Wrong when public sector outcompetes businesses

Politicians and officials at both municipal and state level must realize that the unhealthy competition from the public sector is deteriorating the business climate in our country, write representatives of the Confederation of Swedish Enterprise, Almega and IT&Telecom companies.

In Sweden there are many municipal and state-owned companies. Gyms, state laundries or consultancies that compete with the private sector and are basically funded by taxes. More than one in four businesses in Sweden face competition from the public sector, i.e. from an actor to whom they themselves directly or indirectly pay taxes. This is why, since 2010, there have been rules in the Competition Act to prevent unfair competition. The rules are called KOS, "anti-competitive public sales activities". Ultimately, the Swedish Competition Authority can take a municipality, county council or authority that violates the KOS rules to court and force them to change their activities or focus. In some cases, it has been sufficient for the FCA to intervene to stop a distortion of competition.

These rules are very important for businesses and for competitiveness in general. But when we see the results of the almost nine years of KOS rules, there is more to be desired. The Swedish Competition Authority has chosen to proceed with too few cases, and in cases where a case has gone all the way to court, the processes have taken far too long. In addition, the court places extremely high demands on the evidence the Competition Authority must present. We need to get back to the basic purpose of the law, to quickly resolve a conflict between the public and private sectors.

Hässleholm is a typical example of how this can work. In the fall of 2015, the municipality of Hässleholm banned private companies from digging up and installing fiber in the municipality. The decision was the start of an extensive court case, the end of which is yet to be seen. The reason for the conflict is that the municipality has decided on a municipal monopoly for fiber deployment. No other operators have been given digging permits or land agreements. The companies that want to expand the fiber infrastructure were given no alternative but to complain to the Swedish Competition Authority, whose discussion with the municipality did not lead anywhere either. The Swedish Competition Authority decided to sue Hässleholm municipality in September 2017. Broadband expansion is currently underway throughout Sweden. To avoid more examples like the one in Hässleholm, guiding decisions are needed in court. And they are needed today, not in several years. It is therefore remarkable that it will take until January 2019 before the Patent and Market Court considers that it has time to consider the case. Almost 1.5 years after the Competition Authority sued the municipality.

Not all municipalities or regions do what Hässleholm municipality does, of course. Their actions stand out significantly because of the stated purpose of promoting their own municipal broadband operations through a monopoly. The Swedish Competition Authority's review is therefore very important for the entire continued expansion of broadband networks in the country. If nothing is done about their actions, there is a risk that more municipalities will choose to go the same way, which would have serious negative consequences for the continued expansion of fiber in Sweden and for competition in the entire market.

Politicians and officials at both municipal and central government level must realize that unhealthy competition from the public sector is worsening the business climate in our country. The deterioration may occur in the short term, but it is above all in the longer term that the real effects become clear and by then it is often too late to act. This is why the KOS rules need to be tightened. It should be a priority for a new government that wants to develop the business community instead of inhibiting it.

Caroline af Ugglas, Deputy CEO of the Confederation of Swedish Enterprise
Andreas Åström, Head of Industrial Policy at Almega
David Mothander, Director of IT&Telecomföretagen
Stefan Koskinen, Director of Almega Tjänsteföretagen