out necessary market investigations.

Advokatfirman Cederquist KB

P.O Box 1670
SE-111 96 Stockholm

+46 8 522 065 00

+46 8 522 067 00

fredrik.lindblom@cederquist.se www.cederquist.com
Author Business Card

Law and Practice

Authors



Advokatfirman Cederquist KB is a top-ranked business law firm, regarded as one of the leading law firms on the Swedish market. Cederquist offers full services from its office in Stockholm and provides clients with specialist expertise. The firm consists of approximately 100 lawyers. The EU, Competition & Public Procurement group consists of six lawyers. The group draws on a profound international network for support in other jurisdictions. The firm's lawyers are fluent in Swedish, English and French. Major international deals and transactions handled by the firm include acting as legal adviser in a number of corporate acquisitions of Swedish companies on behalf of foreign corporations, investment banks and law firms, as well as acquisitions of companies outside Sweden. The firm acts as legal adviser on behalf of foreign corporations, entities, organisations, funds, investment banks and law firms in all practice areas in Sweden.

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