Nasdaq's practices did not constitute abuse of dominance

By assistant attorney Adrian Kielberg

The Swedish Patent and Market Appeals Court's decision of 28 June 2019

Background

Nasdaq, Inc. owns and operates the NASDAQ stock exchange in New York and eight other stock exchanges in Europe, including in Copenhagen and Stockholm. For the purpose of its activities in Stockholm, Nasdaq rents server space in a data centre located in Lunda outside Stockholm. The data centre is owned by Verizon Sweden.

In 2010, Burgundy, a rival stock exchange operator, applied for access to place its trading system in the same data centre, which also let server space to other major stock exchange customers, including many of the Swedish commercial banks. The hope was that Burgundy would be able to offer the same high speed of trading.

However, Nasdaq put pressure on Verizon Sweden not to enter into an agreement with Burgundy, threating i.a. to terminate the lease contract with Verizon Sweden. Burgundy therefore had to use another data centre with the result that the stock exchange customers whose trading systems were hosted by Verizon Sweden and who also used Burgundy’s trading platform experienced lower speed of trading.

The initial decisions

The Swedish competition authorities found in 2015 that Nasdaq’s actions had made it difficult for Burgundy to compete in the market and that, therefore, they amounted to abuse of Nasdaq’s dominant position.

The decision was brought before the Patent and Market Court, which found in January 2018 that Nasdaq’s practices did not amount to abuse. The Court noted that Nasdaq had a right under the agreement with Verizon Sweden to deny third parties access to the data centre, including access to co-location with Nasdaq’s systems. The Swedish competition authorities appealed the decision to the Patent and Market Appeal Court.

Acquittal by the Appeal Court

The Appeal Court agreed with the Patent and Market Court, but followed another line of reasoning. Relying on a technical report produced in the case, the Appeal Court noted in particular that the fact that Burgundy had to use another data centre, resulting in slower speed of trading due to the distance, had no effect on competition. The reason was that Burgundy’s trading systems were already significantly slower than Nasdaq’s. Thus, Burgundy would in no circumstance have been able to offer competitive services and was therefore not to be regarded as an effective competitor.

With the Patent and Market Appeal Court’s decision, it has now been established that Nasdaq did not abuse its dominant position. The decision cannot be appealed any further.