Bring Citymail

The most important case on discounts is Bring Citymail.²⁶ Posten, the Swedish former monopolist in the market for postal services, had applied a discount system for the sending of over 300 000 units of mail. The (operational) discount was given for mail that was pre-sor-ted by the companies. The discount was given for the whole amount of pre-sorted mail once the customer had exceeded the threshold and thus constituted a retroactive discount. The only competitor to Pos-ten, Bring Citymail, submitted a complaint to the KKV which was

25. KKV Decision no. 595/2008 (SAS EuroBonus II).

26. MD 2011:14 Bring Citymail (Bring Citymail).

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rejected.²⁷ Importantly, the KKV based its assessment on the AEC-test in the Commission’s Enforcement Paper.²⁸ Subsequently, Bring Citymail made use of its subsidiary right to bring a claim for a cease and desist order at the Market Court.²⁹

The Market Court found that Posten had an advantage by basing the discount on units of mail distributed outside the markets that were open to competition. Moreover, Posten had a very large market share, estimated to 85% of the market in 2009. In addition, the com-plainant Bring Citymail, was the only competitor in the urban areas.

It was also concluded that the state of competition was ‘fragile’ as the market only allowed small margins. The court found that for a com-petitor to challenge Posten it had to compensate for the rebate, including the rebates given for the distribution outside the areas exposed to competition (the non-contestable part of the market). A potential customer of Bring Cittymail needing mail deliveries to the whole country would have to divide up its deliveries between Posten and Bring Citymail, meaning that it would forfeit the discounts given by Posten above the 300,000 threshold. Thus, Bring would have to lower its prices considerably to provide its customers with the amount corresponding to the discounts that the undertaking would have otherwise been granted by Posten in those areas where Bring Citymail did not compete. As competition was already limited, the effect of discount system was found to exclude Bring from the mar-ket. It should also be noted that Posten presented a price-cost calcu-lation when invoking the AEC-test. However, the court did not accept the calculation as the company failed to provide supporting cost data. Moreover, the court did not have access to the calculations made by the KKV based on the AEC-test.³⁰

As regards a possible efficiency defence, it was claimed by Posten that efficiencies would emerge at quantities above 150,000 units of mail and that it was only at quantities above 300,000 that it could be

27. KKV Decision no. 381/2009 (Bring Citymail decision).

28. T. Osen Bergqvist, ‘Sweden’, Chapter 12 in P. Këllezi, B. Kilpratrick & P. Kobel (ed), Abuse of Dominant Position and Globalizatio & Protection and Disclosure of Trade Secrets and Know-How (national report from LIDC Congress 2015), p. 201 (Osen Bergqvist), p. 210.

29. Chapter 3, section 2 KL.

30. Osen Bergqvist, p. 210.

Chapter 4 | Where do we stand on discounts?—A Swedish perspective

assessed with certainty that the quantities would result in cost effi-ciencies. However, the submitted calculation made by Posten was not accepted as a matter of evidence. As the court found that an exclu-sionary effect had been established it was up to Posten to prove any efficiencies. As this had not been done, and it could not be excluded that alternative methods for giving a discount in order to compensate for cost efficiencies could have been applied, the rebate system was found to be abusive under Chapter 2, Section 7 KL.

There are several aspects of the case that are interesting. One factor was the fact that the competition authority had initially rejec-ted the complaint made by Bring Citymail applying the as-efficient-competitor test (AEC-test) in the Commission’s Enforcement Paper.³¹ The case shows that, at least at that time, there was a divergent view between the competition authority and the courts in term of the legal standard applying to discount cases. While the competition authority relied on a more ‘modern’ effects-based approach in line with the Commission’s shift of view, the Market Court based its view on the older case law of the EU courts. Arguably, and as discussed below, the view of the Market Court has been subsequently confirmed by the General Court in Intel and the CJEU in Post Danmark II, but is prob-ably in conflict with CJEU’s judgment in Intel.³²

A second interesting aspect is that the court took into considera-tion the level of competiconsidera-tion on the relevant market. The degree of dominance, which was connected to Posten’s former position as a monopolist seems to have had great influence on the finding of abuse. The fact that Bring Citymail could only compete for particular sections in the market made it vulnerable for discounts which were also based on quantities of mail falling outside the area subject to competition. The Court referred to the special responsibility of dom-inant firms and how the degree of dominance would ‘translate’ into different degrees of ‘responsibility’. However, apart from stating that Posten had a high degree of dominance (implying a high degree of

31. Communication from the Commission, Guidance on the Commission’s enforce-ment priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, [2009] OJ C 45/7 (Enforcement Paper).

32. Case T-286/09, Intel Corp. v European Commission, ECLI:EU:T:2014:547 (Intel, General Court); Case C-23/14, Post Danmark A/S v Konkurrencerådet, EU:C:2015:

651 (Post Danmark II).

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responsibility), it was not elaborated further by the Court how this, in fact, affected the application of the rules in the given case.

A third interesting aspect is that the case focused solely on the capability of the discount system to ‘tie up’ customers and did not involve an in-depth discussion on the effects on the market. In fact, the Court did also concede that the overall effects on customer beha-vior was not conclusive in the individual case, but that there were at least (anecdotal) evidence of larger individual customers not choos-ing Brchoos-ing Citymail because of the inability of the latter to match the discounts of Posten. The court seems primarily to have based its find-ing that the discount system because of its perceived effect of tyfind-ing up customer had the capability or tendency to restrict competition.

The court also rejected, as previously done by the CJEU, the relev-ance of the argument that customers, or at least some, had requested the discount from Posten.³³ All in all, the court’s approach seems formalistic and its effects analysis can only be characterized as super-ficial at best.

Finally, it should also be pointed out that the Market Court was perhaps more lenient in its application of the standard of proof as the case concerned two private parties. The oddity in Swedish Competi-tion Law that gives a subsidiary right for private parties to pursue the case to the Market Court following the rejection of a complaint by the KKV, has raised the issue of what standard of proof is required in theses cases comparing to public enforcement cases of the KKV. The Market court has previously held that the standard of proof should be the same for the KKV and private parties that apply their subsidi-ary right to go to the Market Court.³⁴ Arguably, considering that private parties do not have the same available tools as a competition authority to gather information from the accused undertaking and effects on the market, it has nonetheless been discussed whether the standard of proof is set lower in these cases.³⁵ As stated above, the Market Court did not even find conclusively that all customers (or

33. Case 85/76, Hoffmann-La Roche & Co. AG v Commission of the European Communit-ies, EU:C:1979:36 (Hoffman-La Roche), paragraph 89.

34. MD 2007:26 Ekfors kraft (Ekfors kraft).

35. Henriksson, Lars, ‘Indispositiva tvistemål – handläggningsregler för tillämpning av konkurrenslagen’, forthcoming in Amici Curiae Marknadsdomstolen 1971–2016, (Jure 2017).

Chapter 4 | Where do we stand on discounts?—A Swedish perspective

even a majority of them) would choose Posten over Bring Citymail because of the rebate system. Rather, it appears as if the court relied heavily on the mere possibility as well as the structural factors of the case, such as the market share and market coverage by the dominant undertaking. It seems at least questionable that the same arguments and evidences would have sufficed for a claim made by the KKV.