Two recent developments have highlighted the competition law risks both for companies participating in trade associations and for trade associations themselves.
Firstly, last month the CMA has reached a settlement with a trade association and three of its members in relation to a cartel that was found to have been facilitated through an association’s membership rules, resulting in fines totalling £775,000. The press release is available here and the final infringement decision is due to be published at the end of this month. This decision comes against the backdrop of guidance published by the CMA in September 2014 summarising the most important “dos and don’ts” for trade associations, signalising an increased interest in the activities of trade associations. The CMA’s guidance can be found here.
At the EU level, two recent cases have also highlighted the risks of being found to have facilitated a cartel. While these cases do not directly concern trade associations, they nevertheless serve as useful reminders of the kinds of behaviour that are considered to infringe competition law. In February 2015, the European Commission fined an interdealer broker 14.9 million euros for helping banks make trades related to manipulated interest-rate benchmarks. The press release can be found here. Additionally, in early March a Swiss consultancy appeared before the CJEU to appeal a 2014 General Court judgment which upheld fines totalling 348,000 euros imposed by the European Commission against it in 2009 for having facilitated a cartel. The application to the CJEU can be found here.
Anti-competitive decisions by trade associations
The CMA’s recent settlement decision concerned agreements between members of a trade association which prohibited these members from advertising their fees and discounts in a local newspaper. Crucially, this prohibition was also mirrored in the trade association’s membership rules.
In its press release, the CMA stated that “where the infringements take place within the context of trade associations, both the members of the association and the association itself can be found to have breached the law”. In this case, the CMA only imposed a fine of £100 on the trade association in light of its low turnover and limited financial resources. However, absent these specific conditions, fines are likely to be more significant and, in any case, the decision is a signal the CMA will continue to enforce competition rules against trade associations.
Helpfully, the CMA’s September 2014 ”dos and don’ts” included guidance on practices undertaken by a trade association that would fall foul of competition law. These include:
- Having rules that prevent members from taking commercially independent decisions;
- Issuing pricing or output recommendations to members;
- Restricting members from advertising prices and discounts, soliciting for business or otherwise competing with other members;
- Requiring members to provide the association with commercially sensitive information;
- Publishing messages associating lower prices with lower quality;
- Restricting members promotional business practices beyond ensuring that they are legal, truthful and not misleading; and
- Preventing members from using different contractual conditions from the association-developed standard.
Facilitating agreements between competitors
Decisions by a trade association are not the only way in which it can violate competition law. A trade association will also risk infringing the law if it allows or facilitates commercially sensitive discussions between its members.
However, the risk of facilitating the exchange of commercially sensitive information is not confined just to trade associations. The Swiss consultancy currently bringing the appeal in the CJEU had helped to organise numerous meetings and dinners between companies in the market for certain chemicals, thereby facilitating the creation of a cartel. It also collected sales data and produced statistics on the relevant market which it then provided to the participating undertakings. It was paid for these services by the participants. In current its appeal, it is arguing the General Court was wrong to uphold the Commission’s fine because Article 101 only covers agreements between competitors and not agreements with companies active in separate product markets. The firm is arguing that its behaviour is not covered by Article 101 as it is not active in the market for certain chemicals in which the cartel occurred.
Whether or not the appeal is successful, the case serves as a useful illustration of the circumstances in which trade associations can infringe competition rules by allowing or encouraging the sharing of sensitive information between their members. To minimise this risk, the CMA’s September 2014 guidance recommends:
- forbidding members from discussing competitively sensitive information in or around events or meetings; and
- requiring them to report any discussions of sensitive information directly to the CMA.
These developments indicate a potentially more aggressive approach to the enforcement of competition law against trade associations and their members (and indeed any other third party organisation found to have facilitated anti-competitive practices, unwittingly or otherwise).
Against the background of the potential reputational and financial damage that may result from an infringement, trade associations would be well advised to take seriously the CMA’s recommendation to establish a competition law compliance policy incorporating the above features in order to avoid directly infringing competition law or facilitating an infringement.