The fight against cartels has been one of the EC Commission’s priorities over the last two years. In 2006, the Commission imposed record fines of over €1.8 billion for price fixing andmarket sharing infringements. The Commission has recently acted against cartels in intermediate products like chemicals, that impose extra costs on downstreamEuropean companies, as well as cartels in end products.
On 29 November 2006, the Commission announced fines totalling €519million on six groups of companies for participating in a cartel to fix prices and allocate customers (the second highest total fine ever). The cartel was formed through agreementsmade between the companies before or aftermeetings of the European Synthetic Rubber Association. The case serves as a useful reminder of the careful line a trade association and itsmembersmust tread between improving efficiencies for companies with shared interests and reducing competition.
In this case, as inmany others, the Commission found that the information exchange had an anti-competitive effect. Trade associations often facilitate the exchange of information and this is an area where it is particularly important to respect the fine line between legitimate and illegitimate conduct. Inmany cases, the exchange of information can encourage competition. However, where companies share information which permits themto adjust their behaviour to avoid direct competition, it will be anti-competitive.
The UK Office of Fair Trading (the “OFT”) is also pursuing hard-core cartels and has imposedmulti-million pound fines on cartels in a number of industries. InOctober 2006 theCourt of Appeal in London upheld the original findings of theOFT and the UKCompetition Appeal Tribunal in the Argos/Littlewoods and replica football kits cases. In both cases the OFT found vertical price fixing agreements betweenmanufacturers and retailers, and also a trilateral horizontal concerted practice between themanufacturer and two retailers, despite there never having been any direct contact between the retailers. The Court of Appeal case confirms that a combination of vertical contacts between amanufacturer and retailers can spill over into a horizontal agreement between the retailers, even where there has been no direct contact between them.
- ensure that any information exchanged is historical, anonymised and general, to limit the risk that participants are able to coordinate theirmarket behaviour
- ensure that trade associationmembership rules and conditions for accessing collated information are objective and non-discriminatory
- provide detailedmeeting agendas describing the exact purpose of a trade associationmeeting and take detailed notes of all discussions
- take legal counsel to any trade associationmeeting where sensitivematters are discussed
- leave anymeeting where any anti-competitive subject is discussed and ensure your exit is recorded in themeeting minutes
- if you receive information regarding the prices of a trade associationmember from, eg, a customer, document the source
- discuss or agree on pricing strategies (including discounts or price ranges) – non-observance of an agreement is not a defence
- exchange information which would be considered commercially sensitive
- discuss who will supply a particular customer or geographic area
- agree or discuss production quotas Caution!
- carefully consider the types of information to be shared when developing an information exchange
- joint buying or selling – particularly where participants are expected to buy or sell exclusively through a scheme
- lobbying – where this has an anti-competitive intent