On 16 December 2014, in a decision likely to delight Swedish retailers, the Swedish Competition Authority (SCA) decided not to further investigate or prosecute alleged price fixing by a protein powder retailer.
This instance is significant because on the facts of the complaint: that the price fixing was blatant. In it’s decision, the SCA revealed that it investigated the protein powder producer 13:e Protein Import AB, after an anonymous tip of a 2013 letter sent by the producer. In this letter, sent to its online distributors, 13e responded to recent distributor concerns over low pricing by competitors by stating that all its distributors should adhere to certain minimum prices set by the producer. The supplier then threatened measures against retailers who do not adhere to this minimum pricing scheme by a certain date.
The case is outstanding in that competition regulators often have to deal with complex and nuanced practices by companies and decide whether in effect they amount to price fixing and other anti-competitive behaviours. In this instance, the price fixing could not have been any more transparent and blatant. Even in its decision, the SCA acknowledge that the behaviour constitutes resale price maintenance in breach of Chapter 2, Section 1 of the Swedish Competition Act and Article 101 of the TFEU.
However, what is particularly newsworthy about this instance is the fact that the SCA in its decision (dated 30 October 2014) officially closed the case. It did so on two connected grounds. The first was the fact that the SCA like all regulators runs a prioritisation programme and thus would not pursue all leads or cases presented. It is however the second ground that is perhaps more alarming for competition practitioners throughout the EU. The second ground for closing the investigation without prosecution was the fact that producer in question had a market share of only 3% and that there was no further price fixing between competitors. In its decision, the SCA stated that because of this low market share and the otherwise highly competitive protein powder market, the price fixing (and subsequent higher prices) would only dissuade consumers off this particular product and would cause no likely market harm to consumers.
Although there is obvious logic in the SCA’s decision when analysing the effect of the price fixing, the case creates a worrying Swedish precedent. On reading the decision, any product manufacturer with a small market share could be forgiven for believing that blatant price fixing amongst its distributors was unlikely to result in regulatory fines as long they kept the price fixing within their own distribution chain and if the market were competitive. Many reading or hearing of the case would perhaps wonder why the SCA, being in possession of such gold-plated evidence against the producer, did not simply ask for a commitment that the price fixing would be stopped. Such a decision would have at least closed the investigation with the law being upheld rather then abandoning the prosecution because of the belief that the behaviour did not do enough damage.
It remains to be seen whether future Swedish companies accused of price fixing will brandish this decision and evidence of their small market shares when seeking leniency from prosecution. We suspect this case creates a dangerous and unhelpful precedent in the fight for a competitive and open single European market.