Court judgement could lead to higher costs for district heating

The Logstor and Powerpipe companies are both active in the market for district heating pipes and other products related to district heating. They are also the two largest operators in Sweden. Together they account for approximately 80 % of sales to Swedish customers.

The Swedish Competition Authority has investigated the merger between the two companies and saw that there would be a risk of a deterioration in competition if the deal was permitted to go ahead. Therefore, the Swedish Competition Authority turned to the Stockholm District Court to obtain a ban against the deal. The court’s assessment was different to that of the Swedish Competition Authority, and it wanted to permit the merger. The Swedish Competition Authority appealed to the highest instance, which is the Patent and Market Court of Appeal.

The Patent and Market Court of Appeal has also made a different assessment than that of the Swedish Competition Authority regarding the way in which the relevant market should be defined. The Swedish Competition Authority considers the market to be Sweden, but the court is of the opinion that the market actually constitutes the greater part of Europe.

“The merged company will now receive approximately 80 % of the sales of district heating pipes to Swedish customers – regardless of how the market is defined. This is a very high market share”, says the Director-General of the Swedish Competition Authority Dan Sjöblom.

“The court’s ruling that the merger be permitted represents a clear risk that the price of district heating pipes in Sweden can increase, resulting in many district heating customers being affected by increased costs”.

“The court makes very high demands on the evidence of the Swedish Competition Authority. This could lead to even more comprehensive investigations than at present which, in turn, will place greater demands on businesses in the context of company mergers”, says Per Karlsson, Chief Legal Officer of the Swedish Competition Authority.

The Patent and Market Court of Appeal’s judgement may not be appealed against.